Personal loans for 575 credit score: How to qualify and improve approval odds

Personal loans provide borrowers with exceptional options for covering their day-to-day expenses. That is why, especially to meet expenses around festivities, such loans are availed by borrowers. Still, it is vital to acknowledge that borrowing a new loan with a credit score of 575 can be a challenging experience.

The borrowers who have low credit scores, i.e., scores of less than 650, often face difficulties in getting their personal loan applications cleared. Such applicants are offered loans with stricter repayment terms, higher interest rates, along closer and more intense scrutiny by the lender.

Still, choosing a reputable lender and following key steps can increase their chances of approval and help them manage the loan effectively.

What options are available to borrowers?

Lending institutions review loan applications based on factors such as creditworthiness, past payment history, any past defaults, missed personal loan EMIs, and other relevant information. That is why a low credit score reflects a lack of financial responsibility on the part of the applicant.

You can rectify this and boost loan approval odds by opting for secured loans backed by collateral or applying jointly with a creditworthy co-applicant or guarantor.

What is the significance of regulated lending institutions?

Apart from giving due diligence to the above-discussed essentials, it is also important to only borrow from reputable and extremely well-known lenders. As such, a borrowing will result in respectful treatment of the borrower, and the lender will provide the due respect and opportunity to the borrower in case the repayment becomes difficult to complete.

Vibhore Goyal of OneBanc says, “Borrow only from RBI-regulated lenders, which ensure transparency and borrower protection. About 1,600 verified digital lending apps are listed on the RBI’s official website under regulated entities. For a ₹1 lakh loan over 24 months, expect 0.5–4% processing fees plus 18% GST. EMIs typically range between ₹4,800 and ₹5,300 at 14–24% annual interest. Missed EMIs can incur 1–2% monthly penalties on the overdue amount, which is also subject to GST. Set aside funds from your income for timely repayments. Paying back with discipline is key to improving your credit bureau score.”

Therefore, selecting a regulated lender with proper experience in lending, a healthy record of reviews, and positive experiences ensures fair treatment. Not only this, but before borrowing, one should compare personal loan offers online and take guidance from certified professionals.

Steps to secure and manage the loan

1. Demonstrate repayment potential with solid documentation, such as salary slips, a strong credit profile, and a high credit score.
2. Go ahead with a shorter loan tenure to signal lower risk. Only borrow the amount you can comfortably repay and keep things simple.
3. Avoid accumulating new debt before clearing past dues, and do not avail products and services that you do not need.
4. Plan your finances by understanding the risks associated with personal loans. These loans carry risks, including default, forced liquidation, high interest rates, and emotional stress. That is why only go ahead after proper due diligence.
5. If in doubt, discuss the issues with the customer support executive of your respective lending institution and with a certified financial advisor, so that the best possible loan is secured by you.

With calmness, prudence, and proper planning, borrowers with a credit score of 575 can avail themselves of personal loans while building stronger credit profiles for the future.

Still, before applying for any personal loan product, aspiring borrowers need to exercise due diligence regarding the associated risk factors of availing loans, such as high interest rates, the possibility of debt accumulation, and damage to credit scores.

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Disclaimer: Mint has a partnership with fintech companies to offer credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article aims to educate readers and raise awareness about the essential needs for credit, including loans, credit cards, and credit scores. Mint does not promote or encourage taking credit, as it comes with risks such as high interest rates and hidden charges. We advise investors to discuss with certified experts before taking any credit.