Personal loan credit score 650: Here’s how to get a loan with low credit score
20 January, 2025 | 11:00 IST
Personal loans offer a convenient solution for those in need of quick financial assistance, whether for emergencies, home improvements or any unexpected expenses. But, securing a loan isn’t just about the amount you need – your CIBIL score, or credit score, plays an important role in determining your eligibility.
If you have a CIBIL score of 650, you might be wondering if you still stand a chance to get approval for a personal loan. Let’s take a look at what a 650 CIBIL score means for your loan application and how you can improve your chances of securing the funds you need.
A credit score is a three-digit number ranging from 300 to 900 that reflects your creditworthiness. It is calculated based on your credit history, such as your borrowing patterns and repayment behaviour. A score closer to 900 indicates excellent credit, while a lower score suggests a higher risk for lenders.
In India, lenders use credit scores to assess your ability to repay the loan. Generally, a score of 650 is considered to be on the lower end of the “good” range, but many banks and non-bank financial companies (NBFCs) also offer loans to borrowers with credit scores within this range.
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A credit score of 650 indicates that you may have had some issues with credit management in the past. Lenders view this as a moderate risk, which could lead to a few challenges:
Higher interest rates: Lenders may offer you a loan with a higher interest rate, as they might consider you a riskier borrower compared to someone with a higher score.
Lower loan amounts: You may be eligible for a smaller loan amount, as lenders might limit their exposure to risk.
Stricter terms: The loan tenure might not be as favourable as those offered to applicants with higher credit scores.
While your credit score of 650 is an important factor in the loan approval process, lenders consider a few other factors before making a final decision.
Income stability: Lenders want assurance that you can repay the loan. A steady and sufficient income will improve your chances of approval.
Current liabilities: If you have ongoing loans or credit card debt, lenders will assess your existing liabilities and your ability to manage them while taking on additional debt.
Employment status: A stable job with a reputable employer can help offset a lower CIBIL score.
Loan amount: Applying for a low loan amount that aligns with your income and repayment capacity will increase your chances of approval. Large loans with a 650 score may be seen as risky by lenders.
Steps to improve your chances of loan approval with 650 credit score
While it might be a bit more challenging to secure a loan with a 650 CIBIL score, there are steps you can take to improve your chances:
Be realistic about the amount: An effective way to improve your chances of securing a loan with a 650 CIBIL score is to apply for an amount that you can comfortably repay. Large loans may be deemed risky by lenders.
Show your ability to repay: Lenders will require you to provide proof of income, such as pay slips, bank statements or tax documents. Ensuring that you have clear documentation will give lenders confidence in your ability to repay.
Review your credit report for errors: Check your CIBIL report for errors. Mistakes, such as incorrect payment histories or outdated records, could affect your score. Correcting these errors can boost your score.
Address past financial issues: If your CIBIL score of 650 is a result of financial challenges — such as job loss, medical emergencies or other difficulties — explain these to your lender.
Consider a co-signer: If your credit score isn’t ideal, applying for a loan with a co-signer with a higher credit score can help improve your chances.
Improve your credit score: Work towards improving your CIBIL score before applying for a personal loan. Regularly paying off existing debts, avoiding late payments and reducing your credit utilisation can raise your score.
To maximise your chances of getting approved for a personal loan with a 650 CIBIL score, avoid these pitfalls:
Applying with multiple lenders simultaneously: Multiple loan applications within a short period can lower your credit score due to multiple credit checks. It’s better to compare various lenders and apply with the one that best suits your needs.
Ignoring your debt-to-income ratio: Even if you have a 650 CIBIL score, your debt-to-income ratio plays a key role in loan approval. Ensure that your monthly debt obligations don’t exceed a reasonable portion of your income.
Ignoring loan terms: Be cautious about loan terms that seem too good to be true. Always read the fine print to avoid hidden charges or penalties that could make the loan more expensive in the long run.
In conclusion, securing a personal loan with a 650 CIBIL score is certainly possible, but it comes with challenges. While a higher score would likely improve your chances and terms, lenders will still assess your overall financial profile.
Get access to fully digital personal loans of up to Rs 15 lakhs with Moneycontrol. It’s a paperless process with low processing fees and the convenience of funds being transferred directly to your bank account. Just enter your details, complete KYC verification and choose your EMI plan. Moneycontrol provides access to loan offers with interest rates starting at 12% per annum.
Summary
A credit score of 650 isn’t the end of the road for personal loan approvals. Discover how to navigate challenges, improve your chances, and secure funds when you need them most.
Disclaimer
This piece/article was written by an external partner and does not reflect the work of Moneycontrol's editorial team. It may include references to products and services offered by Moneycontrol.
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