Benefits Of Taking A Personal Loan To Improve Your Credit Score
Clear Existing High-Interest Debts:
You may have to bear high penalty charges and high interest for any existing, past, or unpaid loan dues that you haven’t paid or have missed paying. In such a situation, taking a personal loan at a lower interest rate to pay off all existing debts can eliminate your financial burden while improving your credit score.
Consolidation of Debts:
A single personal loan from Piramal Finance is all you need to pay off and consolidate all your existing debts. Debt consolidation reduces the total interest you pay for all your debts. With only one personal loan to repay back, repayment on time in the form of EMIs in one place is the simplest thing for you. Thus, you won’t miss any repayments and eventually improve your credit score.
What Factors Are Responsible for A Low Credit Score?
Do Not Apply For Multiple Loans:
To improve your credit score with a personal loan, avoid applying in multiple places. It may happen that you applied for a personal loan in numerous institutions, including Piramal Finance. In that case, every institution will perform a credit check on you, reducing your credit score.
Decide The Amount Carefully:
As your primary goal is to consolidate all your debts, select a personal loan amount that you’re comfortable repaying in the form of EMIs on time. Seeking a high loan amount can increase your chances of application rejection. Thus, it can affect your credit score.
Make Regular Payments:
Missing or not paying your loan EMIs on time not only makes you liable to pay penalty charges but also significantly impacts your credit score. It makes you not-so-creditworthy for any future loan applications.
Do Not Prepay Your Loan:
Prepaying or foreclosing any existing loan when there’s an influx of funds may seem like a decent idea. However, it results in a negative impact on your credit report for the long haul.
Do not apply for multiple loans:
Multiple secured and unsecured loans may have an impact on your credit score. Similarly, having multiple credit cards may lower your credit score. Because they indicate how much debt you already have.
Do not close your loan prematurely:
If this is your first loan, then repaying it on time will help you build your credit history and score. Whereas foreclosing on a loan, especially at the end of the term, will not result in significant savings. You will also be required to pay the prepayment penalty fees. Make sure to weigh the costs and benefits before deciding whether prepaying the loan is advantageous.
What Factors Are Responsible for A Low Credit Score?
Missing Loan Installments
According to reports from Financial Express, a 30-day delay in your EMI repayment can reduce your credit score by 100 points. Thus, missing loan installments can be one of the major reasons behind a low CIBIL score.
Coming Too Close To The Limit On Credit Cards
If you come too close to your credit card limit and use almost 90% of it, your credit utilization ratio will fall. Such credit utilization will put you at high risk of defaulting and negatively impact your credit report.
Not Paying Credit Cards Back On Time
Not paying credit card bills back on time can adversely impact your credit report and, thus, lower your credit score. Delayed or missed payments show that you are careless and unresponsive about EMI repayments.
Not Paying Credit Cards In Full
Paying only the minimum amount due for your credit cards will get you trapped in a debt cycle. If you keep rolling the debt, significant interest will compound on your outstanding credit card balance. This will poorly reflect in your credit report and reduce your credit score.
Not Having Any Credit At All
Your credit score is also affected when you have several credit cards but no loans or credit. Your CIBIL score will get severely impacted if you have plenty of credit cards but not even one loan account.
Too Many Rejected Applications For Loans/Credit Cards
When applying for a personal loan or credit card, your credit report gets checked. This process is termed a hard inquiry. It’s most likely that many of the applications will get rejected, thus lowering your credit score.
Settling credit cards
Settlements are generally a less expensive way of paying the creditor an amount that will erase the credit by closing the credit card or loan account. However, having a settled status on a credit card or loan account has a significant negative impact on your credit score.
Frequently asked questions
The minimum CIBIL score that can help you avail of a personal loan faster than usual ranges between 720 and 750. If your credit score falls within this range, your chances of loan approval increase significantly.
At Piramal Finance, we give equal weightage to all eligibility criteria, including credit score, monthly income, credit repayment history, age, and others. However, having a high credit score (750 or above) gives you an edge over other applicants
No, you won’t have a CIBIL score if you have never taken a credit card or loan. That’s because the CIBIL score is computed based on your credit report.
CIBIL score is generated by one of the country’s leading credit bureaus – TransUnion CIBIL. The CIBIL score usually ranges between 300 and 900. The higher the CIBIL score, the higher your chances of loan approval.
While a CIBIL score between 300 and 549 is considered poor, a CIBIL score between 720 and 750 is deemed good. However, having a credit score between 800 and 900 means you have hit the exceptional range, and you’re eligible for the lowest interest rates, best lending terms, and more.
A CIBIL score is a crucial consideration made by loan providers while assessing your application for a personal loan. The lower the CIBIL score, the lower your chances of personal loan approval and vice versa.
That’s because your CIBIL score represents your creditworthiness, your repayment capability, and your commitment to meet repayment terms. A higher credit score makes you eligible for personal loans of higher amounts at lower interest rates.
If you’re wondering how to improve your CIBIL score immediately to avail of a personal loan, follow these few tips:
To obtain a personal loan from Piramal Finance, even with a low CIBIL score, you need to do the following things:
When applying for a personal loan to raise your credit score, submit the following documents:
Address Proof: Utility Bills, Aadhaar card, PAN card, Voter ID card, Ration card
ID Proof: Driving license, Aadhaar card, Voter ID card, PAN card
Income Proof:
Although there are many fees and charges associated with a personal loan, the major ones are listed below:
At Piramal Finance, we give equal weightage to all eligibility criteria, including credit score, monthly income, credit repayment history, age, and others. However, having a high credit score (750 or above) gives you an edge over other applicants
While a CIBIL score between 300 and 549 is considered poor, a CIBIL score between 720 and 750 is deemed good. However, having a credit score between 800 and 900 means you have hit the exceptional range, and you’re eligible for the lowest interest rates, best lending terms, and more.
A CIBIL score is a crucial consideration made by loan providers while assessing your application for a personal loan. The lower the CIBIL score, the lower your chances of personal loan approval and vice versa.
That’s because your CIBIL score represents your creditworthiness, your repayment capability, and your commitment to meet repayment terms. A higher credit score makes you eligible for personal loans of higher amounts at lower interest rates.
If you’re wondering how to improve your CIBIL score immediately to avail of a personal loan, follow these few tips:
To obtain a personal loan from Piramal Finance, even with a low CIBIL score, you need to do the following things:
When applying for a personal loan to raise your credit score, submit the following documents:
Address Proof: Utility Bills, Aadhaar card, PAN card, Voter ID card, Ration card
ID Proof: Driving license, Aadhaar card, Voter ID card, PAN card
Income Proof:
Although there are many fees and charges associated with a personal loan, the major ones are listed below:
