With the soaring growth of credit in India, personal loans have become available in larger proportions to salaried and self-employed individuals. Nevertheless, not every borrower has an excellent repayment record. More than you would imagine, there are cases of loan defaults; it could be because your job situation has changed, you have fallen ill, or you did not plan well financially. In case you have already defaulted on a loan previously, you may ask yourself a question: Is it possible to take a personal loan in India with a loan default on your account?
The short answer: Yes, but it is difficult, and it has preconditions.
This blog will tell you how a personal loan with a default impacts your creditworthiness, your ability to get a loan with a default to your name, and how fintech lenders are making it easier than ever for high-risk borrowers to access and afford the financial products they need.
Learning About Loan Defaults and Credit Scores
If you don’t pay your EMIs for more than 90 days, you are in default on your loan. Then, the lender designates the debt as a Non-Performing Asset (NPA) and tells credit bureaus like Experian or CIBIL about it.
How This Affects Your Credit Score:
- A default will cost you 75-150 points of your credit score
- The default appears in your credit report and up to 7 years
- The future lenders would consider you a high-risk borrower
- This has a direct effect on your ability to access new loans, particularly with conventional banks.
Is It Possible to Get a Personal Loan After Defaulting?
Yes, some lenders may still offer you a personal loan with default, depending on the following factors:
1. Time Since the Default
If the default happened several years ago and you have maintained a clean record since then, some lenders might be willing to take a chance.
2. Type of Default
Technical defaults (like a delay of a few days) may be overlooked
Major defaults (non-payment for months) are harder to recover from
3. Loan Settlement vs. Full Repayment
If you settled a loan (paid less than the due amount), lenders are cautious
If you clear all dues later, it reflects better on your credit history
4. Current Financial Status
Stable income, employment, and reduced debt levels increase your chances.
5. Type of Lender
Traditional banks often reject defaulters
NBFCs and fintech platforms may consider your application under specific conditions
What Are Your Options?
1. Fintech Platforms
Modern fintech lenders use AI-based credit assessments that go beyond just your CIBIL score. They consider alternate data like:
Salary slips
Bank statement behavior
Employment history
Stashfin, for example, offers a personal credit line from ₹1,000 to ₹5 lakhs, even for those with low or recovering credit scores.
2. NBFCs (Non-Banking Financial Companies)
NBFCs are more flexible compared to banks. While the interest rate might be higher, they can offer loans based on your current repayment capacity.
3. Secured Loans
Offering collateral (gold, FD, property) can improve your chances of approval even if you have a default on record.
4. Peer-to-Peer Lending Platforms
P2P platforms allow individual lenders to fund your loan. Though high-risk, these may offer small-ticket loans if you explain your default situation clearly.
Tips to Improve Eligibility Post-Default
1. Pay Off Existing Dues
Clear any remaining dues on your defaulted loan. Request a No Dues Certificate from the lender to update your credit report.
2. Monitor Your Credit Score
Check your CIBIL score regularly. Some platforms also allow you to view credit health insights for free.
3. Build Positive Credit History
Use secured credit cards or small consumer loans and repay on time. Over 6–12 months, this can repair your credit profile.
4. Avoid Applying to Multiple Lenders
Too many applications in a short span can further damage your score. Apply only where you have a realistic chance.
5. Maintain Financial Stability
Keep your debt-to-income ratio low. Demonstrating savings and stable employment builds lender confidence.
How Fintech Platforms Support Borrowers with Defaults
Unlike traditional banks, fintech platforms offer second chances. Here’s how they help borrowers with low credit scores or past defaults:
- Flexible Credit Line: Borrow only what you need, pay interest only on usage
- No Prepayment Charges: Repay early without penalty
- Minimal Paperwork: Digital application and KYC
- AI-Based Evaluation: Looks at overall financial behavior, not just CIBIL
- Credit Score Tracker: Helps you monitor and improve your score
These platforms encourage responsible borrowing and support financial wellness for all, including those working to rebuild after a default.
Things to Keep in Mind Before Applying
If you’ve had a previous default, it’s critical to approach the next loan application strategically.
- Avoid multiple applications at once; it can reduce your credit score further.
- Be transparent about your default history if asked.
- Don’t over-borrow; request an amount you can comfortably repay.
- Focus on repayment discipline from day one to avoid falling back into default.
Default Isn’t the End
Having a personal loan with a default on your credit report isn’t the end of the road. With the rise of alternative lending models, AI-driven evaluations, and supportive platforms like Stashfin, you still have access to personal loans tailored to your current circumstances.
That said, borrowing after a default requires careful financial discipline. Prioritize timely repayments, start small, and gradually rebuild your credit history. Stay transparent with lenders, maintain consistent income records, and avoid repeat mistakes.
Remember, every step towards financial responsibility brings you closer to restoring your credibility in the credit ecosystem.
If you’re looking for a practical, flexible borrowing option after a personal loan with default, Stashfin could be your financial ally. It is one of India’s most trusted digital lending platforms. It offers credit lines from ₹1,000 to ₹5 lakhs, charges interest only on the amount used, uses AI to check eligibility for personalized credit assessment, has no hidden fees or prepayment charges, and much more. Stashfin can help you make better financial decisions today.