No credit score? 5 personal loan alternatives you can still qualify for

In the nation a high credit score often decides who gets personal loans and at what interest. If you are someone who is new to credit or has no borrowing history, you might find traditional banking institutions and NBFCs keeping their doors closed for lending you funds on easier terms and conditions.

Still, this does not mean that you are completely out of options. There are several different credit financing means that you can choose from and avail personal loans even without a credit score.

Here are five smart alternatives to personal loans for those just starting their credit journey:

1. Loan against LIC policy

Life insurance policies with a surrender value like those from LIC can also be used as collateral for seeking quick personal loans. You don’t need a credit score for the same and the process is generally smoother if you have paid premiums regularly for at least three years. These loans are ideal for those who have a policy but lack formal credit history or any past repayment history.

2. Loan against property 

If you own any residential property or commercial holding you can use it to raise funds without needing a credit score. Banking institutions and NBFCs provide Loans against property (LAPs) at lower interest rates due to the security i.e., the collateral involved. This is another reliable option for larger loan amounts with longer repayment periods even for self employed individuals.

3. FD-backed credit cards

The fixed deposit backed credit cards are another option that can be utilised to avail loans even without a credit history, they are offered by most leading banks. You can start with a deposit of as low as ₹10,000 and there is no need to show income proof or existing credit history. Using the card responsibly by staying under the credit limit and paying on time helps in building your credit history and credit score in gradual fashion.

Manish Shara, Co-founder and CEO of ZET, says “FD-backed credit cards are a simple, secure way to start building your credit score, especially for those without income proof or prior credit history. With timely repayments, a strong score can be built within months.”

4. Rental deposit loans

If you are moving into a rented home and don’t have solid savings for meeting a hefty deposit, some lending institutions offer rental deposit loans. These are loans which are unsecured in nature and are paid directly to the landlord. 

Lending institutions such as Bajaj Finserv, LoanTap, CASHe through Magicbricks along with others provide such loans. These loans are especially useful in metro cities where rental advances can go up to 6 to 10 months of rent. It is also important to keep in mind that these loans are designed specifically for the purpose of meeting lending requirements.

5. Overdraft against savings account

Several banks and lending institutions provide overdraft facilities on savings accounts, permitting customers to withdraw more than their balance up to a set limit. This pre-approved credit line does not require a credit score and is often linked to your relationship with the banking institution, including account activity and tenure.

Note: Rates discussed above are illustrative in nature and may vary based on lender policy and applicant profile. Check the website of your respective lender before applying for any loan product.

Therefore, not having a credit profile and a solid credit score does not mean that financial opportunities are out of reach. These secured or flexible products can provide the support you need while helping you build a credible financial profile and a solid credit history. The only thing that you need to keep in mind is to ensure that you make repayments on time and responsibly manage your finances.

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Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit scores. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.