How to Avail a Personal Loan with A Low Credit Score?

Most lenders will access your credit report first to evaluate your creditworthiness when applying for a personal loan. Your credit score is based, among other things, on your credit history, the amount of credit you have acquired, and your ability to pay off debts. Since personal loans are unsecured, lenders assess your creditworthiness to determine whether lending to you is a risky venture.

Lenders use your credit score to assess your capacity to repay a loan. This score reflects your credit history, including the amount of credit you’ve taken out, how you’ve paid it back, and other criteria. Because a personal loan is an unsecured loan with no other assets to fall back on, all of this helps a lender decide whether or not issuing you a personal loan for a low CIBIL score is a risky proposition.

While it is a common misconception that persons with poor credit cannot obtain a personal loan, the truth is that many lenders provide small personal loans to people with poor credit.

What happens if your credit score is low?

When you have a poor credit score, it signifies you are a high-risk customer, and banks are unlikely to lend you money. A credit score is determined mainly by how effectively you have repaid previous loans, whether you have pre-paid any loans or defaulted on any, the types of loans you have taken, and how much of your income will be spent just on loan repayment and other commitments.

So, if you need a personal loan for a low CIBIL score, you can locate some lenders that will lend you money, but they will typically charge you a higher interest rate. Some lenders charge as much as 15-40% p.a., which is exceptionally high.

While it’s true that a bad CIBIL score prevents you from getting a personal loan, this isn’t true. Follow the steps below to secure a personal loan, even if you have a low CIBIL score.

Show that you have enough income to cover EMIs

Even with a low credit score, a lender may consider your application for a small personal loan if you have a salary increment or have an additional source of income. If they know that you have a steady income despite a low CIBIL score, they are more likely to sanction you the loan. While, on the other hand, if your income and CIBIL score both remain low, chances are you may get a personal loan approval but at a higher rate of interest than those with a good credit score and income.

Request a small personal loan amount

Requiring a large sum increases the lender’s risk with a low credit score. In the eyes of a lender, these are signs that you may default on your payments. On the other hand, apply for a personal loan with a smaller amount. In that instance, a lender may be more willing to give you a loan because a smaller sum is easier to repay and eliminates your chances of default.

Have a co-applicant in your loan application with a higher credit score

If your CIBIL score is low, a personal loan might be obtained with the help of a guarantor or a co-applicant. Of course, you’ll need to check with the other candidate first, as they’ll need to complete KYC procedures and must be willing to sign your loan application as a co-applicant or a guarantor.

The most significant advantage here is that if your lender discovers that your co-applicant or guarantor has a consistent income and a higher credit score, they are far more likely to approve your personal loan.

Make changes to your credit report if there are any errors.

There could be mistakes in your CIBIL report that may be causing your credit score to dip. This frequently happens when your record hasn’t been updated with the most recent information or lenders’ errors. Mistakes like these might have a negative impact on your credit score despite your best efforts. As a result, it’s critical to review your CIBIL report for free regularly and make any necessary corrections. This will improve your credit score and make you a better loan applicant.


Always do your homework on the lender to check whether they are reputable and provide a personal loan for a low CIBIL score. Don’t fall prey to scammers who take your personal information and never sanction your loan. Some scammers may even offer you favorable terms, but they will require you to pay a fee upfront which may be a big fraud.

Make sure you’re getting a clear picture of the correct interest rate. Some lenders may create a false impression by displaying their interest rates in months rather than years. As a result, the annual rate of 30 percent is only 2.5 percent every month. On the other hand, a typical bank will charge you roughly 14 percent each year, or 1.66 percent per month. When interest is calculated over a lengthy period, the difference is significant.

Fixing these minor issues will enable you to have a higher credit score and a solid chance of getting personal loan approval. Make sure you’re in synch with these before you set out to submit a loan application.


I've written a lot of websites over the past few years, but I enjoy writing about technology and business. I was also fortunate enough to work on several specialized sites which were focused on science, business, and technology. I love reading and trying new things.

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