Is Your Credit Score Affecting Your Loan Eligibility?
We all have certain dreams, hopes, and aspirations regarding various aspects of our lives that keep on motivating us to work harder. All our life we strive to work as hard as possible to ensure financial security and financial stability, but in the modern-day society, these two aspects are entirely missing. Life in present times is full of uncertainties, and no matter how much we try to get rid of the financial instability in our lives, it is virtually impossible to get rid of it.
Financial emergencies are part and parcel of modern lives, and there is no way to avoid them. Surely you can use your savings to take care of such situations, after all, that is why you had started saving in the first place, but it is not a good idea to use up your entire savings in one go. This would leave you vulnerable to any future exigencies that may come to affect you, and if you do not have money for then, it is going to cause a lot of inconvenience to you.
Therefore, it is a wise decision to plan your finances accordingly, and whenever any such financial crisis comes up, you should explore various external sources of finance to supplement your financials. One of the best options that you can avail is a Personal Loan.
About Personal Loan
Personal Loans are unsecured loans offered by various financial institutions in India for their customers. As they are of unsecured nature, there is no requirement to provide collateral. Personal Loans Offer you a significant degree of flexibility as you can use the loan amount according to your preferences, without any restrictions from the lender.
The repayment tenure for a Personal Loan can extend up to 60 months, and the rate of interest starts from 13.50%. The amount available as a Personal Loan depends on your credit profile and can go up to Rs. 50 Lakhs also. Personal loans can be availed by salaried, self-employed as well as sole proprietors as well.
The rapid influx of technology has made the Personal Loan process really convenient. You can MyMoneyMantra online to find out information about various Personal Loan products, their interest rates, terms and conditions, and so on. You can also check your Personal Loan eligibility using available online tools such as EMI Calculator.
Once you have identified the Personal Loan that meets your requirements, you can apply for the same with the help of a simple application form. If your profile meets the requirements of the lender, your application can be processed within a few minutes, and the amount can be credited to your account on the same day itself.
Impact of Your Credit Score on Your Loan Eligibility
In present times, lenders consider your credit score as the single most prominent factor while assessing your Personal Loan eligibility. It is because your credit score is the numerical representation of your creditworthiness, based on a number of parameters specified by credit information bureaus such as TransUnion CIBIL or Experian. As Personal Loans are an unsecured offering, lenders want to be certain about your repayment capacity before sanctioning any credit facility to you.
Your credit score is calculated between 300-900, and any score which is more than 750, is considered good by the lenders and significantly enhances your eligibility for a Personal Loan and that too at lowest interest rates as the risk of the lenders is significantly reduced.
Why is it so?
If you are wondering that why is your credit score so important to lenders and how does it help them determine your eligibility for a Personal Loan, you need to understand the various parameters that are measured by the credit bureaus to determine your credit score.
It is checked if you are making timely repayments towards your loans and Credit Card bills. Any delay in payment has a negative impact on your credit score.
Multiple loans or Credit Cards:
If you are running multiple loans or Credit Cards, it increases your debt burden and reduces your eligibility because you can only use a certain portion of your income to pay your EMIs (Equated Monthly Instalments).
Credit utilisation ratio:
If your current outstanding against your Credit Card is more than 40% of the total limit, it reflects your dependency on credit and reduces your credit score.
Defaults or write-offs:
If you have defaulted on any loan or have settled any Credit Card dues or have entered into one-time settlement related to any loan, it is going to reflect as a write-off in your credit report and would reduce your credit score significantly.
Multiple loan applications:
If you have applied for a Personal Loan with multiple lenders, it would have a negative impact on your credit score as it reflects desperation. Similarly, every time a lender check pulls your credit report, it reduces your credit score.
So, it would now be evident to you that lenders associate such significance to your credit score because it gives them a snapshot of your credit history and credit behavior. You must keep a close eye on your credit score, and whenever you feel it is below the desired threshold, you must work towards improving it and take professional help if necessary.
Also Read: How Much Loan Can a Salaried Person Get?
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