Can I get Personal Loan With a Low Credit Score? - IIFL




Can I get Personal Loan With a Low Credit Score?

Personal loans offer greater flexibility in utilisation. From using the funds for a vacation or shopping, personal loans can also be used for buying an asset. The quantum of funds and terms of a personal loan get affected by a series of factors including the borrowers the credit worthiness.

Written by Web Desk Team | Published :December 20, 2022 , 8:01 am IST

A personal loan is the first thing that comes to our mind when we have a sudden need for finance. Unlike home or car loans, which are meant for specific needs, personal loans offer greater flexibility in utilisation. From using the funds for a vacation or shopping, personal loans can also be used for buying an asset. The quantum of funds and terms of a personal loan get affected by a series of factors including the borrowers the credit worthiness. Lenders factor in the credit score of the loan applicant while processing. The higher the credit score, the better the chances of approval. However, contrary to a popular belief, lower credit scores don’t always mean rejection of loan applications.

Lenders also assess your income and repayment capacity before accepting or rejecting the loan application. You may be eligible for a loan even with a low credit score. In that case, the interest charged by the lender may be higher. Another misconception about personal loans is that it is only available for salaried professionals. While having a salaried job can definitely boost your chances of getting personal loan approval, it is not a deal breaker.

With the advancement in technology and digitisation in the banking process, borrowers can apply for loans with just a click. The time of extensive paperwork and a long process for personal loan application is a thing of the past. In fact, many lenders now offer same-day disbursal of funds.

While personal loans come with higher interest rates compared to secured loan options, the assumption may not always be true. You can get personal loans at a lower interest rate if you have a good credit score and rapport with the lender. Compared to credit cards, personal loans are available at a far cheaper interest rate. Plus, they also offer the flexibility of use in cash. In contrast, credit cards discourage cash transactions and levy extra charges.

Lenders also offer the flexibility of prepayment of the loan. For that, you may be charged a certain processing fee. However, some lenders also waive this processing fee, if the specific tenure of the EMIs has been completed.

With the rise in the demand for finance, several new options, in addition to conventional banks, have also propped up. Non-banking financial companies, NBFCs, are a popular option among borrowers. While the interest rate may be comparatively high in some cases, NBFCs offer greater flexibility in eligibility criteria and repayment options when compared to any conventional bank. Additionally, there is also the option of digital lenders. Banks have a higher rate of rejection for a personal loan, this is where NBFCs and digital lenders step in. They are willing to offer to lenders who are unable to get loans from banks.

Personal loans, like any other financial decision, must be zeroed only after a thorough evaluation of the terms and conditions. Signing up without being fully aware of the loan, interest rate, repayment, and other aspects causes unnecessary trouble at a later stage.

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