Getting a personal loan is easy today as banks and NBFCs (non-banking financial companies) offer quick approval and minimum paperwork. But two things matter the most: your income and your credit score. If your credit score is high, you get faster approval, better loan amounts, and lower interest rates. But what if your credit score is low?
Don’t worry. Even with a poor credit score, you can still get a personal loan — if you follow a few smart steps. Let’s understand how.
What is a Credit Score and Why It Matters for a Personal Loan
A credit score is a 3-digit number that shows how well you have handled loans and credit in the past. It is calculated by credit bureaus like CIBIL, Experian, CRIF High Mark, and Equifax.
Your score ranges from 300 to 900.
- Above 750 = Good
- 600–750 = Average
- Below 600 = Poor
A high score shows you are a responsible borrower. A low score may make the lender feel you are risky. This can lead to loan rejection or higher interest rates.
Still, this does not mean a low score shuts all doors. Some banks and NBFCs are ready to lend if you can prove that you have a stable income or offer some security.
You Can Still Get a Personal Loan with a Low Credit Score
Here are some simple ways to increase your chance of loan approval even with a poor credit score:
1. Apply for a Small Loan Amount
If your credit score is low, avoid asking for a large loan amount. Asking for a smaller loan reduces the risk for the lender. It also increases your chances of approval because you’re not asking for too much money.
Example:
If your monthly income is ₹35,000, don’t apply for a ₹10 lakh loan. Instead, go for ₹1–2 lakhs depending on your repayment ability.
2. Show Proof of Stable Income
If you have a regular job or a steady source of income (like rental income, freelancing, or side business), show it. A lender will feel more confident if they see that you have the ability to repay the loan on time.
Also, if your salary recently increased, make sure you provide the updated payslip or salary statement.
3. Add a Co-Applicant with Good Credit Score
Adding a co-applicant or guarantor with a strong credit score and income can increase your approval chances. The lender will check both your and your co-applicant’s profiles. If your co-applicant is financially strong, the loan might be approved even if your score is low.
Ideal co-applicants:
- Spouse
- Parents
- Siblings
- Trusted friend with a good financial record
4. Offer Collateral or Security
Usually, personal loans are unsecured, meaning you don’t need to provide any security. But if your credit score is low, offering a collateral (like gold, fixed deposit, insurance policy, etc.) can help.
This gives the lender some backup in case of non-payment, making them more comfortable in approving your loan.
5. Avoid Applying at Too Many Places
When you apply for a loan at multiple banks or platforms in a short time, it creates multiple hard enquiries on your credit report. This can reduce your credit score further.
Instead, use digital platforms like Moneycontrol, BankBazaar, Paisabazaar, or LendingKart. These platforms let you check your eligibility across different lenders without affecting your score.
6. Improve Your Score While You Wait
While you prepare your documents or search for a lender, also try to improve your credit score. A small boost can make a big difference. Here’s how:
- Pay all EMIs and credit card bills on time
- Pay off overdue or defaulted loans if possible
- Keep credit card usage below 30% of the limit
- Avoid taking too many new loans or cards
- Keep your oldest credit card active — long credit history helps
What Factors Affect Your Credit Score?
Knowing what impacts your score can help you make better decisions:
1. Payment History (35%)
Your score improves when you pay your EMIs and bills on time. Late or missed payments reduce your score. Set reminders or use auto-pay features to stay regular.
2. Credit Utilization Ratio (30%)
This means how much of your credit limit you are using. If your credit card limit is ₹1 lakh and you use ₹90,000 regularly, it affects your score. Keep usage below 30% of the limit.
3. Credit History Length (15%)
The longer your credit history, the better it is. If you close your old credit card, your history shortens. Instead, keep old cards active with small spends.
4. Credit Mix (10%)
Using different credit products (like home loans, personal loans, credit cards) responsibly improves your score. It shows that you can handle various types of credit.
5. Number of Enquiries (10%)
Applying for many loans or cards at the same time shows desperation and reduces your score. Always check eligibility first, and apply only when you are likely to get approved.
Where You Can Apply for a Personal Loan with Low Credit Score
Several banks and NBFCs offer personal loans even to those with lower credit scores, especially if the person has a stable income or provides collateral.
You can explore offers on:
- Moneycontrol
- BankBazaar
- Paisabazaar
- LendingKart
- Bajaj Finserv
- EarlySalary
- IndiaLends
- KreditBee
- Navi
These platforms give you offers from multiple banks and NBFCs. You can compare interest rates, processing fees, repayment terms, and apply online — often with minimum documents.
Interest Rates You May Expect with Low Credit Score
While you can get a loan with a poor score, the interest rate may be higher than someone with a good score. Currently:
- Good score (750+) – Interest rate from 10.5% to 14%
- Average score (650–750) – 14% to 18%
- Low score (below 650) – 18% to 28%, or even more
If your income is strong or you add a co-applicant or offer security, you may get a slightly better deal.
Documents You Need to Apply
Even with a poor score, applying online is simple. You will need:
- ID proof (Aadhaar card, PAN card)
- Address proof
- Income proof (Salary slips, bank statements)
- Photograph
- Co-applicant details (if applying jointly)
On most platforms, KYC is done digitally. You can complete the process in 10–15 minutes.
