best personal loan for bad credit in india
Financial institutions or banks do not grant loans to those with bad credit as a low credit score indicates a high risk of default in payments. But thankfully, there are some lenders who do the work of giving loans even with low CIBIL score. They tweak the terms and conditions and optimize their lending, thus helping people with bad credit get instant loans. Let us see which is the bank in India that gives personal loan even on bad credit score?
What is a loan for bad credit?
Loans against bad credit are for people who have low credit scores and are in urgent need of a loan. A low credit score is a reflection of either a bad or short credit history. But a financial emergency can come at any time. Loan for bad credit acts as a panacea and helps applicants to avail loans in times of need. These loans are sanctioned at high interest rates and customized terms and conditions. Loans for bad credit can be secured or unsecured, depending on the policies of the lending company and the profile of the applicant.
best bad credit loan in india in 2022
Borrowers looking for instant loan against bad credit in India can choose from these best bad credit loans:
Secured Loan – Applying for a secured loan is the easiest way to get a personal loan for those with bad credit. The loan is sanctioned against a guarantor or security and as such it reduces the credit risk of the lender. This, in turn, helps the borrower to get the loan at a lower interest rate and favorable loan terms.
Unsecured Loan – If the borrower is unable to pledge any guarantor or something valuable, then one can apply for unsecured loan, provided there is a stable monthly, but the unsecured loan will be sanctioned at a higher interest rate.
Loans from NBFCs – NBFCs are more cooperative than banks in terms of eligibility checks and credit scores. Hence, NBFCs have higher chances of getting loans even on bad credit. But loans from NBFCs are sanctioned at a higher rate of interest.
Choose Your Existing Banker – If you are finding it difficult to get a loan due to low credit score, you can apply for an instant loan for bad credit with your existing banker. Customers who are eligible for a personal loan, have a good relationship with the bank, and have a healthy financial track record, will be approved by their existing bank for an instant loan for bad credit.
Apply for Current Account Overdraft – If you are a self-employed individual and have a current account with the bank, you can avail an overdraft facility to meet the immediate financial shortfall.
Digital Lenders – Apart from banks and NBFCs, digital lenders also offer advance loans. These lenders work through mobile apps. They do not have stringent eligibility checks. They offer short term loans for bad credit without any hassle.
What are the reasons for low credit score in India?
Let us understand what exactly is a low or bad credit score:-
Late Credit Card Bill Payment – Default or delay in credit card payment is the most important factor that causes a drop in credit score. It is pertinent to mention here that the entire credit card dues should be paid on or before the due date. Paying the minimum amount on the due date results in a drop in the credit score.
Overspending and reaching credit limit regularly – Although you may be paying your credit card bills regularly, reaching credit limit early and regularly is not considered a good sign. This is interpreted as excessive spending. This behavior is not appreciated and hence leads to degradation in credit score.
Too Many Ongoing Loans – Having too many active loans is a warning sign for the lender. A very high loan-income ratio can lead the borrower to default on payments. This negatively affects the credit score.
Inadequate credit history – If you have not taken a loan before and do not have a credit card, you will not have a credit history. Thus, the lending company may not be able to assess your creditworthiness. Therefore, it is recommended that you start your credit journey with a secured loan or credit card.
What are the things you should consider before taking a loan for bad credit?
Loan for bad credit can help you tide over the tough times. But before you apply for a bad credit loan, keep the following points in mind:-
Explore Well – A bad credit loan will come at a higher interest rate. Processing fees and other charges will add to the cost. That’s why it is important that you do proper research, evaluate the benefits and carefully compare the offers from different lenders.
Check Eligibility – Loans for bad credit will be sanctioned only if the eligibility conditions are met. Applying for a bad credit loan without meeting the eligibility conditions can lead to rejection of the application, further damaging the credit score.
Understand the terms and conditions – It is important to understand the terms and conditions of personal loan for bad credit before proceeding further. These loans come with multiple clauses at high interest rates. Go through each section closely to avoid hidden charges and financial implications later.
Consider your repayment capacity – Loans for bad credit charge higher interest rates. Going for the same without evaluating your repayment capacity may lead you to default on payments. This can put you in a debt trap, further lowering your credit score. Consider taking a bad credit loan only if you can repay the EMI comfortably.
How to get Bad Credit Loan in India?
Getting a loan for bad credit requires a lot of effort and research and is not an easy deal. But thankfully it’s not impossible to achieve. If you are looking to take a bad credit loan in India, here are some steps that can help you get the loan:
Know your credit score – A credit score above 750 is considered good. A score of over 750 enables the borrower to avail a personal loan on favorable terms and conditions. But before applying for a personal loan, know about your credit score. It can be checked online.
Assess your financial position – Make sure that there should be no defaults in loan repayment. Consider a loan only if your current income is capable of paying the loan EMI.
Compare Personal Loan for Bad Credit – Bad credit loan interest rate will be higher. It is therefore important to carefully research and compare the benefits offered with the terms and conditions that apply. Review multiple lending companies and read the fines carefully before selecting a lender.
