A bad credit score means non-availability of loans which is dangerous for your financial growth. Imagine you want to buy a house but you are not eligible to get a loan due to a low credit score.
This type of scenario can be very limiting as well as harmful to your finances. Although you can improve your credit score easily the time required for this will be a lot.
To ease out this, you have an option to get a low even with bad credit. Some various banks and NBFCs provide personal loans to individuals who want to get loans.
Bad credit loans can also help you build your credit score and are recommended by finance experts to those who have lower credit scores.
If you have a bad credit profile or low credit score then you can opt to get a bad credit loan to improve your overall credit profile.
In this article, we will discuss How to Get a Bad Credit Loan?, the documents required, the process of getting a loan with bad credit, and much more.
But first, let’s find out why you have a low credit score.
Table of Contents
Reasons for Low Credit Scores
The following are the reasons for low credit scores-
- Untimely payment of your credit card bill is usually the big reason why credit scores get low
- Delays or defaults on your previous loan highly affect your credit score and decrease your credit score immediately
- No previous loan taken meaning no financial credit record is present in your name
- Your credit card/loan application failed
Pros and Cons of Taking a Bad Credit Loan
Getting a bad loan is not always beneficial at the same time when no one is providing credit, taking a bad credit loan can be a game saver. The following are the pros and cons of taking a bad credit loan-
- Bad Credit loans always comes with higher interest rate along with higher fees which can make the overall cost of a loan go up
- Bad credit loan is usually for shorter periods anywhere from 12 months to 48 months long
- A bad credit loan may need a co-signer with a good credit score who can guarantee the default
- Helps you repair your damaged credit score and improves your credit score
- A bad credit loan is more likely to be accepted as the requirement of taking the loan is a low credit score
- You can use the bad credit loan for any purpose whether is for purchasing stuff or as a personal loan
How to Get a Bad Credit Loan?
You can follow these steps to avail the bad credit loan-
- The very first step is to identify the banks or NBFCs that provide bad credit loans with lower regulatory requirements
- After finding those banks or NBFCs, you can either contact them by visiting the bank branch or find the online loan application portal
- Usually, it is recommended to visit the bank branch as you’ll be able to negotiate much better and the chances of approval are also high
- Now, you’ll have to contact the bank representative regarding the loan requirement and explain to him/her regarding the situation
- Here you’ll have to negotiate the loan terms like tenure, requirement amount, interest rate, etc.
- After negotiation, your loan application will be filled with your details like name, address, education qualification, etc.
- After filling out the application, you’ll have to submit the documents mentioned below followed by paying the processing fee
- Your application will be processed and in a few days, you’ll be notified about your loan status
- After the approval of the loan, the loan amount will be disbursed into your account and you’ll be able to use the funds
- The repayment schedule will also be sent to you via email
Documents Required for Bad Credit
The following are the documents required for a bad credit score-
- Identity Proof- Driver’s license, Aadhar Card, Passport, etc.
- Address proof- Utility bill, credit card bill, etc.
- Bank statement for 6 months
- Salary slip for 6 months (Employee)
- For self-employed professionals/businessmen: Company Registration Information, TIN/ Service Tax registration proof, 3 years profit and loss statement, 3 years balance sheet, and ITR for the past 3 years.
FAQ
It depends on the policy and your profile of the bank or NBFC, if your profile is weak then you may need a co-signer with a good credit score as a guarantor.
Yes, but the chances of getting a loan will be very low or the terms will not be favorable. If you do not have a credit score, the best way to get a loan is to first take a small loan and try to build your credit history and then take a loan which increases your chance of getting the loan.
The credit score is measured with numbers ranging anywhere from 300 to 900. Your score can lie in between these numbers and the lower the number is i.e. nearing 300, your credit score is low and the higher the score is, i.e. nearing 900, the higher the credit score is. Generally, a credit score of 750 and above is considered a good profile.
A credit score is measured using a financial algorithm by evaluating various aspects of the finances of an individual. If your credit score comes out as 450 then it is a very low credit score and with this score, you’ll not be able to get any loan.
The lowest credit score on the credit score scale is 300.
I’m Shiv Kumar, a graduate with a passion for finance, marketing, and technology. My journey into finance started with a desire to understand money management and investing.
Our main goal is to empower individuals through financial education. We believe that everyone should have the opportunity to build a strong financial foundation. Whether you’re a seasoned investor or just getting started, we provide articles, guides, and resources to help you navigate the financial landscape.
I invite you to join our community of financially savvy individuals. Feel free to ask questions, engage with our content, and explore the topics that matter to you. Together, let’s take control of our financial futures.
