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How to take a Personal Loan with a Low Credit Score?

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Are you stuck in a financial bind and need a personal loan, but worried your low credit score will hold you back? You're not alone! Many people face this challenge, but don't worry, there are solutions. To start, it's crucial to research loan requirements, prepare your finances and present yourself as a responsible borrower. By doing so, you can increase your chances of securing the funding you need. So, let's dive in and explore practical tips and tricks that will help you get approved for a personal loan, regardless of your credit score. Don't let a low credit score hold you back from achieving your goals and dreams. With the right approach, you can turn things around and take control of your financial future!

Key Highlights

  • The credit score is a reflection of your credit history and how reliable you are at repaying debts.
  • To avoid defaulting on a loan, make sure you can afford the monthly payments and have a plan in place to repay the loan on time.
  • Over time, your credit score will start to improve, making it easier to get approved for future loans with better interest rates and terms.

What is a Credit Score?

A credit score is a three-digit number that represents your creditworthiness. It is calculated based on your credit history, including your payment history, credit utilisation, credit mix and length of credit history. The higher your credit score, the more likely you are to be approved for a loan or credit card with favourable terms and lower interest rates. On the other hand, a low credit score may make it more difficult for you to get approved for credit or you may have to pay higher interest rates. Before applying for a personal loan with Shriram Finance, it's important to check your credit score.

Importance of Credit Score in Personal Loan Application

Your credit score is an important factor that lenders consider when deciding whether to approve your loan application. Here are some reasons why your credit score matters:

Reflects your creditworthiness:

The credit score is a reflection of your credit history and how reliable you are at repaying debts. A high credit score indicates that you are a low-risk borrower, while a low credit score indicates the opposite.

Affects the interest rate you are offered:

Lenders use your credit score to determine the interest rate you are offered on a loan. A higher credit score typically results in a lower interest rate, while a lower credit score can result in a higher interest rate.

Impacts your ability to get approved for credit:

If you have a low credit score, lenders may be hesitant to approve your loan application. This can make it difficult to get the funding you need for important expenses, such as medical bills, home repairs or education costs.

Challenges of Obtaining a Personal Loan with a Low Credit Score

If you have a low credit score, getting approved for a personal loan can be challenging. Here are some common challenges that you may face:

Limited options:

Many traditional banks and financial institutions have strict credit score requirements for personal loan applicants. This can limit your options for obtaining a loan.

Higher interest rates:

If you are approved for a loan with a low credit score, you may be offered a higher interest rate than someone with a higher credit score. This can make the loan more expensive over time.

Shorter repayment terms:

Some lending institutions may offer shorter repayment terms for borrowers with low credit scores. This can result in higher monthly payments that may be difficult to afford.

Need for collateral or co-signer:

Sometimes, you may require to provide collateral or have a co-signer with good credit to secure the loan.

Higher risk of default:

Lenders view borrowers with low credit scores as higher risk, which raises the chances of loan default. Defaulting on a loan can compound the damage to your credit score, making it even more difficult to obtain credit approval down the line.

Applying for a Personal Loan with a Low Credit Score

Having a low credit score can make it challenging to secure a personal loan. But, there are still options available for those with less-than-stellar credit.

Step 1: Check Your Credit Score

Knowing your credit score will give you an idea of what kind of interest rate you can expect. Calculate your monthly personal loan EMI using Shriram FinancePersonal Loan Calculator.

Step 2: Gather Your Documents

Once you know your credit score, it's time to gather the necessary documents for your loan application. You will need to provide proof of identity, proof of address and proof of income. Make sure you have all of these documents in hand before applying for the loan to speed up the process. Click here to know about the documents required to apply for a personal loan.

Step 3: Apply for the Loan

Shriram Finance offers a quick and easy online application process that can be completed in just a few minutes. Simply visit the website and fill out the application form with your personal and financial information.

Step 4: Anticipate Loan Approval

Once you've submitted your loan application, the waiting game begins as our dedicated team meticulously assesses your application and credit score. Their thorough evaluation will determine your eligibility for a personal loan. If you meet the criteria and are approved, you can expect to receive a tailored offer detailing the loan amount, interest rate, and repayment terms.

Best Practices for Taking Out a Personal Loan with a Low Credit Score

A. Borrowing Only What You Need

The more you borrow, the more you'll have to pay back in interest and fees. Before you take out a loan, determine how much money you need to cover your expenses and stick to that amount.

B. Repaying the Loan on Time

Late payments can hurt your credit score and make it harder to get approved for future loans. When you take out a personal loan, make sure you can afford the monthly payments. Set up automatic payments to ensure you never miss a payment due date.

C. Avoiding Default

If you default on a loan, your credit score will take a big hit and the lender may take legal action against you to recover the funds. To avoid defaulting on a loan, make sure you can afford the monthly payments and have a plan in place to repay the loan on time.

D. Building Your Credit Score

Utilizing a personal loan and consistently making punctual payments can contribute positively to your credit score. By demonstrating responsible and reliable behaviour to lenders through on-time payments, you enhance your creditworthiness. Over time, your credit score will gradually enhance, facilitating future loan approvals with more favourable interest rates and terms. Maintaining a timely payment record for all bills and managing a low credit utilization ratio are additional strategies to reinforce your creditworthiness.

Elevating Your Credit Score is Within Reach: Start Building Your Credit Today

Getting a personal loan with a low credit score may seem daunting, but with Shriram Finance,it's possible. By following these four easy steps, you can apply for a personal loan and get the funds you need to cover unexpected expenses or invest in your future. By being proactive and taking the necessary steps to prepare your finances, you can increase your chances of getting approved for a loan. Remember to only borrow what you need, repay the loan on time and work on building your credit score over time.


1. How do I check my credit score in India?

There are plenty of options to check your credit score in India, where you can get to know about your credit health, active loans, payment dues and so on.

2. I have never taken a loan or a credit card. Will, I still have a credit score?

Yes, you may still have a credit score even if you have never taken a loan or credit card. Your credit score is based on various factors such as previous utility bills, rent and other credit-related activities.

3. What benefits will I get if I have a good credit score?

A good credit score can provide you with benefits such as higher chances of loan approvals, lower interest rates and faster processing time. A high score can also improve your bargaining power with lenders and increase the likelihood of getting better credit card rewards and perks.

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