Get A Personal Loan Despite Bad Credit History

  Author: Naveen Kumar

To get a personal loan, we need to have a good repayment track record of previous loans. This is because a good credit score is a must to get an unsecured loan like personal loan. For the uninitiated, an unsecured loan is a loan that doesn’t provide the lending institution the comfort of falling back on the security of an asset like a fixed deposit (FD) or home in case of a repayment default.

If your personal loan application is rejected on account of bad credit history then it becomes very difficult to get a loan in future. Here is what you need to do so that you can improve your credit score and future chances of getting a personal loan.

Be patient It will take time to rebuild and improve your poor credit history. This may take anywhere between 1-3 years. So, you will need to be patient.

Settle all previous dues You will need to clear any outstanding loans at the earliest. If the need be, negotiate with lenders a repayment plan based on your repayment capacity. Stick to payment regime and after the final payment get the settlement letter from the lender.

Start with small secured loans You have already been denied an unsecured loan but with poor credit score. At this juncture, getting a big secured loan i.e. loan against assets, may not be easy. Start your journey of credit history improvement with small-ticket secured loan. It could be a small credit limit, credit card issued against an FD, or a small ticket loan against FD. There are lending institutions which offer such products to people with bad credit history. Be on the lookout for them.

Manage new small loans with care On taking the small secured loan, use the money and then ensure that you repay the loan. Remember, you are also establishing a loan repayment track-record. For instance, use the small credit limit credit card regularly.

Be extremely disciplined with repayment Ensure that you repay on time at all costs and you borrow only when you must.

Periodically check your credit report Keep checking your credit score and history regularly so that you can trace the improvement. Look for a bigger ticket loan when your credit score improves. This will go a long way in normalising your credit history.

So, we can clearly see that a bad credit score making you ineligible for a personal loan is not the end of the world. Take it as a wake-up call to improve your credit history. A strong financial discipline and doing the things we have just mentioned, should go a long way in helping you successfully get personal loans in the future.