How to Get a Loan Despite a Poor CIBIL Score?

A low credit score, typically below 650, can make borrowing more difficult, but it doesn’t make it impossible. While lenders do weigh credit scores heavily, they also consider other factors like income, collateral, and co-signers. If you need funds urgently, there are still ways to secure a loan, though you may face higher interest rates or stricter terms. This guide explores practical strategies to improve your chances of approval despite a low credit score.

Also Read: Top Factors Affecting Credit Score Every Consumer Should Know

How to Get a Loan with a Low Credit Score in 2025?

A low credit score does not mean you can't get a loan. It simply implies that you will need to be a little more strategic in your approach. Follow these tips to get a loan despite a low credit score:

Apply with a Co-applicant
Apply with a co-applicant who has a strong credit score and stable finances. This lowers the lender’s risk, boosts your approval chances, and helps secure better interest rates and loan terms.

Apply for a Smaller Loan Amount
Lenders see larger loan amounts as higher risk for borrowers with low credit scores. Applying for a smaller loan can increase your chances of approval.

Provide a Collateral
Using collateral like gold, real estate, or fixed deposits lowers lender risk and boosts your loan approval chances, even with a low credit score. Secured loans often come with better interest rates and terms.

Present Robust Income Proof
Some lenders may overlook a low credit score if you have a stable monthly income. Proof of steady employment or business revenue can demonstrate repayment ability and improve your chances of approval.

Opt for Low Credit Score Loans
Several lenders in India offer instant loans for low credit scores, using factors like salary and financial stability instead. Consider fintech firms or NBFCs that specialise in loans for borrowers with poor credit.

Make Use of Current Banking Connections
Negotiate with your bank if you have fixed deposits, a salary account, or other banking arrangements. An existing relationship with a bank can allow you to get a loan even with a low credit score.

Also Read: CIBIL vs Experian: Understanding the Key Differences in Credit Scores

Tips to Boost Loan Eligibility in the Future

The best way to improve your chances of loan approval with a low credit score is to improve your credit score itself. Here are the tips you can follow to improve your CIBIL score:

●    Pay Your Bills and EMIs On Time: Consistently paying your bills and EMIs helps you build your credit score over time. To guarantee regular on-time payments, set reminders or automatic payments for bills.
●    Keep Your Credit Utilisation Low: Utilise only 30-40% of your credit limit. If your credit card limit is ₹1 lakh, avoid using over ₹30,000 as it hampers your score.
●    Monitor Your Credit Report Regularly: Your score may suffer if there are wrongly reported late payments or outstanding debts. Obtain a free credit report from Experian or CIBIL, and then raise a dispute for any inaccuracies.
●    Build a Diverse Credit History: Credit mix has a 10% weight in the credit score. A balanced mix of unsecured credit (such as credit cards or personal loans) and secured credit (such as home or gold loans) demonstrates to lenders your ability to handle various debts sensibly.
●    Avoid Multiple Loan Applications at Once: Every loan inquiry is recorded as a "hard inquiry," which may result in a reduction in your credit score. To reduce adverse effects, spread out your loan applications and apply sparingly.
●    Maintain Long-Term Accounts: Maintaining older credit lines and being in good standing over time can increase eligibility and show dependability.

Also Read: Essential Credit Score Monitoring Tips for Better Financial Health

To Conclude

Whether it's a credit card or a loan, no application can go through without a credit score. If your credit score is low, you can still apply for a loan, but you must follow the mentioned tips strategically. It not only increases the likelihood of acceptance but also provides access to a financing option with a low interest rate and flexible repayment terms.

At Poonawalla Fincorp, we believe that in a time of need, convenient access to funds can make all the difference. This is why we offer different financing options ranging from Personal Loans, Gold Loans, Pre-owned Car Loans, and Business Loans. No matter the need, Poonawalla Fincorp’s loan offerings have covered all fronts.

FAQs 

Can I negotiate interest rates with a low credit score?
Lenders frequently charge higher interest rates to applicants with lower credit scores owing to higher perceived risk. You can negotiate interest rates by improving your credit score and proving financial responsibility.
 
How long should I wait before applying for another loan after being rejected?
After a loan rejection, wait 3-6 months before reapplying. Multiple applications generate "hard enquiries" that can lower your score. Use this time gap to enhance your payment history, pay down debts, and keep a low credit utilisation to boost your financial profile.

Can debt consolidation help improve my chances of getting a loan?
Debt consolidation can help with loan eligibility by merging multiple high-interest loans into a single loan with a reduced rate. It streamlines repayments, lowers monthly costs, and encourages on-time payments, all of which can help your credit score.

Can improving my income help me get a loan despite a low credit score?
Yes. Lenders assess both income stability and credit score when approving a loan. A regular, substantial salary might compensate for a poor credit history.