There are instances when you need money quickly but are unsure of where to turn especially if you have a bad credit. Banks take their sweet time processing loan applications; in most cases, they even reject your application. Some even turn towards friends for borrowing money and sometimes even are not able to fund you.
Where do you go from here?
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Those who have good credit can choose from a wide range of options, however those who have had credit history problems must search for other options. You might be given the option of a secured loan by moneylenders, but this choice always comes with the risk of losing your property. Moreover, not all borrowers who need urgent cash on the same day have valuable property to use as collateral. And that’s when bad credit loans come in to help.
A bad credit score or no credit history are roadblocks when availing of a personal loan. Financial institutions do not advance loan for bad credit as a low credit score indicates a higher risk of default in payments. Nevertheless, fortunately, there are a few lenders who provide credit to such borrowers. Their rate of interest is high and they set their terms and conditions, thus helping people get an urgent loan with bad credit in India. Let’s check out which lenders give personal loans with bad credit in India.
What Do You Mean By ‘Bad Credit’?
Firstly it’s important to understand what “bad credit” really means. Technically speaking, a bad credit loan means loans that are provided to those that have low credit scores.
The most common reasons due to which individuals might land up with bad credit are –
- Defaults/late payments on previous and ongoing loans or credit card balances
- High usage of credit cards or a lot of hard enquiries
- Those who lack a credit score because they have little or no credit history. (Never accessed credit in the past)
Building a history of on-time payments and lowering your credit utilisation are a couple of things that could help you raise your credit ratings.
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Disadvantages Of Availing A Loan For Bad Credit?
Loans with low credit ratings are referred to as loans for bad credit. In order to make up for the increased risk they assume when lending to borrowers with lower credit scores, lenders frequently modify the loan’s terms and conditions, as seen below:
- High interest rates are frequently charged for these loans.
- The repayment terms for these loans could be short.
- Sometimes, only secured loans—loans that need collateral—are offered for these loans.
Which Lenders Offer Bad Credit Loans?
If you have a bad credit score and want to know which lenders gives personal loans with bad credit or in India, here’s the complete guide:
Personal Loans for bad credit can be availed through any of the financial lenders mentioned below:
- Non-Banking Financial Companies
- Digital Lenders or online loans for bad credit
- Peer-to-Peer Lending (P2P)
Non-Banking Financial Companies
Non-banking financial institutions have more lenient lending terms. Because of this, they are referred to as low credit score personal loan lenders. Even with a low credit score, you have a good chance of securing a low-value, short-term loan. Even borrowers with credit scores as low as 360 may be approved for loans by some NBFCs. Top NBFCs that provide loans for those with negative credit include:
Name of NBFC Rate of Interest
Tata Capital 10.50% p.a. onwards
IndiaBulls Dhani 13.99% p.a. onwards
Fullerton India 11.99% p.a. onwards
Muthoot Finance 14.50% p.a. onwards
Bajaj Finserv 13.00% p.a. onwards
Digital lenders use web and mobile apps to conduct business. They provide loans with a short duration and a low principal amount. They grant loans to candidates with low credit scores following a prior eligibility assessment. The top online lenders providing personal loans for bad credit are:
Name of Digital Lender Rate of Interest
PaySense 16% p.a. onwards
Money Tap 13% per month onwards
Early Salary 1.50% per month onwards
Money View 1.33% per month onwards
The Best App To Borrow Money In Times Of Emergency At Low Interest Rates
Peer-to-Peer Lending (P2P)
This kind of lending enables borrowers to borrow loans from other individuals, thus eliminating middlemen. Requirements for these loans vary, but your credit might not be scrutinized as closely by P2P lenders as by traditional financial institutions like banks.
Best Loan Options for those with Bad Credit Profile
Here are some other options if you have a bad credit score.
You must give gold to the lender as collateral in order to obtain a gold loan. Lenders typically disregard applicants’ credit scores because a secured loan is secured. Additionally, Gold Loans typically have quick processing, quick disbursements, and flexible payback schedules. Loan amounts often range up to 75% of the lender’s estimated worth of the gold, and interest rates start at about 7% per year.
Loan Against Property
Those who have a residential, commercial, or industrial property registered in their name may also choose a loan against property (LAP). Loan terms for LAP typically range from five to fifteen years, with an interest rate starting at around 7.35% per year. Some lenders, however, provide LAP tenures of up to 20 years. The valuation of the property and your ability to repay the loan will determine the loan amount. LAP is very useful for people who want sizable loans and want to repay them over an extended period of time.
Loan against Securities
You can choose a loan against Securities if you have investments in mutual funds, shares, debentures, etc. The securities you choose to offer as collateral to the lender, the LTV ratio, the current state of the market, and the lenders’ procedures for assessing credit risk will all affect the loan amount and interest rate you are qualified for.
Need Money Urgently? 10 Ways to Get Instant Cash for Emergencies
The Money Club is Fintech Company which offers a safe and secure mobile platform for P2P chit fund-based savings and borrowings. . Its community banking app aims to make saving, investing, and borrowing money more efficient. It is a very convenient tool for a common man living in a semi-urban or rural area to raise money for a foreseeable event in which he may require a significant amount of cash, such as payment of children’s college fees, daughter’s/wedding, son’s business capital requirements, and so on.
Moreover, if you’re looking to take a loan that too with you have a poor credit score, it can be quite difficult to apply for it in a bank. If you try to get a loan from moneylenders they ask for security and charge high rates of interest. Getting a loan from NBFCs comes also comes with interest rates. Whereas, if you take the chit fund route, you are sure to save a lot as the interest rate is relatively low.
Let us take an example:
Rishi enrolled in a chit plan of Rs. 20,000 for which he contributes Rs 1,000 every month. After the 3rd month he is faced with a medical emergency. His credit score is low so he cannot get a loan from the bank. But he has a very good option to bid and get a lumpsum amount. By paying only Rs 3,000, he is eligible to bid on the entire amount of Rs 20,000 that too at low rate of interest as compared to banks. Isn’t it the best way of getting funds in need?
So, what are you waiting for? Join The Money Club and forget your worries about a bad credit score.
Different Ways to Borrow Money In India
Numerous factors can contribute to someone having a low credit score. Furthermore, improving one’s credit score from a low one requires time.
However, a credit crunch could occur at any time. Do not worry if your credit score is low; The Money Club nevertheless allows you to obtain funds despite having poor credit.
FAQs on Bad Credit Loans
A credit score is recorded on a scale of 300-900. It is suggested to maintain a credit score of 750 and above to avail of loans on favourable terms.
Between 800 and 900 – Excellent
Between 750 and 800 – Good
Between 625 and 750 - Average
Below 625 – Bad
Your principal loan amount will be sanctioned at a lower principal amount the lower your credit score. A negative credit score typically prevents financial institutions from lending more than Rs. 5 lakh to a person. The loan eligibility will depend upon the applicant’s profile.
The documents required for a bad credit loan include:
Salary account statement for the last two months
Salary slips for the last two months
Passport size photographs
Copy of rental agreement if you reside in a rented house
You can go to the lender's official website to apply for a personal loan with a bad credit. Submit the necesssary information and the required documentation. You can then choose the loan amount you wish will be suitable for you and the tenure. The loan money will subsequently be paid to your bank account within 24 hours if the lender determines that the documents and information you provided were accurate after reviewing them.