Looking for a personal loan with a low CIBIL score can feel overwhelming, especially when most banks focus on borrowers with strong credit histories. But having a low or poor credit score doesn’t always mean your options are closed. In this blog, we’ll walk you through which banks and financial institutions are open to lending to CIBIL defaulters, what conditions they look at, and what steps you can take to increase your chances of approval.

Which Bank Provides Personal Loans for CIBIL Defaulters?

Here's a closer look at the banks that may provide personal loans to CIBIL defaulters:

1. ICICI Bank

   ICICI Bank is one of the few banks that may consider giving personal loans to individuals with low CIBIL scores, depending on the situation. If the borrower has a steady job, regular income, and low existing debt, the bank may still approve the loan after verifying documents like salary slips and bank statements. The loan, however, comes at a higher interest rate. It is often more than 10 to 12 percent and may be offered for a shorter period or a lower amount. If the defaulter’s case is more serious, adding a co-applicant with a good credit history or opting for a secured loan improves the chances. For those with scores below 600, approvals are very rare unless supported by strong additional factors.

2. Yes Bank

   Yes Bank is slightly flexible when it comes to borrowers with lower credit scores. While they usually prefer a score between 700 and 750, they sometimes consider mild defaulters if the applicant can prove stable income and has good supporting documents. The approval depends more on the current financial profile than just the credit score. For people with past defaults, interest rates are usually 2 to 5 percent higher than normal, and the bank may ask for a guarantor or some form of collateral. If everything checks out, loans are disbursed fairly quickly. Still, people with multiple or recent defaults are likely to be rejected, so it is better to work on rebuilding the score over time after taking the loan.

3. Kotak Mahindra Bank

   While Kotak Mahindra Bank doesn't offer unsecured personal loans to CIBIL defaulters, it may allow a One Time Settlement (OTS) if the loan you defaulted on was with Kotak itself. This option is considered in genuine hardship cases like job loss or medical emergencies. You can settle the dues by paying a reduced amount, and the bank will issue a No Dues Certificate. However, the account gets marked as "settled" on your credit report, which can hurt your credit score further.

   If you’re looking for a fresh loan after defaulting, secured loans are your only option. You’ll need to pledge something like property or gold. Interest rates start from 10.99% per year, and approvals depend on your income and repayment capacity. For unsecured loans, most defaulters turn to NBFCs or fintech platforms instead.

Banks That Provide Loans to People With a Lower CIBIL

1. IDFC FIRST Bank

   IDFC FIRST Bank usually offers personal loans to applicants with a CIBIL score of 710 or above, but may consider lower scores if you have a stable job, regular income, and low debt. The bank reviews your full profile, not just your credit report.

   You can apply online using documents like Aadhaar, PAN, and bank statements. If your score is low, expect higher interest rates, smaller loan amounts (up to ₹10 lakhs), or shorter tenures (up to 5 years). Those with very low scores below 700 can improve their chances by adding a co-applicant, pledging collateral, or starting with smaller loans to build credit.

2. Axis Bank

   Axis Bank prefers applicants with a CIBIL score of 700 or more, but may approve those with slightly lower scores if they show good income, job stability, and low ongoing EMIs. A co-applicant with a stronger score also helps.

   The process includes online or branch applications with salary slips and statements. If your score is between 700 and 750, you may get approved at interest rates above 10.49%, with smaller loan amounts (up to ₹15 lakhs) and tighter repayment terms. If your score is under 600, approval is unlikely unless you provide additional support like a guarantor or security.

3. Federal Bank

   Federal Bank typically looks for a CIBIL score of 750 or more, but may go as low as 650 based on your income, repayment history, and overall risk profile.

   They check your credit mix, utilisation, and recent payments. If your score is low, they may offer a secured loan, ask for a co-applicant, or approve a smaller amount to reduce risk. You can also pledge assets like property. Keeping a low credit utilisation ratio helps rebuild your score over time.

Who Is Considered a CIBIL Defaulter?

A person is considered a CIBIL defaulter if they have failed to repay loans or credit card dues on time, and this information has been reported to CIBIL by the lender. While CIBIL doesn’t keep an official "defaulter list," your credit report will show missed payments, defaults, or settlements. These negative remarks lower your CIBIL score, often below 650, making it harder to get new loans or credit approvals.

