Personal loans are best for financial emergencies that require immediate attention. The best part is that a borrower does not have to produce collateral to acquire a personal loan. A good credit score is more than enough for a borrower to qualify for and obtain a personal loan. Besides the credit score, the loan provider considers many other factors.
After fulfilling the eligibility criteria, the borrower is deemed eligible by the lender for a personal loan. Many people also take online personal loans to make timely EMI payments that help improve their credit scores.
Read on to understand how a personal loan online helps improve your credit score.
How Do Personal Loans Improve Credit Scores?
There are numerous benefits of taking a personal loan in India. One can choose to clear their debts with a personal loan. Pending bills and payments will degrade the credit score of an individual. A personal loan also helps build a solid credit history and boost your credit score. Why keep multiple debts on your head? Take an instant personal loan and clear all the debts immediately.
A personal loan helps boost the credit score of borrowers only when they make EMI payments. The lender determines the loan’s EMI based on the borrower’s repayment capacity. For the same rationale, lenders consider the income sources of a borrower before processing the loan. The loan repayment will contribute to the credit history and help the borrower with future loans. The borrower must make timely repayments to maintain their CIBIL score.
What to Consider While Acquiring a Personal Loan to Boost Your Credit Score?
Are you planning to take a personal loan to boost your credit score? Here are the things to keep in mind:
Place a Single Loan Application
People make the mistake of taking up multiple loans simultaneously. Higher obligations make them unable to repay all running loans on time, defaulting more often than not. Late payments hamper their credit scores. Borrowers paying off EMIs on multiple loans can consolidate all loans under a single personal loan from a trusted lender.
Submitting loan requests to multiple lenders is pointless. The decision might backfire, and the applications are likely to get rejected. Borrowers should place a single loan request with a reputed lender like Fullerton India. One can use the personal loan interest rate calculator to determine the right loan amount according to financial requirements. Choosing a personal loan amount beyond one’s repayment capacity is unwise.
Consider the Debt-to-Income Ratio
One must analyze the loan amount and EMIs beforehand. The EMI of the personal loan must not go beyond 50% of the borrower’s monthly income. If the EMI amount exceeds the borrower’s monthly income, it might become difficult to meet monthly expenses. Unfortunately, many individuals commit to acquiring a loan greater than their repayment capacity. As a result, they fail to deposit EMIs timely and suffer
from poor credit scores. Lenders also check an applicant’s debt-to-income ratio before approving the loan application.
Choose the Right Lender
Talk to other money lenders before you finalize one. Avoid signing a loan agreement with the first loan provider you meet. Do a comparative analysis of the interest rates and other charges quoted by different lenders. A personal loan interest rate calculator will help you decide the lender best suited for your needs. Some lenders apply hidden charges on personal loans, an additional financial burden on the borrower. As a result, the borrower fails to make timely payments, and the credit score decreases.
Choose the Prepayment Option Wisely
Lenders allow customers to prepay their loans. Loan prepayment might open doors to other loans. Refrain from prepaying a loan when the aim is to improve the credit score. The longer the credit history, the more chances you have to improve your credit score.
Don’t Take Other Loans
Do not apply for other loans when repaying one personal loan. One should pay more attention to payments when there are multiple loans. Timely repayments will improve your credit score and make you eligible for other loans. If there is no emergency, take your time with other loans before completing the ongoing one.
When to Apply for a Personal Loan in India?
As discussed above, one can apply for an instant personal loan and make timely repayments to improve the credit score. One can also apply for a personal loan during an emergency. Sudden medical surgery, tuition fees payment, and other emergencies call for a personal loan. People also opt for personal loans to keep their savings intact. Why put assets at risk when a personal loan is available without collateral? Apply for a personal loan with Fullerton India and boost your credit score.