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A large number of loan applications are rejected by Banks and NBFCs because applicants have a poor or ineligible credit score. These include individuals who have bad or damaged credit which is reflected in their low credit score and those who do not have any credit history and are hence, considered ‘new to credit.’ Due to a poor credit history or lack of any credit track-record, getting a loan approved can be challenge for these individuals. If you are one of those who are struggling to get a loan due to your credit score or lack of one, here are a few alternative options for you, which will not just enable you to access credit but also improve or build your credit score:
1. Gold Loan: To avail a Gold Loan, you would need to provide gold as a collateral to the lender. Being a secured loan, lenders usually do not factor in the credit score of applicants. Also, Gold Loans usually come with quick processing and disbursals along with flexible repayment plans. The loan amount usually can go up to 75% of the gold value determined by the lender and their interest rate starts from around 7% p.a. onwards.
2. Loan Against Property (LAP): Those who have a property – residential, commercial or industry- registered in their name, can also opt for a LAP. The interest rate for LAP starts from about 7.35% p.a. with loan tenures usually going up to 15 years. However, some lenders offer LAP tenures of up to 20 years. The loan amount will depend on the property value and your repayment capacity. LAP is particularly helpful to those who need large loans which they want to repay over a long period of time.
3. Loan against securities: If you have investments in mutual funds, shares, debentures etc., you can also opt for a loan against securities. The loan amount and interest rate you are eligible for would depend on the securities that you want to provide as collaterals to the lender, along with the LTV ratio, prevailing market conditions as well as the credit risk assessment policies of the lenders. Along with these, if you have an existing relationship with a lender Bank or NBFC, you can also explore if you are eligible for –
4. Top-up home loans: If you have taken a home loan in the past, you can check with your home loan provider for a top-up home loan. Unlike a home loan, a top-up loan can be used for any need. The interest rate on top-up home loans in all likelihood will also be lower than other credit options available for home loan borrowers. Also, for those with long tenures left on their home loans, would be able to get a longer period to repay their top-up loan. While the above lending options are available for those with low credit score, it is key that you take corrective measures to improve and build your score for a stronger financial future and easier access to credit in time of need or to meet future financial goals. (Read: Tips to improve your low CIBIL Score)