Some common reasons for being labelled a defaulter include:

• Not paying EMIs or credit card bills on time
• Settling a loan instead of repaying it fully
• Having multiple loans with missed payments
• Defaulting on a loan entirely with no payments made

Lenders view such records as signs of financial risk. That’s why even a single default can hurt your chances with most banks.

How Can CIBIL Defaulters Get Loans?

Getting a loan with a low CIBIL score is challenging, but not impossible. Here's how defaulters can still get access to funds:

1. Try Secured Loans

   Instead of unsecured personal loans, you can go for secured loans where you pledge an asset like:

   • Gold
   • Fixed deposits
   • Property

   Since the bank has collateral, they are more willing to lend, even if your score is low.

2. Add a Co-Applicant or Guarantor

   You can improve your loan approval chances by applying with someone who has a good credit score and a stable income. This reduces the lender’s risk and may help you get better terms.

3. Approach NBFCs or Fintech Lenders

   While traditional banks are strict, many NBFCs (Non-Banking Financial Companies) and fintech loan apps offer loans to low-score borrowers. These often come with:

   • Higher interest rates
   • Lower amounts
   • Shorter tenures

   But they can still help meet urgent needs or rebuild credit over time.

4. Negotiate a One-Time Settlement (OTS)

   If your default is on an existing loan, you can request a one-time settlement with the bank. This lets you pay a reduced amount to close the loan. It helps clear your dues, though it does leave a "settled" remark on your credit report.

5. Start Small to Rebuild Credit

   Consider taking small-ticket credit like a secured credit card or a small personal loan from a co-operative bank. Pay on time consistently to slowly improve your credit score and unlock better offers in the future.

How Freo Can Help CIBIL Defaulters

Freo is one of the few platforms that offers credit support to individuals with low or damaged CIBIL scores. Instead of rejecting applications based solely on past defaults, Freo takes a more flexible, tech-driven approach. Here's how it supports borrowers with poor credit history:

1. Credit Access Even with Low Scores

   While banks may reject low-score applicants, Freo works with lending partners who look at income stability and spending patterns, not just CIBIL history. This opens up small-ticket credit even for those with past defaults.

2. Smart Credit Limits

   Freo provides controlled credit lines with clear terms. This reduces the risk of over-borrowing and helps users manage their repayments better. With structured borrowing, users stay in control of their finances.

3. Credit Score Recovery

   Every on-time repayment made on a Freo loan or credit product is reported to credit bureaus. Over time, this consistent repayment activity helps rebuild the user's CIBIL score, improving their chances of getting better credit options in the future.

4. Fully Digital and Transparent

   The entire application and approval process happens on the Freo app. There’s no heavy paperwork, and all fees and interest rates are clearly shown. This is especially useful for people who’ve had confusing or negative experiences with lenders in the past.

5. Better Financial Habits

   Freo also helps users stay aware of their spending and repayments by tracking everything inside the app. This builds financial discipline, which is essential for staying out of debt and improving creditworthiness in the long run.

Closing Thoughts

Having a low CIBIL score can slow things down, but it does not mean you are completely stuck. As you have seen, some banks may still consider your application if your income is stable and your overall profile makes sense, while NBFCs and fintech platforms offer more flexible options. The important part is to borrow carefully, understand the cost involved, and focus on timely repayments. Whether you start with a secured loan, add a co applicant, or use platforms like Freo to rebuild your credit step by step, the goal should be to fix past mistakes and move towards healthier financial habits. With patience and the right choices, improving your credit profile is very much possible.

FAQs for CIBIL Defaulters

1. Can a loan defaulter go to jail in India?

   No, loan defaulters do not go to jail just for missing payments or having a low CIBIL score. However, lenders can take legal action and file a case in civil court to recover the amount, especially if there's a cheque bounce or fraud involved.

2. Can I get a personal loan if my CIBIL score is 500?

   It’s difficult to get a personal loan with a CIBIL score of 500 from traditional banks. But some NBFCs and online lenders may still offer small-ticket loans at higher interest rates and fees. Approval depends on your income, repayment capacity, or collateral.

3. Can a CIBIL defaulter get a loan after 7 years?

   Yes. CIBIL usually removes negative records older than 7 years from your report. If you’ve had no defaults in recent years and maintain good credit behaviour, your chances of getting a loan improve over time.

4. Who gives loans to CIBIL defaulters?

   Some NBFCs, fintech platforms like Freo, and private lenders may offer loans to CIBIL defaulters. These loans often come with stricter terms, higher interest rates, or require collateral to reduce risk for the lender.