Have you defaulted on a loan that you borrowed in the past? Or missed many EMIs that significantly lowered your credit score? There can be many possible reasons that have contributed to your bad credit history. But each of those reasons would impact you significantly more whenever you look out for credit in the future. So is there no other way to secure a personal loan with bad credit? There is. You’re not the only person dealing with this problem. There are many such cases in a region at any given time. Finding credit can be challenging in such situations, but there are specific steps that you can undertake to secure a loan. Let’s look at some of the things that can assist you in securing a personal loan.
Reducing the loan amount.
Let’s say you previously borrowed a specific amount to be repaid with some interest at a particular time. Factually, you could not honor the commitments in the past you made to the previous lender. And the fact that you need credit again implies that the situation has not improved drastically. In this case, your priority is to cut a bargain for the credit, and for this reducing the amount comparably to a previously taken loan would make it more likely that you’ll be able to honor the contract this time. Securing loans lower than the defaulted loan amount and repaying them on time would eventually help you make up for bad credit history. So, guaranteeing a personal loan with bad credit history becomes more possible.
Co-apply for the loan.
Having a co-applicant helps reduce personal liability for a loan application. The co-applicant might be a personal friend, a business partner, or a guarantor, provided the co-applicant has a decent credit history. It will help reduce the risk in credit and make the lenders more likely to offer you credit at a reasonable rate. If the loan is taken for business purposes, it might even help you be eligible for tax deductions which are mutually beneficial for all co-applicants.
Accept loans at slightly higher rates of interest with increased EMIs.
In a competitive market, securing credit at a market rate is unlikely if you have a bad credit history. In addition, inflation over time reduces the parity value of a fixed amount decided in the past, making it less likely for lenders to increase the repayment duration without getting anything in exchange. Therefore, opting for loans with a slighter higher interest rate in exchange for increased EMIs is a good bargain as it will allow you to secure a loan and help in the repayment by reducing the number of monthly payments.
Look out for new avenues.
A realization is dawning upon the market about the untapped segment of people who require a second chance to do well in life. A few companies have realized that if proper credit is provided to such people, they have decent options for doing wonders. For the lenders, this would help attract future borrowers while retaining loyal customers who are financially sound and carry financial transactions with them over time. Therefore, if a person cannot get proper credit in the local market, they should expand their search base and include other market lenders, startups, and entities.
In light of the above steps, we can say that securing a personal loan is not entirely out of scope despite having a bad credit history. It would require you to look for newer avenues, reduce the loan amount, get a co-applicant, increase repayment duration or maybe get one against collateral if you have any. If it is being taken for a commercial purpose, then adequate planning and execution can help improve the applicant’s financial soundness and make up for bad history.