Let's take a look at how you can go about securing a Personal Loan with a bad credit.
What's Actually Considered a Bad Credit?
Having a low or bad credit score can affect your chances of getting your Personal Loan approved as lenders would consider you an untrustworthy applicant. Your credit score can get affected when you miss clearing your credit card bills, loan EMIs, or any other debt payments. Generally, a credit score above 750 is considered good by most lenders. So, if you've a score below that, your chances of getting a loan sanctioned can be quite challenging.
How can you Consolidate your Debt?
Your credit score will influence the amount of loan you're eligible for. Factors like interest rates, tenure, and the EMIs you get would also depend upon your current credit score. This means that if you have a low credit score, you might end up getting a small loan. However, a rating above 750 can fetch you a high loan amount with a low rate of interest.
Your lender can also consider your income stability, employer, and other financial investments you've made in the recent past. They will also take into account your debt-to-income ratio (total monthly debt/net monthly income) to ascertain your eligibility for the EMIs of the new loan. In addition to that, the number of times you've defaulted on the loan and your existing bank balance would also influence your eligibility for a Personal Loan. You can calculate the EMIs you'd be eligible for paying using an online EMI calculator for personal loan. This will help you plan your budget better and also understand your financial standing.
How to Improve your Odds?
Before you come to the conclusion that you're not eligible for debt consolidation, it's advisable to take necessary steps to improve your chances of getting one. For instance, you can consider using your home equity as a mortgage for consolidating your loan. This way, you can avail lower interest rates on the loan and be eligible for a higher loan amount.
You also need to research and find a good loan deal that comes with better terms and conditions than your existing one. Also, avoid taking more loans or credit as it would increase the strain on your debt consolidation.
Now that you know what you need to do to increase your chances of getting approved for debt consolidation with Personal Loans, don't hesitate to consider this move. Ensure that along with consolidating your debt, you also commit to better financial habits and improve your credit standing in the future "Know how to increase your credit score".