The approval of your personal loan application directly depends upon the credit score you have maintained. Having a low credit score can affect your loan approval and reduce your chances of getting funds via a personal loan. But that doesn’t mean that you cannot get a personal loan if your credit score is not on the higher side. There are a number of ways that can help you get financing according to your current financial requirements.
Eligibility Criteria for a Personal Loan
Every personal loan in Malaysia comes with a definite set of requirements you need to meet. This mainly includes the following:
- Age requirement: Most of the loans available require you to be older than 21 years of age at the time of application and not older than 60-65 years of age before the term matures.
- Nationality requirement: Most of the banks offer loans only to the Malaysian citizens. There are a few banks and financial institutions that provide foreigners working in Malaysia for a definite duration.
- Income requirement: You are also required to meet with the minimum income requirement of a loan scheme to be deemed eligible. This may vary from bank to bank.
- Other requirements: Other requirements for a loan include a higher credit score and a low debt-to-income ratio.
If you meet with all the above-mentioned requirements, your personal loan can get approved without any obstacle. But if you fulfil all these criteria except the credit score requirement, your chances of getting a loan approval can drop.
What is a Bad Credit Score?
Your credit score is a 3-digit number that helps the financial institutions and banks understand your credibility. The following table contains the credit score range:
|744 to 850||Excellent|
|718 to 743||Very good|
|697 to 797||Good|
|651 to 696||Fair|
|529 to 650||Low|
|300 to 528||Poor|
Most of the banks and other financial institutions won’t approve your personal loan application if the credit score is low or poor. In such a case, you can turn to other options that can provide you with financing of your requirement. Let’s look at how you can get funds even with a low credit score.
Ways to Get Financing with a Bad Credit Score
Taking Help of Credit Unions
If your credit score is coming in the way of getting a personal loan, you can take the help of credit unions. There are a number of banks that provide you with personal loans even with a bad credit. But these loans come at a higher interest rate range than usual. It’s better to turn to the credit unions in such a case. You can get funds at a range of affordable interest rates with these unions by taking up membership of these unions.
Opting for a Payday Loan
If your financing requirement is not too high, you can also take up a payday loan. A payday loan provides you with funds that you can pay back on your upcoming payday. Although the interest rates associated with payday loans are a bit on the higher side, these loans can help you earn short-term benefits. Another advantage of these loans is a shorter approval time.
If you can’t get a loan on your own because of a low credit score, you can ask a relative or a close friend to accompany you to the loan process as a guarantor. A guarantor takes the responsibility of your repayments for the loan and assures that the repayments will be made in time. Although, the interest rates might be higher with a guarantor loan, but the chances of getting a loan approval with a guarantor also increases. But you are recommended not to miss any payment of the guarantor loan as any default of missed payment may affect the guarantor’s credit score along with your own score.
Secured Credit Loan
You can use your own property as a collateral to get a secured loan. Taking a loan against your property is recommended for long-term borrowers who are in need of a large amount of cash. Kindly keep in mind that not all properties can be used as a collateral and the repayment of the loan can take longer than a personal loan repayment. These loans are generally given on houses and have a relatively lower interest rate range.
Co-signing a Loan
Another way to receive funds from a loan is by applying for a loan on a joint basis. If you split the responsibility of the repayments of a loan with a co-signer, your chances of getting a loan can get better. It is highly recommended for you to read the terms and conditions associated with co-signing a loan as some institutions allow only the immediate family members to co-sign a loan with you.
Overdraft on Your Fixed Deposit
Another way of getting funds of your requirement is by using the overdraft facility on your FDs. Although not every FD comes with an overdraft feature, it can be helpful when you require a relatively smaller amount of money. You can get the funds quicker with FDs and make repayments over a flexible repayment term.
Funds from Insurance Policies
Another way of getting the funds you need is by taking out money from your life insurance policies. There are a number of insurance policies that allow you to make partial withdrawal at the times of need and still maintain the coverage you opted for. Keep in mind that you cannot withdraw the entire amount from the policy. This option can prove to be helpful in cases where you need a smaller amount of time for a short-term.
Withdrawals from EPF Contributions
You can also take help of your EPF contributions to get funds at the times of need. Although there are some conditions attached to withdrawing funds from EPF and you can extract cash only for medical emergencies, education purpose, and offsetting the mortgage loan balance among a few other reasons.
Cash Extraction from Credit Cards
There is an array of credit cards offered by a number of banks that allow you to withdraw up to 100% of the credit limit in the form of cash. These facilities come with a relatively lower interest rates than a card’s finance charges and allow you to make repayments over an agreed-upon repayment tenure. This option can prove to be beneficial when the funds required are not too high and the most of your credit limit is unutilised.
Your credit score plays an important role in the approval process of your personal loan. A bad credit score can introduce obstacles in the way of a personal loan approval. But there are a number of ways that can help your get your desired funds even with a relatively lower credit score. You can take the help of these methods to obtain funds and repair your credit score to get lower interest rates with your loans in future.