4 Ways to Increase Your Credit Score with a Personal Loan

A Personal loan is ideal in case of any financial emergency as it does not require any form of collateral. Also, it is quite easy to go through the formalities of availing a personal loan. However, what most people overlook is the fact that personal loans can also play a great role in improving your credit score if managed properly.

Why a Personal Loan is a better choice?

Few individuals opt to apply for credit cards to improve their credit scores. They make purchases on their credit card and pay off the bill immediately for building credit. There is a good chance that you can land in debt if you go overboard on your credit card spends.

In comparison, when you avail a personal loan and make timely payments consistently, it demonstrates your reliability and invariably improves your credit score to a much larger extent than credit cards. Besides, availing a personal loan requires lesser work when compared to getting a credit card for building credit.

You can even choose to set up automatic payment towards your personal loan from your bank account so that you do not miss any payments. You can also get the personal loan approved at a lower interest rate if you have a co-signer with a good credit history. A good credit score lies between 700 and 749. Having a good credit score opens up a good number of options for an individual in the future when going for home loans.

With a good credit score, you can easily apply for better credit cards which offer a greater number of benefits. You can even get the card at a lower interest rate.

How do you benefit from a Personal Loan?

  • To pay off your old debts: Availing a personal loan is one of the easiest ways to settle any old debts. In this way, you can clear your old debts and restart paying off the loan amount with lower interest. This also helps improve your credit payment history, which in turn, improves your credit score.

 

  • To repay on time: You have to repay the loan amount in terms of affordable instalments decided by the financial lender based on your repayment capability. Monthly instalments will reduce your financial burden. You can easily repay the loan amount on time without missing any payment, which improves your credit score and credit history.

4 Ways to Increase Your Credit Score with a Personal Loan

One can follow the below-mentioned steps to increase their credit score with the help of a personal loan:

  1. Avoid applying for multiple loans: You must never represent yourself as a credit hungry person before financial lenders. Besides, whenever you apply for a loan, a hard inquiry is carried out on your credit report and the same impacts your credit score. Several hard inquiries on a credit report are considered bad for a borrower.
  2. Choose the loan amount quite carefully:It is very essential that you apply for a personal loan amount that you actually need and afford. As you are opting for a personal loan to improve your credit score, the loan amount availed becomes a very big factor. Always avail a loan amount that you can repay without too much of a burden.
  3. Make regular payments:Availing a personal loan and not repaying the same on time does not make sense, especially if you are taking out the loan to improve your credit score. As personal loans are unsecured loans, they can easily affect your credit score the most. Therefore, it is better if you repay the Loan EMI amount on a timely basis without fail.
  4. Avoid pre-paying your loan: If your objective of availing a personal loan is to improve your credit history, then it is best advised that you do not repay the loan completely before it matures. Longer credit history is usually considered better. Your credit score will definitely improve if you make regular payments over a longer tenure period.

 

Here’s How You can get a Personal Loan even with a Low CIBIL Score

 

Credit Information Bureau (India) Limited, or CIBIL, is entrusted with the preparation of a credit score, which in turn serves as the first criteria to check the eligibility of an individual while applying for a personal loan. The credit score ranges from 300 to 900. A score lower than 750 is considered as a bad credit score. Usually, it becomes quite tough for a financial lender to process a Personal loan application if an individual has a low CIBIL score.

A personal loan is usually availed by an individual for dealing with personal emergencies. As no collateral is associated with the personal loan, it becomes quite important for the financial lender to check the credit history of the individual in terms of the CIBIL score. It’s not the end of the world if your score is low. There are ways you may still be eligible for personal loans. Let’s look at how you can improve your chances of availing a loan with a bad credit score.

Factors Affecting Your CIBIL Score

  • Availing multiple loans
  • Settling the credit cards with the financial lender by paying an amount lower than the due amount
  • Very high utilization of the credit limit
  • Rejected credit cards or loan requests
  • Untimely payment of credit card bills and loan EMIs
  • Non-availability of credit history
  • A high percentage of unsecured loans

7 Ways to avail a Personal Loan even with a Low CIBIL Score

A low CIBIL score can undoubtedly reduce your chances of getting a personal loan availed. In case you have a bad credit history, then the following are some of the options which could assist you in getting a personal loan:

  1. Collateral loan

You can always try to avail a secured loan if your loan application does not get approved. Any collateral in the form of gold, fixed deposits, mutual fund investments, property, and so on can be used for availing a secured loan even if you have a low CIBIL score.

