How to get a personal loan with bad credit in India
According to improve cibil– In India, life often throws financial surprises—urgent medical bills, home repairs, or opportunities that require immediate capital. Personal loans are among the most flexible forms of credit to manage such needs. But what if your credit score is in poor territory? Is it still possible to get a personal loan with bad credit in India?
Yes — though it’s challenging, with careful strategy you can improve your chances. In this article, you’ll learn:
What “bad credit” means in Indian context
Whether a personal loan is still viable
Practical approaches to secure a loan
Documents to keep ready
Tips to boost approval odds
Lenders more open to higher risk profiles
Pitfalls to avoid
By the end, you should feel empowered to approach lenders more confidently and safely.
What Is Considered a Bad Credit Score in India?
Understanding CIBIL and other credit scores
In India, lenders commonly rely on credit bureaus such as CIBIL (Credit Information Bureau India Ltd.), Experian, Equifax, and CRIF High Mark to assess your creditworthiness. These agencies track your repayment history, outstanding debts, credit inquiries, defaults, and more.
Your credit report is distilled into a three-digit credit score (typically from ~300 to 900). The higher the score, the better your perceived reliability.
Range of credit scores and what’s considered poor
Though thresholds vary among lenders, a rough guideline is:
750 and above — Very good / excellent
700–749 — Good
650–699 — Fair / moderate
600–649 — Below average
Below ~600 — Poor / bad credit
Many banks prefer scores ≥ 700. If your score falls below 600 (or even 650), you’ll encounter resistance. Some NBFCs or fintech lenders may entertain applications even with scores lower than 600 — in rare cases even as low as ~360, depending on other factors.
Impact of low credit score on loan approval
A poor credit score signals risk: past defaults, missed payments, high credit utilization, or multiple inquiries. Lenders may:
Reject your application outright
Approve with stricter terms (higher interest, more charges)
Demand collateral, security, or a guarantor
Limit the loan amount or require shorter tenure
Thus, your goal is to show compensating strengths to offset your credit weakness.
Can You Get a Personal Loan with Bad Credit?
Absolutely — though not via every lender or under favorable terms. Here’s what makes it possible:
NBFCs & Fintech lenders tend to have more flexible scoring and risk models than traditional banks. They may weigh income, employment history, and other behavioural data more heavily.
Peer-to-peer (P2P) lending platforms sometimes have more lenient criteria and may match you with higher-risk investors.
Some lenders offer no-credit-check or minimal-check personal loans, especially via digital routes (though often at higher cost). For example, Airtel Finance offers “no credit check” personal loan options where they focus more on income, employment status, and cash flow.
Co-applicants or guarantors with better credit profiles can boost your approval chances. Many banks explicitly allow adding such co-applicants as a way to mitigate risk.
However, you must accept trade-offs: smaller loan amounts, higher interest rates, shorter repayment durations, or additional fees.
Best Ways to Get a Personal Loan with Bad Credit in India
Here are proven strategies you can employ:
Apply with a co-applicant or guarantor
If you don’t have a strong credit record, having someone with a good history (spouse, parent, sibling) as co-applicant or guarantor helps lenders feel safer. The lender can look at both credit profiles and incomes. Many banks allow this approach explicitly as a risk mitigation measure. Offer collateral or security
Though personal loans are typically unsecured, offering collateral (such as property, fixed deposit, gold, or other high-value assets) can tilt the decision in your favor. It gives the lender a fallback in case of default.
Choose NBFCs or fintech lenders
These newer institutions often rely on alternative data (bank transaction history, digital footprint, income inflow consistency) rather than solely credit scores. They tend to be more lenient than traditional banks.
Start with smaller loan amounts and shorter tenures
Requesting a smaller sum reduces the perceived risk for the lender. Likewise, opting for shorter repayment periods reduces exposure. A lender may be more willing to approve ₹50,000 to ₹2 lakh over 6–24 months than a large loan with long tenure.
Show stable income, job security, or additional sources
Even with bad credit, if you can demonstrate consistent salary deposits, multiple income streams, or proof of business stability, lenders may see you as a lower risk. Submitting a buffer (e.g. extra bank balance, investments) helps.