Opt for a Secured Loan – Getting a secured loan is easy even if you have a poor credit score. Opt for a Loan Against Gold, PPF, or any other financial instrument. These will act as financial aid and hence let you avail personal loans with low APR.
Add Co-Applicants – A co-applicant with a good credit score can help you get a personal loan irrespective of the poor credit score of the primary applicant.
Provide Income Proof – Getting a personal loan with bad credit becomes easy if you have sufficient proof to validate your total income. Hence, make sure that your employment details, business details, ITR documents, etc. are in place before applying for a bad credit loan.
Which lending wake bank or company provide loan against bad credit?
If you have bad credit score and you want to know which bank or company in India offers personal loan with bad credit, then loan for bad credit can be availed through any of the below mentioned financial lenders:
- scheduled bank
- non-banking financial companies
- digital lender
- Peer-to-peer lending (P2P)
Scheduled Banks – There are strict eligibility conditions for scheduled banks. But they sanction loans with bad credit on fulfilling all other eligibility conditions. Having a guarantor pledge and providing sufficient evidence to validate your repayment capacity can help you negotiate a lower interest rate despite a poor credit score. Scheduled banks offer loans to applicants with a credit score between 500 and 750 with stringent terms and high fees. Major scheduled banks offering loans for bad credit are:
|Name of bank||rate of interest|
|IDFC First Bank||more than 10.49% per annum|
|ICICI Bank||Above 10.50% p.a.|
|HDFC bank||Above 10.50% p.a.|
|axis Bank||Above 12.00% p.a.|
|Yes Bank||more than 13.99% per annum|
Non-Banking Financial Companies – Compared to scheduled banks, NBFCs are more flexible and lenient with their lending terms. Despite having a low credit score, the chances of getting a loan of low value and short term are high. Some NBFCs also sanction loans to applicants whose credit score is less than 360. Major NBFCs Offering Loans With Bad Credit:
|Name of NBFC||rate of interest|
|Tata Capital||more than 10.99% per annum|
|fullerton india||more than 11.99% per annum|
|India Bulls Dhani||more than 13.99% per annum|
|Bajaj Finance||Above 13.00% p.a.|
|Muthoot Finance||Above 14.50% p.a.|
Digital lending company – Digital company, works through mobile application. They offer short term loans with low principal. After pre-eligibility checks, they sanction loans to applicants with low credit scores. The leading digital lenders offering bad credit loans are:-
|digital lender name||rate of interest|
|money tap||More than 1.08% per month|
|money view||1.33% more per month|
|early salary||2.50% more per month|
|pay-sense||more than 15.96% per annum|
Frequently Asked Questions (FAQs) on Bad Credit Loans
Q: How can I ensure that my loan application is not rejected because of a bad credit score?
Ans: To increase your chances of taking a bad credit loan:
- give guarantor
- add co-applicant
- Apply for a shorter loan tenure
- Apply for lower principal
- prove your repayment ability
Question: Which lenders offer personal loans for bad credit?
Ans: Personal loan for bad credit can be availed from:
- scheduled bank
- non-banking financial companies
- digital lender
- Peer-to-peer lending (P2P)
Q: What is considered a bad credit score?
Answer: Credit score is recorded on a scale of 300-900.
- Between 800 and 900 – Best
- Between 750 and 800 – good
- Between 625 and 750 – Average
- Below 625 – Bad
- It is recommended to maintain a credit score of 750 and above to avail the loan on favorable terms.
Q: How much loan can I take with a bad credit score?
Answer: The lower your credit score, the lower will be the loan amount sanctioned. Financial companies generally do not lend more than Rs 5 lakh to people with poor credit scores. The loan eligibility will depend on the profile of the applicant.
Question: How can I apply for a bad credit loan?
Answer: To apply for a bad credit loan, the applicant needs to closely evaluate the terms and conditions offered by various lenders.
- Visit the websites of various lenders.
- Select the loan tenure and loan amount.
- Check loan eligibility along with your credit score.
- If the applicant is eligible for the loan, check the rate of interest and other charges on the loan.
- Compare the APRs of different lenders.
- Apply for Bad Credit Loan with the concerned lender
Question: Can I get a top-up loan against bad credit loan?
Answer: Once a bad credit loan is sanctioned and disbursed, an applicant can apply for a top-up loan if there is no delay and default in EMI payment for the specified months.
Question: How long does it take to get a bad credit loan approved?
Answer: The loan application process and processing time for a bad credit loan is the same as in the case of a normal personal loan. The time taken to approve the loan varies from lender to lender.
Question: What are the documents required to apply for a bad credit loan?
Answer: Documents required for bad credit loan include:-
- income proof
- identity proof
- Address proof
- credit report
- pan card
- Documents for guarantor protection
Question: Who can apply for Bad Credit Loan?
Answer: In most cases, one can apply for a bad credit loan if:
- Age should be 18 years and above as prescribed by the lending institution
- Must be an Indian citizen
- Must be salaried or self-employed with required work experience