Loans
A financial emergency can crop up anytime. But unlike in the past, today, the whole financial ecosystem has moved online, allowing you to apply for Personal Loans and obtain instant funding. Earlier, lenders generally insisted that you back your loan application with a guarantor. But today, you can apply for guarantor-free loans, even if your credit score is low. This article explains the different ways you can apply for no-guarantor loans despite a low credit score.
Generally, when you apply for a Personal Loan, your lender asks you to show your credit score, a 3-digit metric that gives them a glimpse into your credit handling behaviour. If your score is high and you can prove that you have a stable income and are suitably employed, lenders do not insist on guarantor-backed applications. However, the lender may ask you to provide a guarantor-backed application if your score is low. If you don’t have either a good credit score or a guarantor’s backing, you may need to explore alternative methods to get your loan approved.
You can explore several options to get your no-guarantor Personal Loan if your credit score is less than 650/900, which is typically the minimum credit score required by most lenders. You can:
If your credit score is low and you cannot get a guarantor to back your Personal Loan application, you can consider applying for the loan with an immediate family member with a good credit score. If your joint applicant draws a monthly income exceeding ₹25,000 and has a credit score above 750, you should have no trouble obtaining a no-guarantor Personal Loan.
Another way to get the loan, despite the low credit score and lack of guarantor backing, is to show that you earn an excellent monthly income. While the minimum income requirement is only ₹25,000, if you can show that your net monthly earnings exceed this amount significantly, lenders may be willing to overlook your low credit score. They may not insist on guarantor backing at all.
You can show that your income sources go beyond the conventional salary. If you have any assets or investments through which you earn a little extra every month, or if you are making money through a side hustle, you can show your income from these additional sources to prove your repayment capabilities.
If your income is lower than or barely meets the minimum requirement by the lender, you can consider going for a collateral-backed loan application. Consider applying for a loan with a bank with which you have an existing relationship and investment products (such as Fixed Deposits). You can pledge the FD as collateral with the bank and obtain the necessary funds.
A high debt-to-income ratio (DTI) signals to lenders that you are already handling significant debt, which could impact your ability to repay another loan. Before applying, try to pay down some of your existing debts, lowering your DTI. Reducing your DTI makes you look more responsible financially and assures lenders that you have the capacity to take on an additional loan.
When you need funds during financial emergencies, you may be inclined to select a reputed lender following fair lending practices. HDFC Bank is one such lender you can rely on to fulfil your funding needs. We provide both, and collateral-backed and unsecured Personal Loans. If you fit our eligibility criteria, you can apply for the loan online within minutes and enjoy rapid disbursement.
*Disclaimer:Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Personal Loan at the sole discretion of HDFC Bank Limited. Loan disbursal is subject to documentation and verification per the bank’s requirement. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.