1. Limited Access to Credit: Lenders may decline your loan applications or approve them only with stricter conditions.
   
2. Higher Interest Rates: Lenders compensate for the increased risk by charging higher rates—sometimes 3–5% above standard personal loan rates.
   
3. Financial and Legal Consequences: Defaults may attract penalties, collections, or even legal action in severe cases.
   
4. Restricted Loan Amounts and Tenure: Lenders may cap the loan amount or shorten the repayment period.
5. Impact on Housing and Employment: Many employers and landlords review credit reports as part of background checks, making poor credit a disadvantage.

Immediate Strategies to Secure a Personal Loan

While rebuilding your CIBIL score takes time, these immediate steps can help you access personal loans even with a damaged credit profile.

1. Co-Apply with a Financially Strong Guarantor

Adding a co-applicant or guarantor with a high credit score (700+) improves your chances significantly. The guarantor’s creditworthiness gives the lender confidence that repayment will be secured even if you default.

Tip: Ensure your guarantor fully understands the risks since they are equally responsible for repayment.

2. Offer Collateral for a Secured Loan

Secured loans are an excellent option for low-credit borrowers. By pledging assets like gold, fixed deposits, or property, you provide tangible security to the lender.

Example: If you have a ₹3 lakh Fixed Deposit, you can get a loan against 85–90% of its value. Interest rates are lower since the lender’s risk is minimal.

Benefit:

• Easier approval despite a low CIBIL score
  
• Lower interest rate
  
• No need for a high income or perfect credit history

3. Accept Higher Interest Rates (Short-Term)

If you need funds urgently, consider accepting a higher interest rate temporarily. Once your credit improves, you can refinance the loan with better terms or prepay it early.

4. Explore Alternative Lenders

Mainstream banks often reject applications from CIBIL defaulters, but NBFCs (like Muthoot Finance, Shriram Finance, Bajaj Finserv) and digital lenders (like Buddy Loan) are more flexible.

They use alternative credit assessment models, evaluating your income, employment stability, and transaction patterns rather than relying solely on your credit score.

5. Demonstrate Regular and Sufficient Income

A stable income can offset poor credit. Submit salary slips, IT returns, or bank statements showing consistent deposits. Self-employed individuals can submit GST filings or profit statements to establish financial reliability.

6. Apply for a Smaller Loan Amount

Start with a smaller loan (₹50,000–₹1,00,000). Lenders are more likely to approve lower amounts for high-risk applicants. Timely repayment improves your credit score and builds a trustworthy credit record.

7. Consider Payday or Salary Loans (If Eligible)

Some banks and employers offer payday loans, short-term loans of up to 50% of your salary with repayment due on your next payday. These loans usually require minimal documentation and are processed within hours, making them suitable for emergencies.

How to Improve Your CIBIL Score: Rebuilding Your Financial Future

Once you secure a loan, the next step is to rebuild your financial credibility. A score above 685 opens the door to better interest rates and larger loan approvals.

1. Prioritise Timely Repayments: Your payment history contributes over 30% to your credit score. Use reminders or auto-debit features to ensure EMIs and credit card payments are always on time.
2. Resolve Outstanding Debts: Negotiate settlements or repayment plans with lenders. If you’ve already settled a loan, request that they update your status as “Paid in Full” in CIBIL’s records.
3. Maintain a Low Credit Utilisation Ratio (CUR): Keep your credit usage below 30% of your limit. If your limit is ₹1 lakh, try not to exceed ₹30,000 in monthly usage.
4. Avoid Multiple Loan Applications: Each application triggers a hard inquiry, which can reduce your score. Apply selectively through aggregator platforms like Buddy Loan, which perform soft inquiries instead.
5. Diversify Credit Types: A healthy mix of secured (home or car loan) and unsecured (credit card, personal loan) credit types signals responsible credit management.

Also Read: Good Credit Score

Find the Right Lender with Buddy Loan

If you have a low credit score and need funds quickly, Buddy Loan can be your digital gateway. It’s a fintech marketplace, not a direct lender, that connects borrowers with a network of verified banks and NBFCs offering personal loans tailored to your profile.

Why Buddy Loan Works:

• 100% digital, paperless process
  
• Instant eligibility check (without affecting CIBIL score)
  
• Multiple lender options for better approval odds
  
• Disbursal within 24–48 hours for approved applicants
  

Using Buddy Loan, even individuals with less-than-perfect credit can find suitable lenders faster and at competitive rates.

Suggested Read: Bad CIBIL Score Can Cost You Your Job

Conclusion

Having a low CIBIL score doesn’t mean your financial journey is over; it’s a temporary hurdle. Today’s credit ecosystem offers multiple solutions for borrowers with poor credit histories through secured loans, co-applicant loans, NBFCs, and fintech marketplaces like Buddy Loan.

However, while urgent funding can provide short-term relief, focus on long-term recovery by rebuilding your credit score through disciplined repayments and responsible borrowing. Over time, this approach transforms you from a CIBIL defaulter into a financially empowered individual. Start by checking your credit score for free!