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Defaults are troublesome and can have wide-ranging impacts on your life and finances, terribly affecting your quality of life in the process. They’re often seen as signs of poor financial management something that isn’t taken pleasantly by lenders. The good news is that they aren’t the dead end, really. They certainly induce setbacks by causing a string of rejections when you apply for new loans or credit cards, but things can definitely change if you take corrective measures. Before we go on to look at how to cope with a default, let us understand what defaults actually are.
Technically, a default is a missed monthly payment towards a loan/credit card for a period of more than 30 days. Anything past the due date is considered a late payment, and late payments aren’t a good thing either. But non-payments have a more serious impact on your credit score, sometimes causing your score to drop by 50-80 points (just a single default). Even a single default in the last 6 months to 1 year can ruin your chances of getting approved for a loan or credit card, despite your income being reasonably good.
Individuals with a good credit score often get approved for higher loan amounts get offered a better interest rate, and more flexible loan terms. That said, the importance of a good credit score cannot be understated by any margin. More than just inflicting rejections, a poor credit score can affect your quality of life, limiting your purchasing power and consequently impacting your standard of living. But hold on they don’t really spell endless doom.
Follow these factors that may help you get a personal loan even if you are a CIBIL defaulter:
If you have a good income presently, you are bound to have improved repayment capacity. This should go a long way to gather an approval on your loan application irrespective of your CIBIL score.
If your CIBIL/Credit score is poor and your husband/wife has got a good CIBIL score, then you may ask for their assistance. You can get your loan application approved by making your spouse a joint loan holder.
You will be allotted loan on collateral such as assets, shares, gold, FDs. There are many other products available as well. Banks don’t complete the process of generating CIBIL report for such instruments.
If you are now financially stable but your credit score isn’t, you may still get approved for a loan if you have a guarantor. This will remove the risk-factor associated with lending you money. You will need to make sure that your guarantor has an excellent credit score. However, note that if you default on this loan too, your guarantor will have to repay the outstanding balance. Also, their credit score will take a hit in case of default on your part. This is why many are apprehensive about being guarantors for loans.
If you had previously not paid the EMIs on time, your credit score must have gone low. But if you find a job where you get high income and discuss this with the bank, then they will grant you a personal loan.
Many Fintech lenders offer debt-consolidation loans. If you have multiple credit cards or personal loans, there is a high probability that you’re headed towards a potential default. Prevent this from happening by taking out a personal loan for debt consolidation and direct your repayment towards a single source. Besides helping you ward off a default in the future, it can also help relieve a lot of stress.
Peer-to-peer lending is a form of crowd-funding used to raise loans for people who need to borrow, from people who want to invest. This is quite a good practice abroad. Yet, it is being applied in India slowly. Remember that on such loans, the rate of interest is very high and the amount is smaller.
If you are in a financial crunch, you can always request your employer for a salary advance. You will need to justify your ask with valid reasons for your employer to consider your request. Being in the CIBIL defaulter’s list is going to create barriers. Before you decide to take an additional loan, you should attempt to clear the loan you have defaulted on. You should also find a way to clear your name from the list and improve your credit history, which will then improve your CIBIL score.
There is a reason this fund was introduced in the first place to ensure your retirement is secure. However, if you are in a financial crunch and are in desperate need of money, you can consider withdrawing your provident fund. Now, you are only allowed to withdraw this fund partially under certain circumstances.
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