Realistic nuclear level densities (NLDs) obtained within the spectral distribution method (SDM) are employed to study nuclear processes of astrophysical interest. The merit of SDM lies in the fact that the NLDs corresponding to many body shell model Hamiltonian consisting of residual interaction can be obtained for the full configurational space without recourse to the exact diagnolization of huge matrices. We calculate NLDs and s-wave neutron resonance spacings which agree reasonably well with the available experimental data. By employing these NLDs, we compute reaction cross-sections and astrophysical reaction rates for radiative neutron capture in few Fe-group nuclei, and compare them with experimental data as well as with those obtained with NLDs from phenomenological and microscopic mean-field models. The results obtained for the NLDs from SDM are able to explain the experimental data quite well. These results are of particular importance since the configuration mixing through the residual interaction naturally accounts for the collective excitations. In the mean-field models, the collective effects are included through the vibrational and rotational enhancement factors and their NLDs are further normalized at low energies with neutron resonance data.