Finding it difficult to get a personal loan due to a low CIBIL score? You’re not alone. Lenders in India use CIBIL scores as a primary tool to assess your eligibility for personal loans. A poor credit history can make it harder to get a personal loan, but the good news is that it’s still possible to secure funding with the right strategies.
In this guide, we’ll explore what CIBIL scores are, why they’re important for loan approval, the minimum CIBIL score most lenders accept, and actionable ways to improve your credit score. We’ll also show you how to get personal loan with low CIBIL through alternate routes, and how to increase your chances of loan approval despite past credit challenges.
1. Understanding CIBIL Scores and Their Impact on Personal Loans
A CIBIL score is a three-digit number, ranging from 300 to 900, that represents your creditworthiness. Calculated by a credit bureau, this score is based on your credit history, repayment record, and the types of credit you’ve used, including credit cards and previous personal loans.
For most lenders, CIBIL scores above 750 indicate a good credit score and improve the chances of securing a personal loan at favorable terms. A low CIBIL score, however, signals higher risk, which can lead to higher interest rates or rejection.
Your credit score is crucial because banks and NBFCs use it to determine the score for personal loan eligibility, the interest rate, and the loan amount they’re willing to offer.
2. How Lenders Use Your Credit Score in a Personal Loan Application
When you apply for a personal loan, lenders pull your credit report from the credit bureau to review your credit score and repayment patterns. A high credit score demonstrates responsible borrowing and increases the chances of loan approval.
If your credit score is low, lenders may still approve your loan application, but you might get a smaller loan amount, a higher interest rate, or shorter loan terms. In some cases, you may need collateral to secure a loan.
For personal loans, a strong CIBIL record improves your chances of loan approval, while multiple rejected loan applications can lower your CIBIL score further.
3. Minimum CIBIL Score for a Personal Loan
The minimum CIBIL score for most personal loans is around 650. That said, a score of 750 or higher is considered a good CIBIL score and makes it easier to get a loan with better interest rates.
If your score is low, certain NBFCs and fintech lenders offer personal loan for low CIBIL profiles, although you may need to apply for a loan with additional documentation or security. Some lenders even provide personal loan without a CIBIL score to first-time borrowers.
A score of 650 generally improves your eligibility for a loan for low CIBIL score, while a score of 550 or less may require you to explore loans for low CIBIL through alternative channels.
4. Common Reasons for a Low CIBIL Score
A low CIBIL score may result from:
- Missed or delayed payments on personal loans or credit cards
- High utilization of credit limits
- Applying for multiple loans in a short time
- Lack of a sufficient credit history
- Defaults on previous loans
If your CIBIL score is low due to a low repayment track record, it’s important to address these issues before you apply for personal loans again. Lenders use the CIBIL score to determine your repayment discipline, so even a few missed EMIs can hurt your profile.
5. How a Low CIBIL Score Affects Your Chances of Loan Approval
A low CIBIL score affects your chances of securing a personal loan in several ways:
- Lower chances of loan approval from traditional banks
- Higher interest rates due to perceived risk
- Reduced loan amount eligibility
- More stringent loan terms
Even with a low credit score, it’s possible to still get a personal loan, but you may need to secure a personal loan through NBFCs, fintech platforms, or peer-to-peer lenders willing to work with higher-risk borrowers.
6. How to Get a Personal Loan with a Low CIBIL Score
Here’s how to get a personal loan with a low CIBIL score:
- Apply with a co-borrower or guarantor to improve your chances
- Offer collateral to secure a loan with better terms
- Request a smaller loan amount to increase approval probability
- Approach lenders that specialize in loan for a low CIBIL profile
Some lenders get an instant personal loan approved for borrowers even with a low CIBIL, especially if they have stable income and low debt-to-income ratios.
7. Types of Personal Loans Available for Low CIBIL Score Borrowers
If you have a loan with a low CIBIL score, you can consider:
- Secured personal loans against gold, fixed deposits, or property
- Instant loans from fintech companies with flexible credit policies
- Employer-backed loans
- Peer-to-peer loans for low credit profiles
These options make it easier to avail of a personal loan or obtain a personal loan even with a low score, while you work on improving your credit.
8. Alternative Ways to Get a Loan Despite a Poor CIBIL Score
Facing loan despite a poor CIBIL score rejection from banks? Alternatives include:
- Credit unions and small finance banks
- Salary advance loans from your employer
- NBFCs that assess beyond just the credit score
- Joint applications with someone who has a higher credit score
These methods improve your chances of loan approval even with a low credit profile, and may allow you to get an instant loan in emergencies.
9. How to Improve Your CIBIL Score for Better Loan Terms
To improve your CIBIL score:
- Pay EMIs and credit card bills on time
- Keep credit utilization below 30%
- Avoid frequent loan applications
- Regularly check your credit report for errors
- Build a mix of secured and unsecured personal loans
A higher CIBIL score not only improves your chances of loan approval but can also secure you better loan terms and lower interest rates.
10. Steps to Take Before Applying for a Personal Loan with a Low Score
Before you apply for a personal loan:
- Use a personal loan EMI calculator to plan repayments
- Check your CIBIL score and resolve disputes
- Select lenders known to approve your loan application for low CIBIL score profiles
- Limit your loan amount request to realistic levels
- Prepare strong income documentation to offset a low score
This preparation increases the chances of securing a personal loan despite a low CIBIL score.
11. Mistakes to Avoid When Applying for Loans for Low CIBIL Scores
Avoid these mistakes:
- Applying to many lenders at once (lower your CIBIL score)
- Hiding your credit history issues
- Accepting loan terms you can’t meet
- Over-borrowing beyond repayment ability
By steering clear of these pitfalls, you’ll have better eligibility for a personal loan and reduce the risk of further damaging your credit.
12. Final Tips to Boost Your Chances of Loan Approval
- Maintain a good credit track record
- Opt for a personal loan for low CIBIL lenders with flexible criteria
- Offer security or a guarantor to secure a loan
- Use smaller instant loans to rebuild your score
- Remember that your score before applying can make or break your application
Key Takeaways
- CIBIL scores are essential for personal loan eligibility.
- A low CIBIL score limits chances of loan approval but doesn’t eliminate them.
- You can get personal loan approval even with a low CIBIL through secured loans or alternate lenders.
- Work to improve your credit score before future applications.
- Always review your credit report and maintain a good CIBIL score to secure better rates.