A Personal Loan is extremely popular because of its multiple uses and relatively effortless availability. It’s a practical way to cover unexpected financial necessities or emergencies because it doesn’t require collateral security, and the approval procedure is much faster than other loans. Most banks have this in their options because of its flexibility. While it is commonly known that a good credit score is needed to obtain a Personal Loan, the contrary is also true. A Personal Loan can help you enhance your credit score if managed carefully. Before discussing the relationship between credit scores and Personal Loans, it’s essential to have a basic understanding of credit scores.
What is the meaning of a Credit Score?
A credit score is a digit value allocated to borrowers based on their credit history. A number between three hundred to nine hundred defines how creditworthy they are. The closer to nine hundred this number is, the more suitable it is. In India, the credit rating is estimated by the “TransUnion CIBIL” credit bureau based on various factors, including as well as not limited to, a person’s credit history, past settlements, active credit accounts, credit utilization ratio, and so on.
Here are the following levels of “CIBIL score” as well as their meanings:
More than seven hundred is excellent:
Six hundred and fifty to seven hundred forty-nine is good:
There have been a few skipped or late payments in the past. A bank will give the loan at a higher interest rate and with extra documentation.
Less than five hundred and fifty is poor:
People in this category are likely to have defaulted on EMIs or have uncleared bills. They have a tiny possibility of securing a loan since it is a high-risk class for banks.
As can be comprehended from the different score ratings, various loan products, including an online Personal Loan, will be readily available only if you have a strong credit score. Therefore, you must confirm that your credit score remains above a specific threshold to keep your loan opportunities open.
There are various ways to strengthen your credit score with a Personal Loan:
Longer Credit Record:
A longer credit record demonstrates that you have been credit-accountable over time. This will help to enhance your credit profile as well as your score. You will have no credit record if you have never borrowed earlier. Getting a Personal Loan is a prominent way to start creating your credit history.
The Credit score is the most important factor in determining your interest rate on a personal loan. If you want to know more about Instant Personal Loans in Hyderabad and your credit score, visit Loans Paradise today and talk with our experts!
