Loans that have been launched specifically for individuals with low or no credit score are called bad credit loans. Borrowers with a low credit score find it difficult to get loans from lenders, as lenders consider such borrowers a high-risk category. 

A low credit score indicates financial indiscipline on the part of the borrower. For evaluating your credit score for availing loans, visit Credit Mantri – the best online loan platform in India where you can get your credit score for free. You can also shortlist the best loan offers matched to your credit profile. 

A bad credit loan is the best alternative for such individuals with a low credit score. Let us explore the 7 top alternatives for bad credit loans in India which would benefit such individuals. 

What is a bad credit loan?

A bad credit loan is offered by various lending platforms to help individuals with low credit scores or no credit score. These loans are normally secured loans requiring borrowers to provide collateral or security like property, gold, etc., to get them. 

Which are the best loans for individuals with low credit scores?

The best alternatives of bad credit loans in India are:

  • Secured Loans from Banks

If you have a low credit score, then banks may still provide you secured loans wherein you would be expected to pledge collateral or security. This would help you to negotiate for a better loan deal in terms of lower interest rates, lower EMIs or longer tenure. 

However, if you are unable to pledge any collateral, then you can opt for unsecured collateral-free loans, like personal loans, if you have a stable monthly income.  However, unsecured loans have a higher interest charge as compared to secured loans and you may also get a lower loan amount sanctioned. Note that the eligibility for an unsecured loan depends on your credit score. However, if your credit score is unavailable or low, you can boost eligibility by offering proof of stable income.  

  • Loans from Non-Banking Financial Companies (NBFCs) 

NBFCs also personal loan to individuals with a low credit score. NBFC’s provide greater flexibility than banks when it comes to credit scores. However, the interest charged on such loans may be higher.  

  • Get a Loan from your Current Financial Provider

By talking to your existing financial provider, you can get a customised bad credit loan as per your requirements. Since your current bank knows your financial status, they may sanction loans for you, even if you have low credit scores. 

  • Overdraft on Current Account

Another option is going in for an overdraft on your current account, where you can avail 0% interest rate up to a specified amount. However, one should bear in mind that crossing the overdraft limit can be very expensive.

  • Digital Lenders

Digital lenders are another option that would help individuals with a low credit score. These are community-operated platforms that are a good real alternative to banks for anyone in need of urgent funds. They are lenient when it comes to eligibility, and sanction loans instantly.  

Additional Reading: Features and benefits of Instant Loans

  • Peer-to-Peer Lending (P2P) 

P2P lending platforms are a popular alternative for providing bad credit loans. P2P platforms offer loans up to Rs.5 lakh, which have loan tenures between 12 months and 60 months for borrowers with a low credit score.

  • Credit Cards

Credit cards are a great alternative that is available for anyone with a low credit score. Now, there are dedicated credit cards available for individuals with a bad credit history. However, a lower credit limit may get sanctioned or higher interest rates could be charged. Any failed application is expected to damage your credit card further. 


There are other alternatives like using your own savings as long as you can, to avoid taking any loans. Also, government schemes are there which offer interest-free budgeting loans to those who can't afford their rent, but certain conditions are to be fulfilled. One should be careful of loan sharks. So, it is always best to consider the above options while going in for a bad credit loan. Also, make sure to work on improving your credit score, so that you can get access to the best loans in the future. 


1.  What is a good credit score?

A credit score between 750 – 900 is considered good with 900 being the maximum score. Having a high credit score entails the borrower to various benefits like higher loan amount, better interest rates, lower EMIs, longer tenure etc. A credit score between 550 – 749 is considered an average score. A credit score between 300 - 549 is considered a poor score, which will lead to automatic rejection of your loan application in most cases. 

2. When should you avail of a bad credit loan?

Bad credit loans can be availed only when it is absolutely necessary under the following situations.

  • Your loan application gets rejected by many lenders owing to a low credit score
  • There is a default on your credit card payments
  • No alternative available to manage your current debts
  • Your overall financial situation shows improvement and you have the financial capability to repay a loan for increasing  your credit score

3. How much bad credit loan can be availed? 

In India, the maximum bad credit loan that can be availed varies from lender to lender. The lender considers various considerations based on your credit score, income, expenses, and related elements to decide on the loan amount that can be granted to you and ensure timely repayment from your end. Normally, such loans vary between Rs.50,000 and Rs.5 lakhs.

4. How can I apply for a bad credit loan?

One can visit the official website of the lender to get a bad credit loan. Necessary documents required for availing of the loan would have to be provided. Based on your eligibility criteria, the lender would sanction the requisite loan amount at prescribed interest rates and other terms. If your documents are found to be correct, the loan amount will be disbursed to your bank account within 24 hours.

5. Can I avail additional bad credit loans apart from the existing one?

Normally, lenders who offer bad credit loans do not offer top-up or additional loans to the existing bad credit loan. So, it is considered prudent to repay the existing loans before availing of fresh ones.