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Personal Loan for Bad Credit

Tenure

10 Months

Interest:

2%/Month

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Tenure

60 Months

Interest:

1.2%/Month

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Tenure

12 Months

Interest:

1%/Month

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Tenure

367 Months

Interest:

0.75%/Month

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As we discussed earlier, getting a personal loan without a credit score is challenging, but getting a loan with a low or bad credit score is dreadful. Lenders wouldn’t be keen on giving loans since a low credit score implies low creditworthiness and might have fears of default on their money.

A bad credit score could be because of any reason, namely:

  • Repayments not made on time
  • High credit utilization
  • Low account age
  • A high number of hard enquiries

The first two mentioned factors have a high impact on credit score which overall results in reducing the credit score and making it low.

In the case of personal loans with low credit scores, lenders demand the applicant to either bring a co-applicant with good creditworthiness for the loan or put up collateral like a house, car, gold, etc to get the loan. This acts as an assurance for the lender to fall upon in case of default.

Always ask for a small amount of loan in case of a low credit score. If you ask for a big amount with a low credit score, it is an indication to the lender that you may default on repayment and hence we will not take the risk. So always ask for a small amount of personal loan as the lender will be comfortable with it as a lower amount is easier to repay.

Features

  • Access to loans with low credit score
  • Guarantor or collateral required to secure the loan
  • Helps to improve the credit score and credit history

Once you start making timely repayments of the loan, it will reflect in your credit report and increase your credit scores. With this, you can easily get personal loans at favourable terms in the future.

You can must check the EMI of your personal loan before finalising the loan offer by comparing offers from different lenders.

Eligibility Criteria

There are certain factors which a lender checks when your loan application with a low credit score reaches him. Once he is convinced then only you can get a personal loan in case of a low credit score:

Criteria Determinant
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Documents Required for Personal Loans with low credit score

The lender calls for some documents of both the applicant and his guarantor (co-applicant) before disbursing the loan amount to the borrower’s account in case the primary applicant has a low credit score. Here is the list of documents:

Requirement Determinant
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Once the lender is fully convinced then only he approves the loan application of the borrower in case of low credit score of the borrower.

Frequently asked questions

  • A low credit score indicates low creditworthiness of the borrower to the lender which increases the risk of default for the lender. As a result, you may face stricter eligibility criteria, pay higher interest rates or submit collateral security to secure a loan.

  • Common reasons for a low/bad credit score include missing payment dates, defaults, high credit utilisation rate, high number of new credit enquiries and foreclosure.

  • Improving your credit score before applying for a new loan is always advisable. You can do this by making timely payments on existing debts, reducing credit card balances, disputing errors on your credit report, and avoiding making new credit applications and enquiries.

  • There are some specialized personal loans made for individuals with bad credit scores like secured personal loans (where you need to make a collateral), peer-to-peer loans, and loans from other lenders who focus on assessing the borrower’s current financial situation rather than just his credit score.

  • Applying for multiple loans in a short period negatively impacts your credit score as each application/enquiry typically results in a hard inquiry on your credit report, which lowers your score temporarily. It is best to research lenders first and then apply selectively.

  • Defaulting on a personal loan will have serious consequences on the borrower, including damage to the already low credit score, collection harassment by the lender and potential legal action. It's important to inform your lender if you're struggling to make repayments and explore available options such as loan restructuring or refinancing.

  • Yes there are alternatives to personal loans for individuals with low/bad credit scores that will help the borrower in improving their credit score before applying for a personal loan. Alternatives include borrowing from friends and family, getting a guarantor or a co-applicant with a good credit history to apply for a loan or exploring credit-building options such as secured credit cards or credit builder loans.

  • There are no specific programs or grants by the government for individuals with bad credit scores looking out for personal loans, but some local community or nonprofit organizations may offer financial assistance or counselling services. Additionally, exploring credit-building programs and financial education resources can help one improve their creditworthiness.

  • Refinancing a personal loan with a bad credit score to get favourable terms, such as a lower interest rate or longer repayment period, may be challenging. You may need to improve your credit score first or explore options with specialized lenders who offer refinancing for borrowers with bad credit.

  • Yes, you can qualify for a personal loan with a bad/low credit score with a high income as lenders may consider your income-to-debt ratio and repayment capacity when assessing your eligibility. Providing proof of stable income and employment history can support your loan application.

  • Get a Personal Loan that fits your needs. Apply for loans from Rs 1,000 to Rs 15 Lakhs with Lowest Interest Rates.
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