There are various factors which prevent individuals from accessing formal finance, such as the inability to offer collateral and ineffective unit economics of large financial institutions. But solutions are on the horizon, with advances in data science, new initiatives from the Government of India, and changing consumer behaviour creating opportunities to overcome this barrier. Listed below are some of the main ways to access finance without credit. These include: a. Taking out online payday loans. These loans are short-term, and can range from $100 to $1000.
b. Avoid payday and other cash advance loans. These methods are often short-term and come with high interest rates. Payday loans, for example, carry APRs of 400%. Collateral loans, on the other hand, require a down payment of at least 10% of the value of the car. While they don’t require a credit check, they carry high interest rates and the lender can repossess the car if the borrower fails to repay the loan.
c. Explore other sources of finance. Personal loans offered by traditional banks, online lenders, and peer-to-peer lending sites are all options. Most are advertised as small unsecured loans, and the decisions are based on a borrower’s creditworthiness and financial strength. There are also lenders who offer secured loans, but these have additional risks and cost more to obtain. However, no matter what the method of borrowing, it’s important to remember that bad credit loans are not without risk.