Improve your credit score beforehand
While this doesn’t give instant results, working actively on your credit can pay off when you apply. Steps include clearing existing debts, making timely payments, reducing credit utilization, and disputing errors.
Documents Required for a Personal Loan with Bad Credit
Even when your credit is weak, you’ll still need to back your credibility with documentation. Typical requirements:
Identity Proof — Aadhaar card, PAN card, Passport, Voter ID, Driving License
Address Proof — Utility bills, rental agreement, Aadhaar, passport
Income Proof
Salaried: last 3 months’ salary slips, bank statements showing salary credits
Self-employed: last 6–12 months’ bank statements, ITR returns, business registration
Employment proof — appointment letter, employer certificate
Bank statements — last 3–6 months statements to show inflows, cash flow
Photos & KYC — passport-size photos, KYC forms
Even with bad credit, these documents help reassure the lender you have capacity to repay.
Tips to Improve Your Loan Approval Chances
When your credit is poor, every extra signal of reliability helps. Here are practical tips:
Pay existing EMIs or dues on time
Settle or reduce your outstanding loans or credit card balances. Avoid missed payments or defaults. This improves your credit history over time.
Maintain a stable job and consistent income
Frequent job changes or erratic income patterns raise red flags. If possible, maintain stability for several months before applying.
Avoid multiple loan applications in short span
Every hard inquiry can further lower your score. Applying repeatedly suggests desperation and is a red flag.
Keep low credit utilization
If you have existing credit cards, try to maintain usage under ~30–40% of limits. High utilization suggests overdependence on credit.
Check and rectify errors in your credit report
Sometimes your low score is due to incorrect entries (missed payments, wrongly assigned defaults). Obtain your credit report, dispute faulty entries, and correct them.
Provide supporting documents or buffer
Show additional financial assets (FDs, gold, investments) or a “buffer” in your bank account to prove that you can service EMIs even in tight months.
Top Lenders Offering Personal Loans for Bad Credit in India (2025 Update)
While terms change often, the following lenders are known for relatively flexible criteria:
Moneyview — Offers personal loans from ₹5,000 to ₹10 lakh, with relatively lower CIBIL threshold (~650) and quick digital disbursal.
Fintech NBFCs in general — Many fintech-lenders evaluate alternate data and are more open to non-prime borrowers.
P2P lending platforms — Some allow people with weaker credit scores to connect with individual investors.
Digital loans with minimal credit check — e.g. Airtel Finance’s “no credit check” personal loan option (though with stricter scrutiny of other factors). Airtel
Banks that allow co-applicants or secured variants — Some banks may permit jointly applying with a higher-credit co-applicant or accepting collateral.
Before selecting, verify current interest rates, processing fees, prepayment charges, and hidden costs from each lender.
Common Mistakes to Avoid When Applying
o protect yourself and avoid worsening your situation, steer clear of these pitfalls:
Applying to too many lenders simultaneously — This generates multiple hard credit checks and can further damage your score.
Hiding past defaults — Transparency is better than being caught in inconsistencies, which raises rejection chances.
Ignoring fine print — High interest, steep processing fees, hidden charges, prepayment penalties — all can sink you.
Desperation borrowing — Avoid loans from unverified, shady lenders or “loan apps” that charge astronomical rates or demand upfront fees.
Overborrowing — Don’t take a loan amount you can’t comfortably repay. The default risk compounds.
Not checking legitimacy — Some fraudulent “loan agents” entice borrowers, take processing fees, and disappear. Be cautious and verify lender credentials.
Conclusion
Getting a personal loan with bad credit in India is not easy—but it’s not impossible, either. The key is to bolster your profile in other ways: showing steady income, using a co-applicant, offering collateral, or choosing alternative lenders who use holistic assessment methods.
Here’s your action plan:
Pull your latest credit report and check for errors
Work to reduce debts and improve payment history
Choose lenders known to consider non-prime applicants
Use co-applicants or security if possible
Apply responsibly (small amounts) and read all terms
If you want, I can also draft a lender comparison table (2025) or help you tailor a sample loan application letter for your credit situation. Would you like me to do that?
