Can I Get a Personal Loan With a 650 Credit Score?

Posted on Monday, January 27th, 2025 | By IndusInd Bank

A personal loan can be your financial helping hand, whether it is for planned expenses like a holiday or unplanned expenses like medical emergencies. 

To secure a personal loan that meets your needs and provides favourable terms, you should have a good credit score. However, what if you have a credit score of 650? Since it is considered a low credit score, does it mean you cannot opt for financing options at all? 

The truth is, you may secure a 650-credit score personal loan. However, there may be a few challenges and conditions. Let’s explore this subject in more depth. 

Can I Get a Personal Loan with a 650 Credit Score?

• Yes, you can get a personal loan for a CIBIL score of 650. However, it will be more challenging to secure one compared to when you apply with a higher credit score.

• A credit score of 650 falls in the middle range. So, while it is not the ideal score, some lenders may work with borrowers in this range.

• For banks and other types of lenders, credit scores are indicators of the applicant’s financial reliability. A score of 730 or above is usually preferred and will give you the favourable terms you need on your instant personal loan.

• However, there are some lenders in the market who specialise in working with borrowers with fair or lower scores. They may be more flexible and offer instant personal loans, but chances are they may not go below the 650 mark.

• With a 650-credit score, your personal loan may be limited to a smaller loan amount or incur with higher interest rate. For example, while a borrower with a high score might enjoy a rate of interest of 10-15%, a 650 credit score might lead to an increase of 5% or more.

Therefore, it is crucial to use a personal loan calculator to understand your estimated monthly payments. It will help you understand how a higher interest rate will impact your budget.

Consequences of Applying for a Personal Loan with a Low Credit Score

Applying for a personal loan for a CIBIL score of 650 comes with a few drawbacks.

· Higher Interest Rates

Since banks view a lower score as riskier, they often offer loans at higher interest rates. This means paying more interest over the loan’s tenure. Over the long term, this will make the loan more expensive.

· Lower Loan Amounts

Lenders are often cautious with low-credit borrowers and may approve only smaller loan amounts. While this can be helpful for covering minor expenses, it may not be ideal if you need major funding.

· Fewer Lender Options

Not all lenders approve a personal loan for a CIBIL score of 650, which can limit your choices. You may have to approach non-traditional lenders or those that cater to individuals with low credit scores. However, you must be cautious with such lenders, as many of them can levy hidden fees and charges.

· Additional Documentation and Delays

Banks may ask for more documentation to make sure of the applicant’s legitimacy and financial capacity. This can result in additional time for processing and delays in the approval process.

Also Read: NBFC vs Bank- Which One to Choose for Personal Loans?

Should You Apply for a Personal Loan with a Low Credit Score or Improve Your Score?

Improving your credit score before applying is always ideal because it can help you secure a loan with lower interest rates and more favourable terms.

Even raising your score by 5-10% could open up options with reduced rates and higher loan amounts.

That said, if your need for funds is urgent, you might still proceed with the personal loan for a CIBIL score of 650. However, you must evaluate the lender and the loan terms with the utmost care. Paying attention to the interest rate, fees, and penalties for late payments is non-negotiable.

Additionally, choose a shorter loan term where possible to help reduce the total interest paid. But for this to work, you must be confident in your ability to make the higher monthly payments.

Conclusion

Getting a 650-credit score personal loan may be possible, but it often comes with limitations. This can include higher interest rates, lower loan amounts, and fewer lender options. Before applying, consider whether it is possible to improve your credit score, even slightly. This could enhance your overall loan experience to a great extent.

If you are ready to explore personal loan options, consider IndusInd Bank to start your new credit journey. With competitive interest rates, no collateral requirements, and instant approval and disbursal, you will have an easy and hassle-free Personal Loan application process. The best part is that you can apply right away since the entire process is 100% digital. So, what are you waiting for? Apply now!

Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.