The Second Chance Loan | Bad Credit Loans Explained | How To Get Loan On Bad Credit Score

Life can throw sudden money problems at you – like a hospital bill, job loss, family emergency, or car repair – even if your credit score is not good. Many people in India face this. Banks usually say no if your CIBIL score is low. But there are other options called bad credit loans or low CIBIL loans that can help. These are mostly from non-banking finance companies (NBFCs) and online apps. They look more at your current income and job than your past mistakes.

What is a Bad Credit Loan?

It is a personal loan given to people with a low or bad credit score (usually below 650 on CIBIL). You don’t need to give any property or gold as security in most cases – it’s unsecured. Because the lender takes more risk, the interest rate is higher, the amount is smaller, and you get less time to repay.

Who Has a Low Credit Score?

Your score can drop because of:

Missing EMI or credit card payments
Old loan defaults or settlements
Using too much of your credit limit
Applying for too many loans in a short time
No past credit history at all

A score below 650 is seen as poor by most lenders.

How Does It Work?

The process is easy and mostly online:

You apply on the lender’s website or app.
They check your credit report (soft check – it doesn’t hurt your score much).
They look at your salary slips, bank statements, and job details.
If okay, they give you an offer with interest rate and monthly payments.
Money comes to your bank account – often in hours or the next day.

You repay in fixed monthly installments (EMIs) through auto-debit.

Types of Loans for Low Credit

NBFC Personal Loans Companies like Bajaj Finance, Tata Capital, Moneyview, or Fibe give these. They check income more than credit.
Small Instant Loans from Apps Apps like CASHe, Olyv (SmartCoin), or others give quick small amounts (₹5,000 to ₹1 lakh) with very few papers.
Gold Loans or Secured Loans If you have gold, fixed deposit, or vehicle, you can pledge it for lower interest even with bad credit.
Peer-to-Peer (P2P) Loans Platforms connect you to private lenders. They may be more flexible.

Good Things About These Loans

You can get approval even with low score
No need for security in many cases
Money comes very fast
Helps in real emergencies
If you pay on time, it can slowly improve your credit score

Bad Things to Watch Out For

Interest rates are high (often 18% to 36% or more per year)
Extra fees for processing (1-5%), late payment, etc.
Small loan amount and short time to repay
Strict rules if you miss payment – penalties and calls from collectors

Always read everything carefully before agreeing.

How is it Different from Payday Loans?

Bad credit loans are better than payday loans because:

You pay back in easy monthly parts (EMIs)
Not full amount in 15-30 days
Can help build credit if paid on time

Payday loans are very expensive and dangerous.

Who Can Apply?

Basic rules (may change by lender):

Age 21 to 60 years
Regular job or income (salaried or self-employed)
Bank account
Aadhaar, PAN, and some proof of income/address

Even with low score, good salary and stable job help a lot.

Papers You Need

Aadhaar and PAN card
Salary slips or ITR
Last 3-6 months bank statement
Mobile number linked to Aadhaar

Many do online KYC – no need to visit office.

Interest Rates and Costs

Rates depend on your income, job, and how bad your score is. For low credit, expect 18% to 36% or higher. Some apps go even more for very small loans. Always check the full cost (called APR) and total amount you will pay back.

Extra costs: Processing fee, GST, late fees.

Tips to Pick a Good Lender

Choose only RBI-registered companies
Compare total cost, not just interest
Never pay money upfront to any agent
Read real customer reviews
Ask about late payment help policy

Avoid agents who promise “100% approval”.

Can It Help Improve Your Credit Score?

Yes! If you pay every EMI on time for 6-12 months, your score can go up. After that, you may get better loans from banks with lower rates.

Best Ways to Use the Money

Use only for real needs like:

Hospital bills
Fixing vehicle
School/college fees
Small business needs
Paying off high-interest debts

Never use for shopping or fun.

What Happens if You Don’t Pay?

Big penalties
Bad marks on credit report
Legal notices
Constant calls from recovery agents

So, borrow only what you can easily repay.

Other Options Before Taking This Loan

Try these first:

Gold loan (lower interest)
Ask family or friends
Credit card (if you have one)
Advance salary from office
Hospital EMI plans

Mistakes to Avoid

Don’t apply to many places at once
Don’t ignore the full cost
Don’t add extra insurance if not needed
Don’t miss even one EMI

Frequently Asked Questions(FAQ)

Can I get a loan with 550 CIBIL score? Yes, many NBFC apps and companies approve if your income is good. But interest will be higher.
Do I need to give security? No, most are without any security.
How fast is the money? Same day or next day in many cases.
Will paying on time help my score? Yes, it builds positive history.
Are these loans legal? Yes, if the lender is registered with RBI.

Conclusion:

A loan for low credit score can be a big help in tough times. It gives you a second chance when banks say no. But use it carefully – pay on time, borrow small, and only for real needs. With good habits, you can fix your credit and get cheaper loans later. Always compare options and stay safe from fake lenders. Borrow smart for a better future!