Taking a loan or other form of credit at some point of time in life is inevitable. Whether it is requirement for buying a house or to fund the education of child or any other exigency, the fact remains that it is practically impossible to survive without access to credit in today's time. The quantum of loan that you would be able to get basically depends upon the repayment capacity. But the other important factor that impacts the decision of the lending institution is your credit profile.
The credit profile can be termed as the possibility of an individual to pay up the credit facility. Based on the historic loans and other credit facilities held by the individual, the bureaus predict the possibility of him defaulting over a certain period of time. This forecast is depicted through numeric expression called credit score. Lower score depicts higher chances of the borrower to default.
Bad credit is another term that is used to identify the poor CIBIL score. The bad credit can be an outcome of two factors.
Frist, if the person had in past not been able to pay up the loan obligations or has had consistent delayed payments.
Second, a low score which is an outcome on account of other important factors like inadequate exposure or a long inactiveness on bureau (since a credit facility has not been taken for a long time) can also be termed as bad credit.
Any lender would want the money to get returned in the contracted time and all dues paid up. Any delay or lapse in repayment would add to stress on the balance sheet. Hence the people with bad credit would find it difficult to have access to loans.
While it is difficult to have seamless access to loans by people with poor credit records, there are some ways that can help them to get an approval on loan. Before this it is pertinent to understand that no product like personal loan for CIBIL defaulter exists. One has to work on improving the credit profile and that can only be possible through a loan. In this chicken and egg situation how can one improve if he is barred from getting a loan? Read on to know the solutions.
Gold Loan : One can take a loan against the gold since it does not rely upon the credit profile. The disbursals are instant and also get reported to the bureau.
Small ticket Personal Loan : There are small ticket personal loans that may be charging a higher rate of interest but it could help in aiding the cause of improving one's credit profile.
Consumer loans : The consumer loans are also not very stringent on credit health and one may be able to get approved on these if the past issues are not highly concerning. These loans also get reported to the bureaus and will be of help in the over all scheme of things.
Secured credit card : This is a product that every single individual with poor credit score must take. Since there is no risk involved, the banks do not think twice in issuing such a card. While the credit limit is issued against the fixed deposit, the card functions just like another other normal credit card. This product is a must and would help in kick starting the journey towards a better credit profile.
P2P : there are multiple platforms that are aggregating loan disbursals from various individuals. However, since this segment is still not regularized like a bank or NBFC, the reporting on repayment to bureaus also does not happen.