Personal Loans in recent times The number of borrowers has increased rapidly. However, after the strictness of the Reserve Bank of India (RBI), many banks are reluctant to give personal loans. The banks that are giving loans are choosing only those customers with good credit scores. Good credit score means that banks are giving loans only to those whose CIBIL score is more than 750. In such a situation, if your CIBIL score is below 620, then banks are refusing to give loans. If you are also struggling with low credit score and banks are refusing to give loans, then you can turn to ‘subprime’ personal loans. Let’s know what type of personal loan is this and how banks will give you loans even with a bad credit score.
Banks give priority to repayment capacity
In the changing times, many banks are giving loans by looking at the repayment capacity of the borrower instead of the credit score. This method is different from traditional lending, in which the loan section mainly depends on the credit score. Banks give ‘subprime’ personal loans keeping these things in mind.
Income and employment track record: In ‘subprime’ personal loans, banks do not check the credit score. They ensure what your income and employment track record has been. If they are satisfied, they give the loan even if the credit score is bad.
Debt-to-Income Ratio: Your total debt is compared to your income using the debt-to-income ratio. A high ratio indicates you may have difficulty repaying new loans.
Down Payment or Girbi: If you are able to make some mortgage or down payment then banks do not hesitate in giving loan.
Do subprime loans affect credit score?
This depends on how well you repay the subprime loan. If you make your subprime loan payments regularly and on time, your credit score will increase. However, if you miss payments, your credit score will deteriorate significantly.
How to apply for a subprime loan?
Applying for a subprime personal loan is similar to applying for any other loan. You choose a bank that offers subprime personal loans. Then, select the bank that offers the best loan terms based on your needs. Check the prices and interest rates, taking into account the origination fees for the loan. Even a slightly lower APR can increase the cost when fees are included. Choose a loan that fits into your spending plan.
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