Poor credit score is a clear indication of bad fiscal management by a person. Banks and lenders become extra cautious and give a second thought before lending to such borrowers & get credit rating. Financiers certainly play safe because they do not want bad debts to dent their business.
Though poor score gives a negative impression, but it is not an authentic proof that the borrower will not pay back. One of the reasons for this score could be that the applicant has too many open accounts. However, this does not indicate that the applicant will not pay back the amount borrowed.
Two loan options for people with bad credit score:
All of us are in dire need of money at some point in our life. If this is your scenario currently and you need money badly, then there are a number of money lenders who offer credit to people with bad credit rating. The following are your options –
- Secured Loans – Under the secured loan setting, the borrower pays a collateral security against the amount borrowed. This security needs to cover a good amount of the principle that the applicant is applying. The best part about this loan structure is that rate of interest charged on secured loans is similar to the ones offered to people with excellent credit score.
Why is this kind of borrowing an excellent option for people with poor credit score?
Under this type of borrowing, the applicant offers a security to the lender against the amount borrowed. Hence, he is opening a positive account for himself. For instance, if the applicant has pledged gold worth Rupees 3, 00,000 against the amount of Rupees 5, 00,000, he is, in turn, building his score. This is because the current transaction will reflect in his credit report till it is cleared.
This transaction; in the future will help the applicant get loans from mainstream lenders at reasonable interest rates.
- Unsecured Loans – This loan is meant for people who do not have any security that can be offered to the lender. The notable thing under unsecured loans is that the rate of interest is extremely high. Sometimes it’s 30% the principle amount. Hence, until you are in a crucial state, opting for an unsecured loan is a bad financial decision.
Be careful of small prints and ensure lenders do not take advantage of your situation.
Though getting a loan against a poor credit score is difficult, but it’s certainly not impossible. However, the applicant needs to be extremely cautious when it comes to signing any documents.
“Stay Alert! Fine Prints can Cost you a Bomb.”