Personal Loan- Nowadays, taking a personal loan has become quite easy. Loans are available in a few minutes through many digital platforms and loan apps. But this is possible only when your credit profile is strong. Banks or NBFCs check your credit score before giving a loan. Apart from this, income and credit history also play a big role in getting or not getting a loan.
The better your credit score, the greater your chances of getting a loan. During this time, you can also be offered a better credit score. That is, a good score can get you a cheaper loan and can also increase your chances of getting a large amount. Credit score is a three digit number that tells how faithfully and on time you have repaid your previous loans and other borrowings. Its range is between 300 to 900. You can check your credit score for free on platforms like Moneycontrol.
Impact of personal loan on credit score
Personal loans are one of the most commonly used types of loans today. You can use it for a variety of purposes, such as home repairs, medical needs, big purchases or vacations. Personal loans are unsecured, meaning you do not need to pledge anything for it. In such a situation, your ability to repay the loan can be estimated only by the credit score. If you do not pay the EMI on time or apply for a loan many times in a very short period of time, then it can have a bad effect on your credit score.
You can get a personal loan of up to Rs 50 lakh through the Moneycontrol app and website . The interest rate here starts from 10.5% p.a. You can apply for a loan with a 100% paperless process. Often people believe that taking a personal loan lowers the credit score, but this is not always true. If you have repaid the loan properly and on time, then its effect can also be positive.
Positive impact on personal loan’s credit score
Actually, the credit score depends more on how you manage your credit instruments and not just on whether you have taken a personal loan or not. If you have taken a loan and repay it on time, then the credit score improves.
Improvement in credit score: If you pay your EMI on time, your credit score can increase. For this, you can turn on the auto-pay feature or set a reminder. It is also important to maintain balance in your bank account before EMI.
Ease in taking a loan: When your credit score is good, it becomes easier to take a loan from a bank or NBFC next time and you also get offers at better interest rates. Generally, a score above 700 is considered more reliable.
Benefit of credit mix: Adding personal loans to your financial portfolio improves your credit mix. This also plays an important role in determining your credit score. A mix of different types of loans and borrowings benefits your credit score.
Negative effects of personal loans
Loan Inquiry: If you apply for a loan repeatedly, your credit score is checked every time, which can have a bad effect on it. So avoid applying for a loan many times in a short period of time.
Default in repayment: If you do not pay the EMI on time or do not manage the loan properly, then the credit score can fall. With a low credit score, it may be difficult to get a loan in the future.