Credit score under 650? Here are effective ways to raise a personal loan

Are you planning to raise a personal loan while your credit score is lower than 700? And what if it is even lower than 650? There are some banks which give loans to applicants who have a slightly poor score however, the loan amount can be lower, or the interest rate could be higher.

For instance, if you want to raise ₹5 lakh as loan which the bank is willing to lend at an interest of 11.5 percent. The bank may give the same loan to an applicant with a low credit score but at a higher interest rate of, say, 12.5 percent.

On Bank of Baroda’s website, for example, the interest rates on personal loan range between 13 to 18.25 percent, and the difference is a function of the credit score. This means applicants with an impressive score may bag a loan for 13 percent whereas applicants with poor score could get it for as high as 18.25 percent.

Notably, it is possible to raise a loan despite a poor credit score. But you need to keep the following points in mind.

Different ways to improve your credit score

I. Higher interest rate: The bank may agree to lend you a loan but for a higher rate of interest. So, if you are comfortable coughing up a higher EMI, you may manage to get a loan.

II. Small amount via instant loan: There are a number of fintech platforms, which offer small loan amounts instantly. But make sure that this fintech platform is recognised by the regulator i.e., either it is approved by RBI, or a partner of an RBI-approved NBFC.

III. Pre-approved loan offer: There could be a pre-approved loan offer which you want to avail. However, these offers generally have a higher rate of interest.

IV. Check your credit score: It is important that you check your credit score from time to time. Sometimes, there is a mistake that needs to be rectified. If you correct that mistake, your credit score could improve, thus improving your chances of procuring a loan.

V. Secured credit card: If you still fail to get a loan because of the poor credit card, you can take steps to build your score gradually. You can do this by getting a secured credit card and using it for some time to build the score. Thereafter, you can apply for a personal loan.