Emergencies can arise out of nowhere and often lead to financial distress. There can be different types of emergencies, including medical needs, unplanned travel and a big-ticket expense like vehicle repair, or house renovation. One thing to keep in mind is that during a scenario like this, you need to have enough cash to keep you cushioned. However, this may not be possible all the time, and it may take a toll on your savings and investments.
Availing an emergency loan could be helpful to avoid financial distress when you are running short of cash. The tech-driven digital lending platforms, like Moneycontrol, have made it easier to get instant emergency loans. Getting an emergency loan primarily depends on your income and credit score. A higher credit score could help you in getting quick approval for an emergency loan.
Those with a bad credit score or no credit history may find it difficult to avail a personal loan. However, many lenders are now offering instant loans even for those with not so great credit history, though the interest rates could be higher depending on the terms and conditions.
Let’s take a look at why credit score matters and how to get an emergency loan for a bad credit score.
Emergency loan and bad credit scores
Many apps and digital lending platforms in India are offering emergency loans to users, with flexible repayment terms and reasonable interest rates. These loans are disbursed quickly, within a few minutes to one or two days depending on the lender. You can avail such loans with even credit scores below 700. A bad credit loan refers to borrowing despite having a poor credit history.
Taking an instant loan online from a trustworthy platform and lender is generally safe, and since they are unsecured, you won’t need to offer any of your assets as collateral to secure the loan.
However, while disbursing an emergency loan, the priority is always given to your credit score. A credit score is a three-digit number that evaluates your creditworthiness as a borrower. It ranges from 300 to 900, helping lenders get an idea about how reliable you are for repaying loans.
You can check your credit score for free on the Moneycontrol app and avail personal loans up to Rs 50 Lakhs from eight leading lenders. The personal loans start at an interest rate as low as 10.5% per annum. The application process is seamless as you can complete the KYC verification and EMI payment set up digitally.
How to get an emergency loan for bad credit score
Even if your credit score is bad, you can get an emergency loan. This is because other than credit score, the bank may consider other factors like income, loan amount and more. If you fulfil those criteria, your emergency instant loan will be disbursed within minutes. Here's what you can do:
- Provide income proof: If your low credit score is due to past financial difficulties, lenders will want assurance that you can now repay your EMIs on time. To assess this, they will review your current income, job stability, work experience, and other financial factors.
- Apply for a smaller loan: Since individuals with low credit scores are considered higher risk, lenders are unlikely to approve large loan amounts. The lenders feel more comfortable approving smaller loans for borrowers with bad credit.
- Include a co-applicant: If your credit score is low, adding a co-applicant with a higher score can improve your eligibility. This provides the lender with extra assurance that the loan will be repaid on time.
- Opt for collateral: While emergency loans are traditionally unsecured loans, the bank may ask you to provide collateral if your credit score is low. This can be a good option if you are confident of repaying the debt on time.
- Correct errors in your credit report: Sometimes, errors in your credit report can unfairly lower your score. By reviewing and correcting any inaccuracies, you may see an immediate improvement in your loan eligibility.
Through the Moneycontrol app and website, you can now apply for an emergency loan of up to Rs 50 lakhs from eight lenders. For these loans, the interest rates start 10.5% per annum. The process is completely paperless, allowing you to get an instant online loan with ease.
ALSO READ: Emergency loan apps: Check Pros and Cons before borrowing
Conclusion
With a bad credit score, while you still may be eligible for getting an emergency loan but it has a few cons. The interest rate could be high and the bank may also provide you with a smaller loan amount. It’s prudent to check multiple offers before applying for a loan and taking steps to improve your credit score.
Disclaimer
This piece/article was written by an external partner and does not reflect the work of Moneycontrol's editorial team. It may include references to products and services offered by Moneycontrol.Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
