Personal Loans Without A Guarantor For Low Credit Score

How persons with low credit can avail personal loan without guarantor from direct lender? Read this article by IIFL Finance to know!

6 Nov,2022 18:07 IST 146 Views
Personal Loans Without A Guarantor For Low Credit Score

Personal loans have gained immense popularity in recent years, as banks and non-banking finance companies made it simpler and quicker to borrow money to meet immediate short-term money requirements. These loans can be used for any legitimate requirement, from festival shopping and buying home appliances to paying hospital bills.

One of the biggest reasons for the popularity of personal loans is that borrowers need not provide a collateral to the lender. But since a collateral is not required, a borrower’s credit score is one of the key metrics on which banks and non-banking finance companies approve personal loans.

The credit score is a three-digit number that ranges from 300 to 900. It is derived by analysing the borrower’s credit history and gives the lender an indication of the individual’s repayment capacity. A higher score makes it easier to avail a loan. However, many a time the person in need of money may struggle with a low credit score. In such a case, lenders may ask the borrower to nominate a guarantor.

Who Is A Guarantor?

A personal loan guarantor is a person who will sign the borrower’s loan agreement and effectively agrees to repay the loan if the borrower defaults. This person may be a family member, a close friend or a well-trusted colleague.

Guarantors have to be over 18 years with a good credit history and often have to have a certain amount of savings or income. Most lenders would want a guarantor with a good credit score before they provide personal loans to people with a low score.

When a person becomes a guarantor, he is entering into a legally binding contract with the lender. If the borrower does not make the payment, the lender will be legally entitled to ask the guarantor to pay the debt. If the guarantor defaults in making the payments, the lender can take legal action against them to recover its money. Also, a default by the guarantor can have a negative impact on their own credit scores.

Ways To Get Personal Loans Without A Guarantor

A borrower with a poor credit score may find it difficult to convince his family, friends or colleagues to become a guarantor. In such situations, there are few ways that can help a borrower take out a personal loan.


A borrower may apply with a co-applicant as that improves the chances of loan approval and reduces the risk of default as one takes over the task of repayment if the other cannot.

Sufficient Income:

The applicant would need to have a stable and consistent source of income to repay the loan without any difficulty. An applicant with a higher disposable income stands higher chances of getting the approval.
Zaroorat aapki. Personal Loan Humara
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Lower Loan Amount:

Lenders may be hesitant on approving a bigger loan amount without a guarantor and a poor credit score. Hence, lowering the loan amount increases the chances of approval.

Alternative Lenders:

A borrower may look for alternative lenders such as NBFCs that may adopt a lenient approach.

Improve Credit Score:

A credit score is a dynamic rating which keeps improving or deteriorating with a borrower's repayment behaviour. There are several ways by which a borrower can improve his credit score over time.

How To Improve Credit Score

Timely repayment of existing loans and reducing the outstanding amount on credit cards can positively affect the credit score over a period.

• A borrower must use his credit lines responsibly and not borrow more than what he can repay. People must use their credit card, loan amount, or any other type of borrowing wisely.
• A borrower should avoid late or missed payments.
• A borrower should maintain a low credit utilisation ratio and not exceed 30% of the credit card limit.
• A default will reflect in the credit history and will bring down the credit score. A borrower must make sure to pay the unpaid amount and ensure the account gets a "closed" status.


Prospective borrowers with a poor credit score may often find it difficult to get a loan without a guarantor, who becomes responsible for repaying the loan in case of any default.

Faced with such an issue, a personal loan borrower may look at other alternatives. In most cases, a lender will ask the borrower to submit a collateral if he does not have a guarantor. Borrowers may also apply for a joint loan with an applicant with a good credit score or opt for collateralised loans such as a gold loan.

Reputed lenders such as IIFL Finance provide several options to prospective borrowers to help them avail a personal loan when they need it the most. IIFL Finance offers personal loans ranging from Rs 5,000 to Rs 5 lakh via an online process that can be completed within minutes.

Apart from personal loans at competitive rates of interest, IIFL Finance also offers a variety of secured lending products such as gold loan and loan against securities that can help people with a low credit score.

Zaroorat aapki. Personal Loan Humara
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Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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