Get Quick NBFC Personal Loans with Bad Credit Score in India

If you have a low CIBIL Score and are worried about loan approval, securing an Unsecured Personal Loan from a Non-Banking Financial Company (NBFC) could be a viable option for you. Unlike traditional banks that adhere to rigid credit score cut-offs, Regulated NBFCs often offer more flexible loan terms and adopt a broader view of a borrower’s financial health beyond just their credit score. They typically evaluate key factors such as the borrower’s stable employment status, primary income source, and any additional income streams, making it possible to get an NBFC Personal Loan for Bad Credit in India approved even with a low CIBIL Score. This article, provided by Zype, a regulated NBFC, is for informational purposes only and is based on our 15+ years of industry experience.

Understanding a Bad Credit Score in India (CIBIL Score)

In India, a borrower’s creditworthiness is primarily measured by their CIBIL Score, a three-digit number that ranges from 300 to 900. This score, generated by Credit Bureaus like CIBIL, reflects your credit history, including repayment behavior and debt management.

• Excellent (800+): Indicates low risk and stable income, making the borrower eligible for the best interest rates.
• Good/Very Good (750-799): The preferred score for most banks and NBFCs, representing a good credit history.
• Fair (651-700): Borrowers may have existing liabilities but can still be considered, though finding new credit becomes more difficult.
• Poor/Bad Credit (300-650): This range signals a high risk of default and results in the highest chances of loan rejection from traditional lenders. (Source: CIBIL, as of 2024-25)

The Impact of a Low CIBIL Score on Personal Loan Eligibility

A low CIBIL Score, typically below 650, has a significant impact on an unsecured personal loan application. Lenders perceive a low score as an indicator of past financial mismanagement, leading to:

• Higher Interest Rates: To offset the higher risk, lenders charge a significantly higher Annual Percentage Rate (APR), making the loan substantially costlier.
• Lower Loan Amount: The sanctioned loan amount is often much lower than what a prime borrower would receive, reducing the lender’s exposure to risk.
• Stricter Terms and Conditions: The loan tenure may be shorter, and the lender may impose more stringent requirements or penalty charges.
• Increased Documentation: Borrowers may be asked for additional documents to prove current financial stability and repayment capacity, such as extensive bank statements and salary slips.

Why NBFCs are a Better Option Than Banks for Low CIBIL Scores

NBFCs have emerged as reliable and accessible sources of credit, especially for individuals who fail to meet the strict credit score requirements of traditional banks.

Flexible Eligibility Criteria

Unlike banks that may reject applications outright for a CIBIL score below 750, NBFCs employ a more flexible and holistic assessment. They are often willing to consider applicants with scores as low as 600 to 650 or even lower, provided other mitigating factors are strong. They fill the gap for first-time borrowers, freelancers, or self-employed individuals with unconventional income streams. (Reference: RBI Guidelines on Fair Practices Code for NBFCs)

Quicker Loan Disbursal Process

Many NBFCs, especially the digital-first or Fintech-backed ones, leverage technology and automation (like AI/ML-based credit checks) to offer a streamlined, digital-first application process. This results in significantly faster approval and disbursal—often within 24 hours or even minutes—compared to the more traditional and time-consuming in-person verification processes of banks.

Alternative Credit Assessment Models

NBFCs frequently use alternative credit scoring algorithms that look beyond just the CIBIL Score. They focus heavily on current financial indicators such as income stability, the reputation of the borrower’s employer, banking transaction history, and Debt-to-Income (DTI) ratio to assess repayment capacity, rather than relying solely on past credit history.

Key Eligibility Criteria for an NBFC Personal Loan with Bad Credit

While NBFCs are more flexible, they still have essential eligibility criteria, which are often adjusted based on the borrower’s risk profile:

Income & Employment Stability

This is the most critical factor that can compensate for an NBFC Personal Loan for Low CIBIL Score. Lenders look for consistent proof of income to ensure the borrower can handle the monthly EMI.

