Bad Credit Loans in India: Finding Alternatives When Your CIBIL Score is Low

4 MIN • LAST EDITED BY SHEFAALI BOPANA ON MAY 19, 2025.
Fi.money
Written by Shefaali Bopana on APRIL 24, 2024.
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Table of contents
  1. What is a CIBIL Score?
  2. Why does CIBIL Score matter?
  3. Why is your CIBIL Score bad?
  4. When should we avail a bad credit loan?
  5. An overview of the different types of personal loans
  6. When Are Bad Credit Loans Needed?
  7. Alternatives For Personal Loans When You Have Poor Credit
  8. Should I Opt for Bad Credit Loans?
  9. Frequently Asked Questions

Personal loans are handy when stranded for cash and can’t meet immediate needs. Readily available, these loans are easily sanctioned and disbursed. However, the story is quite different if you have a poor credit score. This is where bad credit personal loans become the ultimate saviour. 

Urgent loans with bad credit in India are specifically designed for individuals with a low or no credit score, helping them access funds despite financial setbacks. Many lenders hesitate to approve loans for those with poor credit due to the increased risk of default. 

Since a low credit score signals weaker repayment capacity, individuals with bad credit often struggle to find lenders willing to offer them a loan. However, several financial institutions and NBFCs provide urgent loans with bad credit in India, ensuring quick access to funds during emergencies.

Have you been wondering how to get a personal loan with bad credit in India? There are quite a few alternatives to traditional loans.

What is a CIBIL Score?

A CIBIL score, short for Credit Information Bureau (India) Limited score, is a three-digit number between 300 and 900 that represents your creditworthiness, reflecting your ability to repay debts. It matters because lenders use it to assess your risk, influencing loan approvals, interest rates, and other credit terms. 

Why does CIBIL Score matter? 

The CIBIL score acts as a lender's first impression of a borrower—higher scores improve the chances of loan approval. However, the final lending decision rests entirely with the lender, as CIBIL does not influence whether a loan or credit card is sanctioned. 

Typically, a CIBIL Score around 700 is considered good.

Why is your CIBIL Score bad?

Your credit score may be low due to the following reasons:

  • Missed bill payments 
  • Failure to make loan repayments 
  • Rejected credit applications 
  • Previous borrowings with delayed or missed payments 
  • No prior loan history, resulting in the absence of a financial track record

When should we avail a bad credit loan?

Bad credit loans should only be considered in urgent situations, such as:

  • Multiple lenders have rejected your loan application due to a low credit score. 
  • You have missed or defaulted on credit card payments. 
  • You have no alternative to manage your existing debts. 
  • Your financial situation has improved, and you can now repay a loan to rebuild your credit score. 

An overview of the different types of personal loans

It's good to know the different types of personal loans before trying to apply for one. This article on the different types of personal loans should be a helpful one, give it a read!

When Are Bad Credit Loans Needed? 

Your credit score is the barometer of your creditworthiness. Lenders use this 3-digit score to determine your credibility and sanction loans. Missing credit card payments, defaulting on loans, breaching your credit limit, and existing loans can all lead to a poor CIBIL score.

Moreover, did you know the absence of credit history also bundles you with poor CIBIL score applicants? In both cases, your poor credit score disqualifies you from securing funding. However, the good news is that there are still ways of meeting your immediate funding needs.

Alternatives For Personal Loans When You Have Poor Credit 

Here’s how you can get a personal loan with bad credit:

Opt for a Secured Loan 

Secured personal loans don’t consider your credit score since the loan amount is sanctioned against collateral. Pledging your asset lowers the lender’s lending risk since the lender can repossess these assets if you fail to repay the loan.

As for the assets allowed, you can use fixed deposits, gold, property, insurance, mutual funds and PPF to secure such loans. However, remember that lenders have specific guidelines regarding the maximum loanable amount and tenure vis-a-vis the type of asset pledged as collateral.

