Personal expenses and medical emergencies can be unpredictable. The best way to secure financial assistance in such situations is to approach NBFCs, as their loan process is quick and short. This allows applicants to fulfill their emergency financial obligations. But for those with a lower credit score, this can be challenging. Most NBFCs follow RBI guidelines while lending personal loans. However, it is not the end of the journey. With the right tools and guidance, individuals with a poor credit score can also obtain an NBFC personal loan in India.
In this article, we extensively discuss how to get an NBFC personal loan for bad credit in India, what measures potential borrowers can take to improve their credit score and how to choose the right lender.
Benefits Of NBFC Personal Loans
NBFCs or Non-Banking Financial companies are private entities which are approved under the Companies Act, 1950, to lend loans and provide financial advice to small and medium-scale businesses and individuals. These institutions are allowed to lend loans, similar to full-time banks, but do not hold a banking license. Why borrowing an NBFC personal loan may be beneficial? An NBFC personal loan can be helpful when you have a low credit score. Here are a few points that indicate why this might be beneficial.
Flexible Lending Policies
All NBFCs lend personal loans. Their lending policies allow non-salaried personnel to borrow substantial loan amounts provided they have a fairly good credit score, or name a co-applicant who has a stable credit history.
Digital First Approach
Unlike government approved banks, NBFCs offer a digital-first approach, allowing applicants to submit their personal loan request, online. This is convenient for those who are remotely located.
Credit Score Review
NBFCs employ different credit scoring algorithms to analyse and review applicants’ credit reports and provide valuable advice on how they can improve their credit score. If you wish to analyse your credit score individually, consider opting for Oolka’s credit scoring feature. The AI-powered scoring system provides ready made reports with actionable insights that can improve your credit score.
Easy Application Process & Minimal Documentation
Due to their nature of operation, NBFCs make it convenient for applicants to apply for personal loans by offering multiple mediums of submission. If all the documents are in place, individual applicants may submit their personal loan application within a few minutes and even get it approved in time.
How To Get An NBFC Personal Loan For Bad Credit Score
If you have a low credit score and are in need of a personal loan, the journey towards loan approval could be a bit longer than those with favourable credit scores. The following table indicates the different credit score brackets and how they are interpreted by NBFCs while processing a personal loan request.
Understanding Credit Score Brackets & What They Mean
| Credit Score Range | Status | Interpretation |
| 800 and above | Excellent | Low risk borrowers having stable income sources. Are capable of paying off the loan amount within the loan period. |
| 750 to 799 | Very Good | Good credit history. Profile can be considered for loan approval from NBFCs. |
| 701 to 749 | Good | An average benchmark for those in need of immediate personal loans. People having this score can still improve by implementing certain measures. |
| 651 to 700 | Fair | Borrowers having existing liabilities which can be still paid off. However, these borrowers find it difficult to borrow new credit. |
| 300 to 650 | Poor | Borrowers with very high chances of loan rejection. If you belong to this section, it is important to pay off major existing loans and get rid of liabilities to be able to qualify for an NBFC personal loan. |
Check If Your NBFC Is RBI Approved
If you are relying to borrow a quick loan from an NBFC of your choice, ensure that it is registered with the RBI. RBI-approved NBFCs follow a transparent procedure, ensuring that the loan process is hassle free and legally approved.
Use AI-Based Tools To Improve Your Credit Score
If your credit score is in the ‘Poor’ of ‘Fair’ range, as indicated in the table above, you must consider using AI-powered tools to take control of your credit report. This can have a tremendous impact on your credit score. It also gives you an understanding of how credit bureaus calculate your score and how they rank you. FinTech companies like ZestMoney, CASHe, and KreditBee, Oolka, and SBI’s Yono app, make use of AI-powered credit scoring algorithms to calculate and generate credit reports. Oolka’s credit scoring algorithm enables you to take appropriate steps towards improving your credit score by providing actionable insights.
Compare Interest Rates & Processing Fees
Interest rates are an integral to the personal loan process. NBFCs are known for their high interest rates and processing fees, especially applicable to individuals with ‘Poor’ or ‘Fair’ credit scores. If you are shortlisting NBFCs for a personal loan instead of diving headfirst into the process, you must go through their interest rates. The rates could be higher or lower, depending on which credit score bracket your profile matches. Look for competitive rates but be very careful about lenders who offer personal loans at very low interest rates as these may have hidden costs or processing charges.
How To Improve Your Credit Score To Get An NBFC Personal Loan?
Before the advent of AI and automation, banks and private lenders relied on credit bureaus for credit scores and detailed information on an individual’s credit history. AI has enabled Fintechs across the world to develop credit scoring algorithms which can be integrated into mobile apps, improving public access to credit scoring and analysis. Although these tools cannot directly influence the credit score information, they compile and deliver reports within minutes and suggest actionable insights that may potentially help users achieve their goal of getting a personal loan without hassles.
Pay Off Existing Debts & Manage Liabilities
If your score is in the ‘Poor’ or ‘Fair’ range, it means that you must take into account your existing debts like a home loan or an education loan, assess their repayment durations and pay them off. This can have a positive impact on your credit score.
Avoid Applying For Multiple Credit Cards
Every time you apply for a credit card, the related bank makes a hard inquiry to understand your credit history. Each hard inquiry negatively impacts your credit score. Hence, if you only possess just one credit card and your score is at the brink, avoid applying for another one.
Keep A Low Credit Utilisation
Try to keep your credit utilization at par with your income. A lower debt-to-income ratio can help improve your credit score.
The journey towards a hassle-free personal loan process can be a long one for those with lesser credit scores. This is where credit management tools like Oolka, Cred, etc. come into play. With their advanced, AI-powered algorithms, these tools help individuals navigate their credit profile by generating precise credit reports which they can analyse and use in the future.
Conclusion
For someone with a low credit score, securing a personal loan can be difficult, not impossible. With several AI-based credit management tools that can help you organize, collate and create detailed credit and expense reports, it is very easy to take simple steps and improve your score. Most NBFCs lend personal loans to people with low credit scores, however, if applicants take the appropriate steps, rebuilding a damaged score profile is possible, which in turn qualifies them for NBFC personal loans.
FAQs
Can I Get An NBFC Personal Loan If My Credit Score Is Below 650?
Generally, NBFCs do not entertain individuals with low credit scores. However, their lending policies are flexible and can be changed based on how good your profile is – stable income proof, timely EMI payment receipts for existing debts are some of the documents you can submit to get an NBFC personal loan with a credit score of 650.
Will The Interest Rates Be Higher If I Have Bad Credit?
Yes, the interest rates for personal loans are higher, especially for those with poor or fair credit scores. However, if your financial profile is clean, certain NBFCs may still consider your application and provide some respite on the interest rate. However, this decision is purely individual.
What Documents Are Required For a Personal Loan With Bad Credit?
Most NBFCs ask for Aadhar and PAN card, along with recent salary slips and ITR if you possess any. However, if your credit score is low, you may have to submit additional documents showing you pay your existing dues regularly.
How much can I borrow with bad credit from an NBFC?
Bad-credit personal loan amounts typically range from around ₹10,000–₹5,00,000 for most fintech/NBFC players, depending on your income, obligations, and internal policies.
