All unsecured loans such as personal loans are hard to apply for with a low credit score. An unsecured loan means that you do not need to provide any collateral in the form of gold, property or other assets as security for the loan amount. This increases the risk factor for the bank or the Non-Banking Financial Company (NBFC). So, having a credit score below 750 is not advisable when applying for unsecured loans as this can lead to a higher interest rate or in some cases, a loan rejection. A loan rejection can further reduce your credit score.
Examples of unsecured loans
- Personal loans
- Some business loans
- Some educational loans
- Credit cards that are not secured
So, if you are planning to apply for an unsecured loan, it is best to improve your credit score first and then apply for the loan.
How do I improve my credit score?
- Resolve negative accounts, if any
- Subscribe for a credit improvement service with a finance portal like CreditMantri to get expert help to settle past accounts to improve your credit score
- If you have a current loan or credit card, make EMI payments on time in full.
- If you do not have a current loan or a credit card, you can apply for a secured credit card or a score builder loan and repay your EMIs on time and in full to begin improving your credit score.
To improve your credit score, click here.