As CIBIL plays an important role in deciding your eligibility for a personal loan, it may be a very difficult proposition to get a personal loan for defaulters. If you have failed to repay the loan in the past, leading financial institutions may decline your application for a personal loan.

So the moot question is how to get a personal loan with a bad credit score? While leading lenders may reject your application for a personal loan, there are some lenders that offer loans to individuals with a bad credit score.

How to get a personal loan with bad or low CIBIL score?

CIBIL score is one of the most important considerations for lenders to offer a personal loan, home loan, business loan, and car loan. A CIBIL score is used to determine an applicant’s eligibility for a personal loan. The applicant with a bad CIBIL score is considered as an irresponsible and risky borrower. When you default on a loan, it is recorded on your credit report and your credit report is added to the defaulters’ list.

Defaulters may not be able to access credit from mainstream lenders for years because they will consider you as a risky borrower. Personal loans are unsecured loans and you need a good credit score to get a personal loan. But the situation is tricky – you can not improve your credit score unless you get a personal loan. So how can you get a personal loan if you are a loan defaulter?

Well, having a poor credit score does not eliminate your chances of getting a personal loan completely. Here are some options for CIBIL’s defaulters to get a personal loan.

Secured loan

If you are not able to get a personal loan due to low credit score, you can apply for a secured personal loan or a loan against collateral. You can submit assets like gold, land, or fixed deposit with your lender. The assets act as security against the loan amount offered. Hence if you default on the loan, the lender can seize the asset and auction it. Since the risk of default is less, the lender may agree to offer the loan.

Apply with a co-applicant

Owing to bad CIBIL, if you are not able to get a loan, apply for the loan with a co-applicant who has an excellent credit score. In this case, the co-applicants credit score will be taken into consideration. However, if you default on this loan too, the lender will recover the outstanding balance from the co-applicant.

Try with your current bank

Speak to your current bank where you have your savings or current account. If you share a good relationship with the bank, it may agree to offer you a personal loan at reasonable rates. However, tell the bank everything about your financial background including default on credit. If you hide anything, the bank will somehow find out it and would reject your application.

Employer’s tie-ups with the lender

Top companies, generally, share a corporate relationships with banks to offer loans and other financial facilities to their employees. Check with your company if it has tie-ups with any bank and applies for a personal loan with the bank.

Online lenders

Today financial industries have upgraded their methods of offering services to their customers. With the penetration of information technology in the banking sector, searching custom-made loans has become very easy.  There are some financial institutions that have flexible eligibility criteria, including leniency in credit. However, they may levy a higher personal loan interest rate and provide lower loan amount and tenure than regular lenders.

For example, Vintage, an RBI registered firm and a Non-Banking Finance Company (NBFC), offers a personal loan for CIBIL defaulters in Delhi. There are other lenders that offer a smaller loan amount for a shorter term. For example, you can also get a personal loan by Fullerton India.

Try to close the credit you have defaulted on

If you have not closed any credit, it is added on your credit report. It will damage your credit score and creditworthiness severely. So, close the loan immediately and make sure that your credit report has a ‘closed’ status not ‘settled’. The settlement also affects your credit score, because it shows you have not paid the original amount you got from the lender, and the lender is sustaining the loss. It is advisable to close the loan instead and get the certificate from the bank for the same.

While it is not easy to get a loan if you are in a CIBIL defaulter list, but you can find out ways with some research.