Nowadays taking personal loan has become very 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. Before giving loan, banks or NBFCs check your credit score. Apart from this, income and credit history also play a big role in getting loans or not.
The better the credit score, the more the chances of getting a loan will increase. During this time you can also be offered better credit score. That is, a good score can also give you a cheaper loan and can also increase the chances of getting a large amount.
Credit score is a three digit number, which tells how honestly and time you have repaid the loans and second borrowings taken earlier. Its range is between 300 and 900. You can check your credit score for free on platforms like Moneycontrol.
Personal loan impact on credit score
Personal loans are one of the highest loans in today’s time. You can use it for many tasks, such as home repair, medical needs, large shopping or vacation.
Personal loans are unsecured, that is, you do not need to mortgage anything for this. In such a situation, your ability to repay the loan can only be gauged from the credit score. If you do not repay EMI on time or apply for loan several times in a very short time, it can have a bad effect on your credit score.
Through the Moneycontrol app and website, you can get a personal loan of up to 50 lakh rupees. Here the interest rate starts at 10.5% PA. You can apply for a loan with 100% paperless process.
Often people believe that taking a personal loan falls the credit score, but it is not always right. If you have repaid the loan correctly and on time, then its effect can also be positive.
Positive impact on the credit score of personal loan
Actually, the credit score depends more on how you manage your credit instruments, not just whether you have taken a personal loan. If you have taken a loan and do it on time, then the credit score improves.
Credit score improves: If you fill your EMI on time, your credit score may 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.
Easy to take loan: When your credit score is good, it becomes easier to take a loan from the bank or NBFCS next time and offers are also available at better interest rates. Usually the score above 700 is considered more reliable.
Benefits of credit mix: Adding personal loans to financial portfolio improves your credit mix. It also plays an important role in fixing the credit score. Mix of different types of loans and borrowings benefits the credit score.
Negative effect of personal loan
Loan Inquiry: If you apply for a loan again and again, every time your credit score check, which can affect it. So avoid applying for loan several times in a very short time.
Lack of repayment: If you do not fill EMI on time or do not manage the debt properly, then the credit score may decline. It can be difficult to get a loan in the future with a low credit score.
How to improve credit score
Pay your existing loans.
EMI filling on time is most important, because your long-term repayment history is seen in the score.
Do not take a lot of loans together, rather consolidate them and convert them into a single loan.
Keep the credit mix fine and check your credit report 2-3 times a year.
conclusion
Taking a personal loan does not reduce your credit score. If you do the repayment properly, the score can also be better. If you are looking for the best personal loan offers, then Moneycontrol app and website can help you in this. Here you can get a loan up to 50 lakh rupees online at an initial interest rate of only 10.5%.
Summary
Personal loans can improve your credit score and bad, it depends entirely on how you repay it.
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Disclaimer
This fraction/article is written by an external partner and does not reflect the work of the editorial team of Moneycontrol. This may include references to products and services offered by Moneycontrol.