Pledging a collateral when you have a low credit score can help you get a decent deal on loans. This collateral can act as a low-risk bearing factor not just for you but for the risk associated with lending to you. The collateral acts as a leverage for you to negotiate with the lenders to offer you lower interest rates. Loans that are generally given against collateral/security are known as secured loans.
But what happens when you don’t have a collateral?
In these situations, the lenders will offer you unsecured loans, you may be eligible for a loan if your monthly earnings are on a higher side and if you work for a reputed firm. But if you choose to go for unsecured loans then the lenders will charge you a higher interest rate and there are also chances of getting lower loan amounts. There are also chances that you will be offered shorter repayment tenures as banks will look at collecting the loan amount as soon as possible.
Apart from banks, there are two other options that you can try if you have a poor credit score and wish to avail a personal loan. They are
- Non-Banking Financial Companies (NBFCs) - There are many NBFCs that will offer you a personal loan despite your low credit score but may charge a slightly higher rate of interest. Usually, NBFCs are more flexible than banks when it comes to credit scores. Some NBFCs have sanctioned loans for credit scores that are as low as 360.
- Peer-to-Peer Lending (P2P) - There are digital lending websites, called P2P websites, that offer loans of up to Rs.5 lakhs with tenures ranging between 12 months and 60 months to people with low credit score.
At CreditMantri, we help you find the best loan offers matched to your credit profile. Use our site to find the best loan deals for you.