All About Effects of Personal Loan on CIBIL Score
A personal loan is a very popular financial product. Hence, many people avail of this service in order to overcome financial hurdles. This is a service that provides instant help to a person irrespective of the reason of need. Thus, You can get a personal loan very easily and quickly. In addition, There are a lot of banking and non-banking financial organizations in India that provide personal loans.
There is an Eligibility Criterion that one has to satisfy in order to get a personal loan:
- Your age should be more than 21 years
- You should be financially stable
- Your credit history needs to be good.
If you fulfil all the criteria, then your loan is likely to be approved in a day. But, one thing a person should keep in mind is that a personal loan can affect your credit score both positively and negatively.
Let us discuss them one by one in a Positive Way
A personal loan can be very beneficial to us if we deal properly with it. Therefore, if we have paid all our debts timely then it will increase or boost up our credit score. And, Credit Score is the most important factor on which our creditworthiness depends. If your credit score is good you will get all the financial services very easily. Or else, if your credit score is not good then a personal loan is the best way to improve it. But for that, you need to deal very decently with your loan.
Ways to Improve CIBIL Score
- Do not Apply for Credit, If once Rejected: First of all, if you have been rejected by a bank or NBFC for a personal loan. Then, do not make a mistake by applying for a personal loan immediately in order to avoid a further decline in the CIBIL score
- Low Frequency in Applying: Next, a loan seeker should avoid applying for too many loans as it displays the Credit Hungry Behaviour of a person. That is considered a factor in the declination of credit score.
- Do not Settle Loans: Another way, do not to opt to settle the debts on a lower amount with the banks. As it is recorded in the Credit Information Report further decreasing the Credit Score.
- Timely payments: Moreover, the loan seeker should pay the amount of the loan on time. Any delay in the payments can sharply decline the credit score.
- Take Distinct types of Loans: Finally, the loan seekers should have a proper balance between secured and unsecured services.
In a Negative Way
A personal loan can boost your credit score, however, it can destroy your CIBIL score as well. To begin, If you are not paying all your debts on time or your EMI’s on time, your CIBIL score will be ruined. And once this happens you won’t be able to get other loans or other financial services in the future. This is going to affect your financial life very much because each and every bank and non-banking financial company gives your records to CIBIL. CIBIL is a credit information company that keep the records of debts of all the customers and portray the customer’s behaviour through this Score. So you are always suggested to get a personal loan that you can pay. This is the only way to keep your CIBIL score good.