Outstanding credit card dues or loan EMIs can sometimes lead an individual into a debt trap, disrupting his/her financial health. In such a scenario, a debt consolidation loan or a personal loan can come to the rescue. A recent survey by IndiaLends shows that almost 72% of Indian people have expressed the wish to opt for a personal loan to fund unavoidable financial liabilities, including consolidating debt.
Nonetheless, borrowing such options require applicants to possess a good credit score that several debt-ridden individuals lack. Those with a bad credit score can also apply for a personal loan if they follow some smart tips.
Tips to avail a debt consolidation loan with a low credit score
A personal loan for debt consolidation is one of the most preferred credit options for several regular borrowers. While it is recommended for borrowers to possess a high credit score before opting for such a loan, this aspect is negotiable.
Those looking to avail a personal loan with bad CIBIL score can try following these below-mentioned tips.
- Apply for a lower loan amount
It is advisable to avail a comparatively lower credit amount when applying for a loan with a poor credit score. Doing so will convince the lender that you are capable of repaying the borrowed amount without default.
While most reputed financial institutions offer a personal loan for debt consolidation of up to Rs.25 lakh, you can choose the amount you need immediately. It also effectively lowers the EMI payable against this loan.
- Look for Pre-approved loan offer
Select lending institutions like Bajaj Finserv in an effort to make the loan application process straightforward and quickly extend pre-approved offers to customers. Apart from a personal loan, such offers are also applicable to other credit options like business loan, credit card, etc. One can check the pre-approved offer instantly by entering contact number and name.
It allows you to learn beforehand how much loan amount you are eligible for and helps you to select a debt consolidation plan accordingly.
- Choose a co-applicant
Individuals with poor credit score can also opt for a joint debt consolidation loan where the co-applicant possesses a high credit score. Doing so will convince the lenders about their repayment capabilities. Opting for the loan with a co-applicant possessing a healthy credit score can also help the borrower avail more convenient terms against the advance.
- Consider flexi loan facility
It is another excellent option for individuals with a bad credit score that allows them to reduce the overall cost of servicing a debt consolidation loan. Availing this facility, borrowers can withdraw multiple times from the loan amount that is pre-sanctioned by the lender. Moreover, its interest will be charged only on the amount withdrawn and not on the entire loan corpus. This provision reduces the burden of the EMIs to a great extent.
It is crucial to know how flexi loans are revolutionising lending in India to maximise one’s benefits.
- Try improving credit score
Apart from all these tips, it is important to adopt ways to improve your credit score. Until the score does not go up significantly, you can also do so by reducing your debt-to-income ratio, by taking some steps like –
- Increasing your income
- Paying off small, manageable debts
Since a credit score plays a determining factor in loan approval, you need to focus on increasing it by undertaking effective measures.
Along with following these tips diligently, you will also need to keep some essential documents to apply for a debt consolidation loan. With such information, you can proceed to apply for a personal loan to consolidate your existing debt without hassle.