How To Apply For A Personal Loan With Bad Credit In India

Getting a personal loan in India can be tough—especially if you have a low credit score. Most traditional banks and NBFCs (Non-Banking Financial Companies) rely heavily on your credit history to assess loan eligibility. But having bad credit doesn’t mean you’re out of options.

At Transparent Investment, we believe financial setbacks shouldn’t prevent you from moving forward. Whether you’ve missed a few EMIs or are new to credit, this guide will help you understand how to successfully apply for a personal loan with bad credit in India—updated for 2025.

What Is a Bad Credit Score?

In India, a credit score below 650 is typically seen as poor. Scores range from 300 to 900 and are calculated by credit bureaus like CIBIL, Experian, Equifax, and CRIF High Mark.

Common causes of a low score:

1. Missed or late credit card/loan payments

2. Loan defaults

3. High credit utilization or outstanding debt

4. No or limited credit history (new borrowers)

Can You Get a Loan with a Bad Credit Score?

Yes. While traditional banks may decline your application, many NBFCs, fintech lenders, and peer-to-peer platforms offer personal loans to people with low or no credit history. The key is to:

1. Understand your options

2. Improve your loan eligibility

3. Apply through the right lenders

Top 7 Ways to Get a Personal Loan with Bad Credit

1. Choose NBFCs or Fintech Lenders

Private lenders and fintech platforms are more flexible than traditional banks. Some leading options include:

1. KreditBee

2. CASHe

3. MoneyTap

4. Faircent (P2P lending)

5. Nira

These platforms may assess factors like salary, employment stability, or cash flow, rather than just your credit score.

2. Apply for a Secured Personal Loan

Secured loans are backed by collateral, which makes approval easier. Common examples:

1. Gold Loans

2. Loan Against Fixed Deposits (FDs)

3. Loan Against Insurance Policies or Mutual Funds

These typically have lower interest rates and higher approval chances—even with poor credit.

3. Improve Your Debt-to-Income (DTI) Ratio

Even with a low credit score, lenders look at how much of your income goes toward existing debt.

Tips to lower DTI:

1. Close unused or high-interest credit accounts

2. Avoid multiple loan applications at once

3. Repay small loans or dues

A better DTI = higher chances of approval.

4. Add a Co-Applicant or Guarantor

A co-applicant with a good credit history can strengthen your application. This also helps in negotiating better terms.

Ideal co-applicants: Spouse, parent, sibling, or friend with a credit score above 700 and a stable income.

5. Be Transparent with Your Lender

If you’re applying with a low score, honesty goes a long way. Some lenders appreciate a written explanation detailing:

1. Why your credit score is low

2. What steps you’ve taken to improve it

3. How you plan to repay the loan

Responsible behavior builds lender trust.

6. Start Small and Repay on Time

If you can’t qualify for a large loan, start with a microloan or a credit builder loan. Timely repayment boosts your score and builds trust with lenders.

Once you have a repayment track record, it becomes easier to qualify for larger loans.

7. Consult a Loan Advisor

Navigating bad credit lending can be complex. At Transparent Investment, our advisors help you:

1. Analyze your credit profile

2. Match with suitable lenders

3. Prepare and verify documentation

4. Rebuild your credit over time

Expert guidance can significantly increase your chances of success.

Documents Required for Bad Credit Personal Loans

While eligibility may vary, most lenders require:

1. Identity Proof: Aadhaar, PAN

2. Address Proof: Utility bill, rental agreement

3. Income Proof: Salary slips, bank statements, ITR

4. Employment Proof: Offer letter or employee ID

5. Collateral Documents (if applying for a secured loan)

Many digital lenders now offer paperless and e-KYC options for faster processing.