Can you get a personal loan with an average credit score? Here’s how

Understanding the impact of an average credit score
A credit score is normally the first barrier for lenders to overcome while evaluating personal loan proposals. Though a good rating is ensured, a mid-grade score of 650-700 is not always a sure denial. It simply means you may be rated a moderate risk. This may be paid with a higher interest rate or more difficult repayment conditions. Knowing where you are and where the lender is with your score is where to build a successful application.

Shopping around for best opportunities
Not all the lenders are the same when it comes to treating credit scores. All the big conventional banks are more fastidious, whereas lenders and NBFCs online are more accommodative. Very few give as much importance to income stability and work experience as they do to credit score. By comparing rates among a few lenders, cross-checking the same against eligibility criteria, and through online pre-qualification websites, subprime borrowers can choose lenders more likely to fund their loans at market rates.

Income and payment ability prioritized
If your credit score is less than optimal, your ability to prove consistent income and repayment ability counts. Banks may ask for proof of salary, bank account statements, or tax returns to gauge your financial health. Higher month-to-month income, lower debt-to-income ratio, and evidence of good payment history on other loans may counterbalance the impact of a mid-grade score. Showing prudent finances ensures banks that you are able to service new debt in a responsible manner.

Offering collateral or a surety
Secured personal loans, for instance, against something like fixed deposits, gold, or other property, make you eligible. Or, having a guarantor with a clean credit history sways the balance in your favour. All these steps reduce the risk for the lender and can help you negotiate lower interest rates. Even if you prefer an unsecured loan, offering collateral as an option makes you more negotiating powerful.

Negotiating terms and conditions
Average credit borrowers needn't be intimidated into not negotiating terms. Pointing out your payment record, repayment history, or relationship with the bank might persuade some lenders to change rates or waive processing fees. Requesting a smaller loan amount or shorter tenor will also increase approval possibilities. Keep in mind, lenders have to grow their loan portfolios, and decent borrowers with average credit scores are still a safe bet.

Establishing your credit rating along the way
While still going on applying for a loan, it is a good idea to start establishing your rating. Clearing small outstanding debts, lowering your credit card balances, and refraining from taking several new loans concurrently positively affects your rating within a short while. Additionally, lenders also look into recent trends within your credit history, and so showing payments that were made on time when applying for a loan can help support improving your application. Not only does this aid in approval currently, but it also offers a chance for nicer loans in the future.