Which banks give personal loans with bad credit in India?

A personal loan is taken when you have an immediate need for funds, and the money existing with you doesn’t cover the financial emergencies you are facing. People often opt for personal loans when they have exhausted all other options. But today, it seems India runs on personal loans. Take a look at the excerpt from the Times of India, the leading English newspaper in the country. Do you want to know which banks give personal loans with bad credit in India?

Looking at the credit industry in India and at the pace at which it is growing, I feel not all loans will be good loans. Meaning there will be people having bad credit. And if you are one of them, there is no need to worry because we are here with this post to help people with bad credit. We will also mention about the places from where you can borrow.

First, you need to ascertain your financial situation and assess whether you need a personal loan. Having done all that, if you feel you still need a loan, we have discussed some steps that you need to consider before applying for the said loan.

Things to consider so that banks can give personal loans with bad credit in India.

You must keep in mind the following points so that banks give personal loans with bad credit in India.

01. Explore the options for bad credit loans well.

A bad credit loan will come at a higher interest rate along with processing fees and other charges, including tax. Hence you need to compare the terms of different lenders, evaluate the benefits, and go through the loan offer carefully before finalizing.

02. You need to be eligible to apply for loans with bad credit.

The eligibility terms vary from lender to lender. Apply for loans with eligibility requirements you fulfill; otherwise, your application will be rejected, damaging your credit scores further. Please keep in mind every hard inquiry by the lender drops your credit score further.

03. Understand the terms and conditions of the lender.

Loans with bad credit will come with many clauses and financial implications. Don’t hurry to sign the loan and go through all the minute details thoroughly, and only after you are satisfied to proceed with the process of getting the loan.

04. And finally, consider your repayment capacity.

All your due diligence will come to a naught if you haven’t analyzed your repayment capacity. If you cannot pay off this loan, you will sink further into the quicksand of bad debts and hurt your credit scores further. Only if you feel you can repay the EMIs comfortably, then go ahead and opt for a bad credit loan.

It may not be impossible to get a loan with bad credit, but it will still take time and be wrought with hassles. That is why we have suggested some tips you can consider before opting for a loan with bad credit.

How to avail loans with bad credit in India?

01. Knowing your credit score is very important.

A score above 750 is considered very good, and you will get lenders to provide you loans at favourable terms and conditions quickly. But low credit scores are anything below 625. Before you avail of a personal loan, you can check your credit scores online for free.

02. Assess your financial position and ensure no defaults with the new loan.

You should consider taking a new loan only if your current income can support the EMIs.

03. Compare the various bad credit loans available in the market.

Review the terms and conditions of the loans and read through the fine print carefully.

04. Opt for secured loans.

Though personal loans are collateral-free, some lenders provide personal loans with collateral. This helps negotiate the terms in your favor, and the approval will be quicker. A secured personal loan is easy to get, especially if you have bad credit.

A guarantor with a good credit score can help you avail of a loan despite having bad credit scores. 

05. Provide income proofs to support that you have enough income to remain regular with your EMIs.

This helps in getting a personal loan with bad credit. Provide employment information, business details, income tax returns to the lender to convince him of your repayment capacity. 

Now that you have done your due diligence and have assessed your financial position, we have listed some banks that will provide you loans even with bad credit.

Which banks give personal loans with bad credit in India?

You can get loans with bad credit from scheduled banks and non-banking financial companies, though the terms won’t be favourable to you. But before approaching them, you can try approaching your existing banker. Yes, you heard that right, we however suggest going to your primary bank for a loan.

Let me elaborate: If your credit score is low because you have no credit history to back you up, you can approach your primary banker. Your bank will know about your financial track record as you bank with them, and they won’t mind approving a personal loan for you without bothering too much with your credit scores.

You can also apply for an overdraft facility on your current account. This is possible if you are a self-employed individual and have opened an existing account with your bank. You can utilize this facility to overcome a short-term shortage of funds instead of going for a personal loan.

Now, with that out of the way, let us discuss schedule banks. Schedule banks have strict eligibility conditions, and they will approve your loan application only if you meet all their requirements. Some banks might ask you to pledge collateral or provide income proofs or both to support your repayment capacity. 

Banks have stringent terms and conditions for loan applicants whose credit scores range between 500 and 750. The excerpt from My money Mantra a financial website, lists prominent scheduled banks providing personal loans to applicants with bad credit scores. 

The rates shown here are as of September 2021. It is best to approach these banks yourself to confirm the interest rates as interest rates are prone to changes.

Compared to scheduled banks, non-banking financial companies offer better terms and conditions on personal loans with bad credit. They are more flexible and lenient, and the chances of getting a low value, shorter tenure loan are high even if you have a low credit score. The below excerpt from My money Mantra a financial website compiles the leading NBFCs into a list.

You can approach these NBFCs and enquire about their terms and conditions and confirm their interest rates before proceeding to apply.

What causes bad credit score in India?

A credit score is a three-digit number that depicts a person’s creditworthiness based on their borrowing and repayment history. It ranges from 300 to 900, with a higher score indicating better credit health. In India, credit scores are calculated by credit bureaus like CIBIL and Experian based on the data provided by lending institutions.

A bad credit score is generally considered to be below 650. This signals high risk to potential lenders. There are several reasons why people may have poor credit scores in India:

Reasons for Bad Credit Score in India

Reason Description Payment Delays and Defaults Not paying credit card bills or loan EMIs on time leads to delayed payments being recorded in your history. Consecutive delays or non-payments result in defaults which drastically drop your score.

Excessive Credit Card Usage Maxing out credit cards to the full limit consistently shows high reliance on credit. Using more than 30% of your total credit limit also reduces your score.

Multiple Loan Applications Every loan or credit card application is recorded as a hard inquiry, which causes minor dips in your score. Too many inquiries signal credit hungry behavior.

Errors in Credit Report Incorrect personal or account details in your credit report can bring down your score. For example – being linked to loans that do not belong to you.

Short Credit History Having a thin credit file with limited accounts or a recently opened first loan/card leads to less information about repayment capacity.

As per data from CIBIL, in 2019 nearly 24% of analyzed credit reports had scores below 650, indicating poor credit health. The below table shows common reasons and their contribution to bad credit scores in India:

ReasonPercentage of Bad Credit
Attributed Missed/Delayed Payments68%
Credit Card Misuse18%
Multiple Loan Applications5%
Other Reasons9%

The best way to improve or maintain a healthy credit score is to avoid these mistakes – pay all bills on time, limit credit card use to 30% of the limit, space out loan applications, and check your credit report regularly for errors. Being credit disciplined is critical for financial health.


There is no such thing as a free lunch. This saying is apt for this situation. When you have bad credit then your negotiating capacity reduces and you will have to do a lot of research before settling on a lender. It is always advisable to increase your credit scores and maintain them.

Credit scores are important because they present a picture of your repayment capacity to the lender. That is why bad credit scores have such a drastic impact on your borrowing capacity. We hope this article is able to help you in deciding suitable lenders who will provide you with a personal loan with favourable terms and conditions.

Also read,

  1. How to get an Instant cash loan 24/7 in India
  2. How to get a personal loan for a CIBIL score of 550 in 2022?
  3. How to get 1 hour loans by phone in India?
  4. How to get an Instant cash loan in 1 hour without documents?
  5. How to get a loan with bad credit scores in India
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