A low credit score can feel like a major roadblock when you’re in urgent need of funds. Whether you’re applying for a personal loan, business loan, or home loan, a weak credit history may lead to rejections, higher interest rates, or less favorable loan terms.
However, all is not lost.
Many borrowers with a low CIBIL score still manage to get loans by taking the right steps, choosing the right lenders, and presenting a strong case. In this article, we’ll explore how you can get your loan approved even with a low credit score, what options are available, and how to improve your financial profile for better chances in the future.
What is Considered a Low Credit Score in India?
In India, CIBIL scores range between 300 and 900. Here’s a quick breakdown:
| CIBIL Score | Credit Standing |
|---|---|
| 750–900 | Excellent |
| 700–749 | Good |
| 650–699 | Fair |
| 550–649 | Poor |
| Below 550 | Very Poor |
If your score is below 650, most traditional banks may hesitate to approve your loan. But don’t worry — there are alternative ways to secure funds even with a less-than-perfect credit history.
Why a Low Credit Score Makes Loan Approval Difficult
Banks and NBFCs (Non-Banking Financial Companies) assess the risk of lending primarily through your credit score. A low score indicates:
-
Late or missed EMI/credit card payments
-
High credit card utilization
-
Loan defaults or write-offs
-
Over-dependence on unsecured credit
-
Multiple recent loan applications
These raise red flags, causing lenders to deny your loan application or offer loans with higher interest rates and stricter terms.
How to Get a Loan with a Low Credit Score
Here are smart and proven strategies to increase your chances of loan approval, even if your credit score is low:
✅ 1. Apply with an NBFC or Fintech Lender
Unlike traditional banks, NBFCs and digital lending platforms often use flexible evaluation criteria. They may consider factors like:
-
Monthly income
-
Employment stability
-
Bank statement patterns
-
Utility bill payment history
-
Alternate credit data
Platforms like Loan7d.com specialize in helping borrowers with average or low CIBIL scores find customized loan offers from NBFCs and fintechs.
✅ 2. Offer a Collateral or Apply for a Secured Loan
Secured loans (like Loan Against Property, gold loans, or fixed deposit-backed loans) reduce the lender’s risk because they can recover the amount if you default.
Even with a poor credit score, pledging collateral shows commitment and boosts your approval chances.
✅ 3. Apply with a Co-applicant or Guarantor
Having a co-applicant or guarantor with a high credit score and stable income improves your application’s strength. Lenders will assess their profile alongside yours, increasing your chances of getting a loan.
Common co-applicants include spouses, parents, or siblings.
✅ 4. Improve Your Income-to-Obligation Ratio (FOIR)
Your Fixed Obligation to Income Ratio (FOIR) is the percentage of your income already being used for EMIs and other debts. Keep it below 40–50% for better eligibility.
If your credit score is weak but your FOIR is healthy, many lenders will still consider you eligible for a loan.
✅ 5. Apply for a Lower Loan Amount First
Start small. Applying for a lower loan amount with a short repayment tenure reduces the risk for the lender, improving your chance of approval.
Once you build trust by repaying on time, you can apply for larger amounts in the future.
✅ 6. Get a Secured Credit Card First
If your score is extremely low (below 600), consider getting a secured credit card (against a fixed deposit). Use it responsibly, pay bills on time, and within 6–9 months, your score can improve significantly — putting you in a better position for future loans.
Lenders Who Offer Loans with Low Credit Scores
Some lenders and NBFCs known for flexible criteria include:
-
Bajaj Finserv
-
L&T Finance
-
Tata Capital
-
MoneyTap
-
LoanTap
-
EarlySalary
-
KreditBee
-
Loan7d.com (aggregator with multiple lender tie-ups)
Each lender has different risk appetite. While some may approve loans for scores as low as 550, the interest rates might be higher — so always compare before you commit.
Mistakes to Avoid with Low Credit Score
If you're applying for a loan with a poor score, avoid these pitfalls:
-
❌ Applying to multiple lenders at once (each hard inquiry lowers your score)
-
❌ Accepting very high-interest loans without checking the total cost
-
❌ Ignoring loan terms or hidden charges
-
❌ Overextending your finances by borrowing more than you can repay
Instead, consult with financial advisors or platforms like Loan7d to find transparent loan offers suited to your credit profile.
How to Rebuild Your Credit Score for Future Loans
Even if you manage to get a loan now, it’s essential to rebuild your score for better terms in the future. Here’s how:
-
Pay all EMIs and credit card dues on time
-
Avoid minimum due payments — pay the full amount whenever possible
-
Keep credit utilization below 30%
-
Avoid closing old credit accounts — they help lengthen your credit history
-
Check your CIBIL report regularly and dispute any errors
With consistent discipline, your score can improve by 50–100 points in 6–9 months.
Final Thoughts
While a low credit score can limit your financing options, it’s not the end of the road. There are several ways to work around it — from opting for secured loans and co-applicants to exploring NBFCs and fintech lenders.
The key is to be realistic, responsible, and informed.
At Loan7d.com, we understand that every borrower’s story is unique. That’s why we offer personalized loan guidance, connect you with lenders that accept lower credit scores, and help you choose options with flexible repayment and lower risk.
Don’t let a low score stop your financial journey. Apply smart, repay responsibly, and rebuild stronger.