Maximum Loan Amount and Tenure

For borrowers with bad credit, NBFCs mitigate risk by offering conservative loan amounts and tenures.

• Loan Amount: Typically ranges from mathbf{\text{\textcurrency} 10,000} up to mathbf{\text{\textcurrency} 5,00,000} for bad-credit profiles, although some NBFCs offer up to mathbf{\text{\textcurrency} 25} lakh or more for prime customers.
• Tenure: NBFCs offer flexible tenures, generally ranging from 3 months up to 60 months (5 years). However, a shorter tenure may be imposed for higher-risk borrowers.

Interest Rates and Other Fees You Must Know

Because a low CIBIL Score denotes a higher lending risk, the cost of borrowing from an NBFC will be significantly higher than a bank loan for a prime customer.

Typical Interest Rate Range (Higher APRs)

NBFC interest rates are calculated based on their internal benchmarking system and the borrower’s risk profile, leading to a very wide range.

• General NBFC Range (Risk-Based Pricing): For a broad range of customers, NBFC rates can start from around 10.99%{ p.a.} and go up to 36.00%{ p.a.} or even higher for high-risk profiles.
• Bad Credit Impact: A borrower with bad credit should expect to be charged towards the higher end of this spectrum (e.g., 20% text{ to } 36% text{ p.a.} or more). This high Annual Percentage Rate (APR) covers the lender’s perceived risk of default. (Reference: RBI Guidelines on Digital Lending, 2022) 

Processing Fees, Foreclosure Charges, and Penalties

NBFCs charge various fees, which must be accounted for in the total cost of the loan:

• Processing Fees: Typically a percentage of the loan amount, generally ranging from 2% 9% of the sanctioned amount, plus applicable Goods and Services Tax (GST).
• Penal/Late Payment Charges: These are significantly high for a missed EMI, often calculated as a high percentage 3% per month, or up to 36% on the overdue amount. (Note: RBI has mandated a shift to ‘penal charges’ instead of ‘penal interest’ in recent guidelines).
• Foreclosure/Pre-payment Charges: If you choose to pay off the loan early, charges may apply. These typically range from 2% to 7% of the outstanding principal amount, depending on how many EMIs have already been paid. However, some NBFCs or Fintech lenders may offer zero pre-payment charges.

Documents Required for an NBFC Loan with a Low CIBIL Score

One of the benefits of NBFCs is the minimal documentation, often enabled by a digital-first approach. However, for a low CIBIL Score, documentation for income proof becomes even more critical.

How to Improve Your Chances of NBFC Loan Approval

Even with a low CIBIL Score, there are several strategic steps you can take to make your application more appealing to an NBFC and secure approval for an NBFC Personal Loan for Low CIBIL Score:

• Apply with a Co-Applicant or Guarantor: Adding a co-applicant or guarantor with a strong CIBIL Score significantly mitigates the lender’s risk. Their creditworthiness acts as a form of assurance, bolstering your application and making it more credible.
• Offer Collateral (Secured Loans): If you cannot secure an unsecured loan, opting for a secured loan (like a Gold Loan or Loan Against Property) by pledging valuable assets can substantially increase your approval chances. The collateral reduces the lender’s risk, often leading to loan acceptance despite a low credit score.
• Choose a Smaller Loan Amount: Applying for a smaller loan amount makes the application appear less risky to the NBFC, increasing the willingness of the lender to approve it. This also demonstrates responsible borrowing behavior.
• Demonstrate Repayment Capacity (Debt-to-Income Ratio): A low Debt-to-Income (DTI) ratio is a powerful mitigating factor. Ensure your existing debt obligations (EMIs, credit card bills) are a small percentage of your total income (ideally 30% or below}). Presenting consistent income proof, even if your CIBIL Score is low, reassures the NBFC of your capacity to manage the new EMI.