  1. Look for tie-ups between the financial lender and your employer

If you are employed by a reputed firm, then there is a good chance that you might find a relationship between the financial lender and your employer as part of corporate relations. Due to such tie-ups, the financial lender can offer you special facilities on banking and loan products. This, in turn, can help you get a personal loan smoothly.

  1. Applying for a Joint Personal Loan with any family member or your spouse

You can check with any family member or your spouse to see if they have a good CIBIL score. In case they do have, then you can opt for a joint personal loan which could be easily approved based on the CIBIL score of both applicants.

  1. By having a Guarantor

You can manage to get a guarantor amongst your friends or family members who have an excellent credit history. In such cases, there is a high possibility that you can get your personal loan approved based on the CIBIL score of the guarantor.

  1. Asking for a lower personal loan amount

If you ask for a higher loan amount while having a low credit score, it only indicates more risk to the financial lender. From their point of view, this is an indicator that you can default on the repayment of the loan. Financial lenders are usually more comfortable to process your application when you ask for a lower loan amount as it is easy to pay the same back.

  1. Provide proof that your income can support the monthly instalments

If you have received an increment in your salary or have an additional source of income, then the financial lender might consider processing your application even if you have a poor credit history. However, in this case, you might have to end up paying a higher rate of interest.

  1. Correcting any mistakes present in your credit report

It is quite possible that some errors might be present in your credit report. This usually happens when the most recent information has not been updated in your report. Such mistakes can easily affect your credit score without any fault of yours. Therefore, it is important for you to periodically check your CIBIL report and correct all possible mistakes. This will improve your credit score and make it easier for you to avail a personal loan.

 

Handy Checklist for First-Time Homebuyers

Handy Checklist for First-Time Homebuyers

Buying your first dream house is definitely a significant milestone in the life of any individual. People invest their entire life savings into buying their home and it can be an emotional moment that brings a great amount of joy and fulfilment. At the very same time, buying your first home involves a lot of careful planning with the financials as well as other critical choices.

The choices are not only limited to picking the right home loan suited to your requirement. If you planning to purchase your very first home, then you can go through the below-mentioned checklist to help you arrive at a decision that you will never regret.

  • Thorough Assessment of Your Requirements

When you are house-hunting for the first time, it is quite natural to be attracted to everything that looks good. It’s quite obvious as one can explore a good number of real estate options as of today. A majority of builders offer compelling brochures and competitive prices which can excite anyone.

However, when going through the probable options carefully, it is best if you focus your energy on only those properties which are ideal for your current and future requirement. After all, it is a lifetime investment and must be well thought out. Your decision for buying a home can be influenced by any one of the following two causes – as an Investment option or for Self-use. Your requirement will slightly vary depending on these options.

  • Figuring Out The Total Cost And Determining Your Budget

Purchasing a home demands huge investment and financial considerations will largely determine the most affordable choice among the available options. Apart from the home loan burden, you’ll also need to factor in other payments such as property registration fee, stamp duty fee, legal checks, transfer of ownership (if it applies), and other such costs. Once you have the complete breakup of costs involved, you can plan your financials that comply with the same.

  • Compare Effective Home Loan Rate

Once you have decided upon your budget, you can go through the various home loan options offered by well-known financial lenders. Your credit history will play a vital role while availing a loan. A good idea is to compare different home loans online by using an EMI calculator depending on your loan amount, down payment, processing fee and so on.

 

Besides, the home loan interest rates will vary depending on your specific requirement. For instance, a salaried home loan applicant can avail loans at a lower rate when compared to a self-employed individual.

 

  • Avoid being in the dark about Eligibility

A majority of individuals are unaware of the terms “credit score” and “loan eligibility” until they are applying for a loan. One must always be aware of their credit score. A home loan applicant with a very good credit score is usually offered attractive interest rates by financial lenders. You can always check your credit score online at no additional costs. A credit score greater than 750 will allow you to avail the best possible loan offers.

 

ü Maximize your Down-Payment Amount

Irrespective of the choice of the financial lender, it is always better to make a good down-payment. The greater the down-payment amount, the lesser will be the interest that you pay over the loan tenure period. So, quite naturally, your EMI will also be lower.

 

ü Avoid opting for a Long Tenure period

A longer tenure period has a massive impact on the interest you pay over the repayment tenure. The total interest cost will not reduce despite a drop in your EMI amount. Therefore, it is better to opt for a shorter tenure period while opting for an affordable instalment.