Apply for a Payday Loan 

A payday loan is a short-term unsecured loan sanctioned to help salaried employees meet immediate cash needs until their next salary is credited. The approved loan amount is lower than your salary and can be used to meet small expenses like paying your rent or electricity bills. If you need high-value funding, such loans might not be viable options.

Peer-to-Peer Lending Sites 

You can also get small ticket personal loans up to ₹5 Lakh via peer-to-peer lending websites. These websites match prospective lenders and borrowers, mediating between the two to facilitate the loan process. The interest rates and loan tenure is decided mutually by the two parties. Since regulatory bodies are involved in peer-to-peer sites, complete funding security is guaranteed.

Approach Your Current Lender 

If you have a good relationship with your current lender, you can get a bad credit personal loan tailored to suit your needs. This option is ideal if you're a first-time borrower holding a salary account with the lender and receiving regular payments.

Loans from NBFCs 

Non-Banking Financial Companies (NBFCs) offer more lenient loan terms than regular banks, with some sanctioning personal loans to those with a credit score below 700. While the interest rate is slightly higher, getting a bad credit personal loan from an NBFC should be easy if you can prove a steady income with a good employment history.

Secure an Instant Loan from a Fintech 

Much like NBFCs, Fintechs have an easy eligibility checklist. These digital lenders operate through the web and mobile apps to offer hassle-free, instant-approval loans to borrowers with poor or no credit scores. Since the entire process is online and lightning-fast, applying for such loans takes just a few minutes.

You can hop onto the Fi app, apply for Instant Loans, and receive money in minutes once approved.

Apply for Current Account Overdraft Facility 

With the overdraft facility, you can withdraw more than the amount available in your bank account. You can then use this sum to meet immediate cash needs. While most banks offer this facility on current accounts, some even extend it to their salary accounts. 

Improve CIBIL Score 

CIBIL score is considered as the lender's first impression of a borrower, hence having a score above 700 improves the chances of loan approval. 

Here are few ways ways to improve your CIBIL Score:

  • Clear all your existing debt
  • Have a good credit mix
  • Limit your credit utilisation
  • Pay EMIs on time

Read to know more on how to improve your CIBIL score

Should I Opt for Bad Credit Loans? 

These credit alternatives can help you get a personal loan with a bad credit score and easily sail through tough financial times. However, they might force you to wager assets and pay higher interest rates. Thus, improving your credit score and applying for a new loan is advisable.

Once you’ve improved your credit score by repaying dues on time, you can check for pre-approved instant loans up to ₹5 Lakh on the Fi Money app. From a paperless application process and competitive interest rates to automatic in-app EMI payments and Fi's Instant Loans bring you benefits you've never seen before.

Frequently Asked Questions 

1. Who can apply for a bad credit personal loan? 

Borrowers with a credit score of less than 700 can apply for bad credit personal loans. First-time borrowers without a credit history can also apply for such loans.

2. How can I apply for a bad credit loan? 

You can approach your existing lender, an NBFC, peer-to-peer lending platforms, or digital Fintech to apply for such loans. Depending on the lender and type of bad credit loan you pick, you might have to pledge collateral, list a co-signer, or prove steady income to sanction the loan.

3. How much money can I borrow with bad credit?

The amount of money you can borrow with bad credit will vary depending on several factors, including the lending institution's policies, your income, the purpose of the loan, and the specific circumstances of your credit history. Generally, with bad credit, you may have access to loans with lower borrowing limits and higher interest rates compared to individuals with good credit. It's best to consult with lenders directly to understand the specific loan options available to you.

4. What are the best personal loan companies for bad credit? 
 

Here are some reputable personal loan companies in India for individuals with bad credit:

  1. MoneyTap offers flexible options and considers factors beyond credit scores.
  2. Fullerton India provides customized loan options and simplified application processes.
  3. Home Credit India specializes in loans for those with limited or no credit history.
  4. Tata Capital and Faircent also offer personal loan opportunities to borrowers with bad credit.

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