How to Get an Urgent Loan Even with a Bad Credit Score?

 All lenders, including banks and non-banking financial companies (NBFCs), assess the credit score of the applicant before granting them a loan. Lenders believe poor credit means high risk, causing them to reject your loan application. While getting an urgent loan with bad credit in India is certainly a bit difficult, it is not impossible. There are certain strategies and approaches you can follow to get a loan even with bad credit. However, before getting into that, you must understand what exactly a bad credit score is.

What Is a Bad Credit Score, and What Causes It?

The credit scores are a direct indicator of one’s creditworthiness. Lenders typically prefer a credit score or CIBIL score of 750 and above. Hence, you should try your best to keep this score high. A low or bad credit score is anything below 550, and may hurt your ability to secure a loan.

• Bad CIBIL Score: 300-550 (high possibility of loan rejection)

• Average CIBIL Score: 550-650 (you would have better access to loans, but may have to deal with high interest rates)

• Good CIBIL Score: 650-750 (improved chances of availing a loan with favourable conditions)

• Excellent CIBIL Score: 750-900 (borrowers with such a high score usually find it easy to get a loan at preferential terms)

There are many factors that can lead to low CIBIL scores, starting from late payments of EMIs and credit card bills to high credit utilisation and credit report discrepancies.

Strategies to Get a Loan with Bad Credit

• Consider A Secured Loan: If you are unable to get an unsecured loan with bad credit, you should consider applying for a secured loan. Secured borrowing requires you to pledge a valuable asset, like gold ornaments, property, or a fixed deposit, as collateral against the loan amount. Since the lender has the assurance of an asset, their risk is significantly reduced. As a result, even applicants with poor credit histories might be able to avail a loan.

• Apply with a Co-Signer: A co-signer can be a trusted family member who has a strong credit profile. By agreeing to co-sign the loan, this person promises to take responsibility for repayments if the primary borrower is unable to do so. From the perspective of the lender, this significantly lowers the risk involved, thereby improving your chances of securing urgent financial assistance despite poor credit.

• Apply for a Smaller Loan: Applying for a smaller loan amount is another strategy worth considering. While lenders may hesitate to approve a higher loan value for borrowers with low CIBIL scores, requesting a reduced amount can improve the odds of loan approval. For example, if you need ₹1,00,000 but expect rejection due to your credit profile, applying for ₹60,000 instead might signal better repayment capability to the lender.

• Improve Your Credit Before Applying: If you can afford to wait, it would be a good idea to take steps to improve your credit score before applying for the loan. To improve your CIBIL score, you should pay off existing debt as soon as possible and ensure you pay credit card bills and loan EMIs on time. Maintain your credit utilisation ratio below 30% to demonstrate responsible credit management. You should also carefully review your credit report before submitting a loan application. Errors or outdated information can unfairly reduce your credit score. Identifying and resolving these discrepancies with the credit bureau can prevent unnecessary rejections or delays.

Following the simple strategies discussed above can go a long way in enabling you to avail urgent loan with bad credit in India.

Author Bio: The author has over 15 years of experience in wealth management, and personal finance. She is passionate about financial literacy and hence provides insights into diverse financial products through her blog.