It is very common that you need money to fulfil your requirements and some needs are beyond our affordability. While those needs can be funded by applying for a Personal Loan from an NBFC or a money lender, in order to get a loan application approved, it involves a lot of documentation. Apart from documentation, you need to consider the requirements set by the lenders which you will need to fulfil while applying for a Personal Loan.
Personal Loans are easy to avail with the help of NBFCs and financial institutions. The NBFCs and money lenders provide loans to the applicants even with a lower credit score; as a result, some of the applicants end up defaulting on the monthly instalments of the loan. As Personal Loans are unsecured loans, people usually are not worried too much about defaulting on their loan repayments and take it rather casually. If you are not paying your dues on time it will reflect on your credit report.
A bad credit score can affect your loan eligibility as the credit score is one of the basic factors of loan eligibility set by the lenders. A bad credit score can be improved, but first you need to learn what credit score is.
What is credit score?
A credit score is points given by the Credit Information Bureau (India) Limited (CIBIL) to an applicant for the repayment of his previous loans. To get a loan approved, you need to have a CIBIL score of 750 points, which is considered to be excellent and trustworthy by the lenders. Anything below that can be a red flag for the lenders.
How to increase your credit score by using Personal Loan?
A bad credit score can be improved, if you avail a smaller loan and pay the dues on time. This might increase your credit score. Personal Loans are a form of unsecured loans. While banks require a credit score of 750 points to approve a loan, there are some NBFCs and lenders who provide loans to the applicants on a lower credit score too. As Personal Loans have small amounts involved they are easy to avail. While you need to be strong on the other aspects like employment stability and income if you have a bad credit score.
You can increase your credit score by getting your loan approved and repaying it. On the first month of the loan, your credit report might show a lower score, which is expected to increase once you keep the EMI payments constant. When you finish repaying your Personal Loan, your credit report will reflect a higher credit score than before.
Credit cards are another form of Personal Loans and can be used to increase the credit score. You can apply for a credit card from any financial institution. While applying for a credit card you need to look for the financial institutions which provide a credit card on a lower interest rate. While credit card repayments are considered as loan repayments, CIBIL approves such repayment and increases your credit score for the repayment of the loan.
It is very important that you keep your credit score well-maintained, as a bad credit score can close many doors for you. You need to make sure that you pay the monthly instalments on time and keep your credit report updated after the closing of each loan you take.