Getting a loan may be difficult if you have a low credit score. However, if you are in urgent requirement for loans, here are some quick solutions.
Your credit score plays a key role in determining your borrowing ability when you approach a bank or financial institution for a loan. Ranging from 300 to 900, the score tells about your credit history and repayment patterns. A score of 750 or higher is considered to be ideal by many lenders. A score below that can lead to paying higher interest or even rejection of loans. Approaching banks repeatedly and facing rejection may knock down your score further. While you can work towards improving your credit score by making regular payments of loan EMIs and credit card bills here on, if you are in urgent requirement for loans here are some quick solutions.
Rely on gold loan
Known for quick disbursal, gold loans can help you raise fund during emergencies to meet any end. This is a secured loan given against gold articles pledged by a borrower. The loan amount is usually about 80% of the value of the gold collateral submitted. You can approach a gold loan company or a bank for a gold loan. Interest charges on gold loans are typically on the lower side when compared with personal loan. And it serves as a good short-term loan option with the tenure ranging from one month to five years. The paperwork involved is less and the processing time is short as well.
Get a co-signer with good credit score
Explore the possibility of taking a joint loan with a co-applicant, say your spouse or other relatives, to fund your needs. The lender checks the credit history of both the applicants. So, even if your score is low, if your co-applicant’s score meets the benchmark, you stand a higher chance to get an approval. You can also opt for a loan guarantor with a good credit score. However, this would also mean that the loan guarantor will be liable to cover your back in case of default in repayment on your part. So make sure, you both are on the same page.
Opt for collateral loans
Collateral loans are taken against investments and assets such as shares, endowment plans, FDs, property, PPF etc. The credit amount would depend on the value of the assets. The interest rate would vary basis the type of financial product you pledge.
Borrow from friends and family
If you are in need for a smaller amount for a short period of time, you can borrow from friends or family members. You can pay them back once the crisis gets over. The advantage here is the loans are interest-free. However, do make sure you have a repayment plan in place. You can also give the lender a post-dated cheque to assure them of the repayment plan you have.
Opt for advance salary from your employer
Some employers allow you to avail advance salary for a few months against a low interest or no interest at all. The loan amount then is adjusted through deductions from your salary every month. However, this amount will be taxable as per your applicable tax slab, as it is lent out to you in the form of salary.
(The writer is CEO, BankBazaar.com)