Your credit score is a very important part of your personal financial profile. It is a three-digit number, typically between 300 and 900, computed using various factors like your loan repayment history, your credit mix, your credit utilization ratio and the like. This score is computed by credit rating agencies like the TransUnion CIBIL.

Today, many employers and even landlords look at this number to determine how creditworthy or reliable an individual is. However, in addition to these aspects, your credit score primarily plays a pivotal role in determining your eligibility for a loan. If your credit score is 750 or higher, you will generally find it easy to obtain a loan, a new credit card or any other credit facility.

However, if you have no credit history, or if you have a poor credit score of 600 or lower, it  becomes harder to avail a new loan or credit facility when you need it. So, if you have a low credit score and you are in need of funds for a financial emergency, what can you do? Let’s find out.

1. Opt for a secured loan

A secured loan is one where you offer an asset that you own as collateral to the lender. In case of any default from your end, the lender can sell the asset to recover the dues. This minimizes the risk that the lender takes on. In case you have a low credit score, look for secured personal loans as an option instead, so you can improve your chances of getting a loan. However, to do this, you need to have gold, a house property or some such asset in your name.

2. Get a guarantor or a joint loan applicant

A guarantor essentially offers the lender a guarantee that you will repay the loan as scheduled. While this person is not responsible for repaying the loan, they may be expected to take on the liability if you default. A joint applicant, on the other hand, is someone who co-borrows the funds with you. You can opt to get a guarantor or a joint loan applicant to improve your chances of having your loan application approved, especially if they have good credit scores.

3. Consider borrowing a lower amount

Sometimes, lenders may be more willing to offer a lower amount as a loan, particularly if your credit score is in the middle of the spectrum. While this may not be the most ideal situation, it still allows you to borrow some funds to meet your financial emergency. So, this is another option that you can consider. Check if you can make do with a lower amount and apply for a smaller loan if that’s feasible.

4. Or choose loans with a higher interest rate

If you absolutely cannot settle for a lower amount of loan, you may have to bear the burden of higher interest rates. Some lenders may be willing to loan money to borrowers with low credit scores, but to cover the risk, they may charge much higher interest than what traditional banks do. If you are capable of taking on this additional financial burden, this is a course of action that you could consider.

5. Also, look for errors in your credit report

Sometimes, your credit score may be low due to no fault of your own. Errors in your credit report — like some incurred data or a loan repayment that is yet to be updated — may be pulling your score down. Though this is quite rare, it doesn’t hurt to check out your credit report thoroughly and look for any potential errors that may be affecting your credit score. In case you spot any such errors, you need to get them rectified quickly, so your repayment capacity is unaffected.


These are some of the solutions available to you in case you have a poor credit score but are still in need of some funds urgently. That said, the long-term solution to this situation is to work on your credit score and improve it, so it’s easier for you to avail credit facilities in the future. You can do this by making your repayments in a timely manner, limiting your credit utilization ratio to around 30%, and having a healthy mix of credit facilities in your portfolio.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.