Your credit score plays a very important role when it comes to applying for loans in banks or any other financial institution. When you have a good credit score, you can easily get loans at attractive interest rates. However, the same becomes difficult in case of a bad credit score. It is hard to get loans at low interest rates when your credit score is low.

Even if you have a good salary or income from your business, a bad credit score can seem like a roadblock when it comes to getting loans. However, it is not completely impossible to get a loan.

Below, we will see all the info about credit scores and how you can get an urgent loan even with bad credit in India.

What is a Credit Score?

A credit score is a 3-digit score that represents an individual’s creditworthiness. It's like a report card that scores your borrowing habits. The credit score falls between 300 and 900 in India. It is calculated by Credit bureaus like CRIF High Mark, Equifax and TransUnion CIBIL™, and Experian. 

The credit score takes into account things like payment history, credit mix, credit utilisation, outstanding debt, and recent loan inquiries. The higher the score, the better offer you can get while applying for a loan. You'll also likely qualify for lower interest rates and better terms.

A credit score above 650 is considered to be fairly great in India.

Factors Affecting Credit Score

  • Paying your bills and dues on time: This is the most important thing that affects your score. If you miss payments on credit cards, loans, or even utilities, it can hurt your score a lot. (35% of your score)

  • Credit card balances: Don't use your credit cards to their complete limit. Using too much of your available credit limit can lower your score. You should aim to keep your credit usage below 30% of the limit.

  • Credit history length: The longer you've had credit cards or loans and managed them responsibly, the better your score. This shows lenders and banks that you're a responsible borrower.

  • Applying for new credit: Every time you apply for a new credit card, loan, or some services, it can lower your score a little. This is especially true if you apply for many loans in a short period of time.

  • Mix of credit: Having a variety of credit cards and loans, not just credit cards, can help your score. This shows you can handle different types of credit.

How to Get Urgent Loans in India for Bad Credit

If you don’t have a good credit score, don’t worry. You can still get loans using the below methods:

1. Borrow from a Non-Banking Financial Company (NBFC)

Think of a bank, but instead of taking your everyday savings, it focuses on giving out loans and other financial services. That's an NBFC. They're a great option for personal loans, especially if your credit score is low. NBFCs consider more than just your credit history when deciding if you qualify for a loan. Here's what they might look at:

  • Your income: Do you have a steady job that brings in enough money?

  • Can you repay the loan? This depends on your income.

  • Do you have something valuable you can offer as security (like a car or jewellery)? This lowers the risk for the NBFC.

  • How much money do you need? Borrowing a smaller amount is easier to get approved for.

  • Why do you need the loan? Having a good reason helps your case.

2. Get a Secured Personal Loan

This type of loan requires you to put up something valuable as security, like a car or property. This lowers the risk for the lender and makes them more likely to approve you, even with bad credit. While bad credit might affect the interest rate (the cost of borrowing), secured loans often have better rates than unsecured loans (loans without collateral).

Here's a tip: Make sure you can comfortably repay the loan before you borrow. Look for a reputable lender who can offer you a quick loan and also help you improve your credit score over time.

3. Find a Guarantor

A guarantor is a backup plan for the lender. If you can't repay the loan, they will step in and pay it off. Think of it like having a friend vouch for you. Having a guarantor with good credit significantly increases your chances of getting a loan, even if you don't meet all the requirements on your own.

Eligibility Criteria for Urgent Loan With Bad Credit in India

Minimum Credit Score:

Age:

  • The age range generally falls between 21 and 57 years old.

Income:

  • You'll likely need a minimum monthly income, sometimes around Rs. 13,500 or more.

  • Your income should ideally be deposited directly into your bank account for easy verification.

Other Considerations:

  • Employment: Being a salaried employee with proof of income and job continuity improves your application.

  • Loan amount: With bad credit, you might be offered a smaller loan amount than someone with a high score.

  • Interest rates: You might have to pay higher interest rates due to the perceived risk of lending to someone with bad credit.

Disclaimer: The above information about eligibility criteria is written as of May 2024 and is subject to change. Please refer to the concerned bank/NBFC’s website for the latest updates.

Tips to Manage an Urgent Loan with Bad Credit

  • Shop Around: Don't just take the first loan offered. Look at different lenders and compare their interest rates, fees, and how long you'll have to repay the money.
     
  • Know What You're Signing: Before you agree to the loan, read the whole agreement carefully. Make sure you understand the interest rate (is it a fixed rate or does it change?), how much you'll pay back each month, and any extra fees they might charge you.
     
  • Make a Repayment Plan: Create a budget that shows how you'll afford the loan payments. Include the monthly payments in your budget and stick to it! Setting up automatic payments can help you avoid missing payments and those extra late fees.
     
  • Get Help if You Need It: Don't be afraid to ask for help from a professional. Credit improvement services can give you personalised advice on managing your loan and getting your finances back on track.
     
  • Borrow Only What You Need: It might be tempting to borrow more than you need, but don't do it! Just take what you need to cover the urgent expense. A smaller loan means less interest to pay and you'll pay it off faster.
     
  • Fix Your Credit Score: Even though you have a bad credit score now, this loan can be a chance to make it better. Pay all your bills on time, including this loan. This shows you're responsible with credit and can help improve your score over time.

How to Improve Your Credit Score

To improve your credit score over time, you can follow the below tips:

1. Pay Your Bills on Time

This is one of the most important things you can do to improve your credit score steadily. It holds the highest weight and impacts your credit score the most. So make it a habit and pay your credit card bills and loan EMIs on time. Set up an auto-payment schedule or reminders to ensure that you never miss a due date.

2. Don’t Use Complete Credit Limits

Keep a target to use less than 30% of your available credit limit. This shows you're borrowing responsibly and managing your credit well.

3. Check Your Credit Report Regularly

Mistakes happen, and sometimes incorrect information can hurt your score. Get free copies of your credit report from all three credit reference agencies and dispute any errors you find.

4. Don't Apply For a Lot of Credit in One Go

Every time you apply for a new credit card or loan, it leaves a temporary mark on your credit report. Applying for too much credit in a short period can make you seem like a risky borrower.

5. Keep Old Accounts Open (even if you don't use them)

Having a long credit history with a good track record is beneficial. So, if you have an old credit card you barely use but always pay off on time, consider keeping it open.

Frequently Asked Questions

1. How to get an instant loan with bad credit?

Instant loans for bad credit are tough, but some lenders and NBFCs might offer them with a simplified application process. You can also opt for a personal loan.

2. Who will provide an urgent loan with bad credit?

Some online lenders and payday companies might give you a quick loan even if your credit score is bad. There are also special loan companies (NBFCs) that offer fast loans to people with a history of not paying bills on time. These companies typically have fewer requirements for getting a loan.

3. What credit score indicates bad credit?

A bad credit score in India generally falls below 600.

4. How to improve credit score?

Pay bills on time, keep credit card balances low, and avoid applying for too much credit at once.

5. What is the lowest credit score to get a loan?

The exact score depends on the lender, but a very low score may result in getting loans at an extremely high-interest rate.

6. What is the disbursal time for an urgent loan?

Disbursal time can vary, but some lenders might offer same-day or next-day approval for urgent loans.

 

Disclaimer: This page includes information that has been compiled from many sources and is only offered for informational purposes. Since this type of data might change over time, we cannot guarantee that the information supplied or included within it is accurate. It is anticipated that the user would confirm with the relevant source prior to taking any choices or actions.