Obtaining a loan with very bad credit history would seem a herculean task as the banks would want to be ensured of 100% repayment. When you fail to establish your repayment ability, what they look for is a collateral out of which they can retrieve the loan amount. There can also be instances where you have now a better repaying ability but have a history of negative repayment track record. Your past credit history may remain on the credit report for up to 8 years. In such a scenario, how can you acquire credit from lenders?
Following are some of the best options wherein you can comfortably get loans for very bad credit history.
Debt Consolidation Loan
This is the best option of all if your intention is to pay off the multiple existing loans and improve your credit score. This loan can’t be used for emergencies or any other personal purposes as the main objective of the loan is purely to improve your credit health. You can take out a single loan to pay off all other loans at one shot. You will now have a fresh repayment period with new terms on the loan.
Debt consolidation loans help improve your credit health considerably after making consistent repayment. It is the best option to go for if you want to get out of debt sooner and change your bad credit history to good credit history.
Additional Reading: 6 Month Loans for Poor Credit
You can check out for lenders who offer these loans exclusively for people with bad credit history. Though a debt consolidation loan is generally an unsecured loan, certain lenders may demand a collateral if the loan amount is higher. Moreover, some lenders provide only up to a certain percentage of the overall amount required for closure of all loans. The rest has to be borne by you.
Loan Against Property
The lender usually expects a good repayment ability from the borrower or some form of collateral to get back the loan amount. Loan against property is one of the best possible options that can be exploited by the individuals with very bad credit history. You can get this loan from banks and NBFCs. The lender provides you this loan for slightly higher interest rates as you have bad credit history.
You can make use of this loan for various purposes such to pay off existing debts, medical emergencies, education, etc. You can get quick funds through this loan option if you have all the documents ready with you.
Gold Loans
This is another viable option for people with bad credit history. If you want instant funds with bad credit history, gold loan can help you get that. You just walk into any bank, NBFC or any other private lenders, you can walk out with cash in an hour. Most lenders do not do a credit check for gold loans. The gold is evaluated by an appraiser, and the interest rate is determined instantly.
Gold loans are easier to get as the lender has the advantage of your collateral. If you are unable to make the repayment, the loan amount will be recovered through auction.
Peer to Peer Lending Marketplace
When banks and NBFCs fail you while trying to secure a loan with credit history, you can turn to peer to peer lending marketplace where you may have higher chances of approval. You can check online for peer to peer lenders who provide exclusive bad credit loans. The interest rates tend to be higher as you have bad credit history. However, the rejection rates are lower with peer to peer lending platforms.
Loan Against Fixed Deposit
You may not become eligible for any loan if you have bad credit history. As we know, in such instances, the collateral acts as the saviour. Loan against Fixed Deposit is one of the secured loan options that can save your day. You can avail a secured loan against your fixed deposit at better rate of interest even with bad credit history. The maximum loan amount could be up to a 80 to 85% of the fixed deposit amount.
Apart from the above options, loan against insurance schemes, mutual funds, stocks and bonds are some of the other popular secured loan options that can be used by individuals with very bad credit history.
How to get loans with very bad credit history?
We now know that there are several loan options for people with bad credit. But how will you approach a bank to get this approved?
Clear The Past Dues: You may have continuous record of non-payment which has resulted in a bad credit. All you need to do is to pay off the past dues to the lender so that it gets reported to the credit bureaus that all debts are paid. Even though you now have bad credit history, you have cleared the debts which indicates a positive sign. From now on, your credit score will remain intact and by availing a fresh loan and making timely repayments, the credit score will improve significantly.
Show Proof of Income: If you have bad credit but have lucrative income, you may qualify for a bad credit loan. However, the interest rates may be higher on these loans.
Talk to the lender: If you are an existing customer with the respective bank and have a good relationship, you may talk to the manager, explain your situation and assure him/her of the consistent. By doing so, you may have higher chances of getting a better loan.
The past may have been bad, but the future is ahead of you which you can make the best of it. After you have cleared the past dues, make sure that it gets reported to the credit bureaus by your lender. It should show a change in your credit health after you have repaid all your dues.