When you apply for a personal loan, banks evaluate your eligibility to decide whether to approve your application. Since personal loans are unsecured and require no collateral, banks have to rely heavily on parameters like your occupation, income, employment type, and, most importantly, credit score.
A credit score reflects your creditworthiness. It is derived from your credit history, which includes information like total debt levels, repayment track record, length of credit history, and other factors.
Understanding the factors that impact your credit score is crucial. This knowledge enables you to assess whether you need to take specific actions to improve or maintain your score. By being aware of these elements, you can make informed decisions to enhance your financial health and ensure you remain in good standing with creditors.
Know how the credit score affects your personal loan eligibility
Your three-digit credit score affects your personal loan eligibility in multiple ways and can be a make-or-break factor in banks’ decisions to offer a loan. Know how below:
Approval time: Applicants with higher credit scores might enjoy faster loan processing and approval times. This is because their strong credit history simplifies the lender’s risk assessment process.
Personal loan interest rates: Usually every bank has its own fixed rate, but if you have a low score, you may incur higher interest rates. This is because the bank needs to compensate for the risk they are bearing with a less reliable financial history.
Loan amount: The amount you are eligible to borrow from online personal loans is also tied to your credit score. A high credit score could mean you may qualify for higher loan amounts because it signals to lenders that you are a reliable borrower who can handle debt responsibly.
Access to pre-qualified offers: If you have a high credit score with your existing bank, you may be eligible for pre-qualified personal loan offers. If you opt for it, the entire loan process, from applying to disbursal, will take only a few minutes.
Ways to boost your personal loan eligibility
From using a personal loan calculator to selecting the right bank, know how you can improve your loan eligibility.
Choose a bank with flexible criteria and terms
It is wise to choose IndusInd Bank’s Instant Personal Loans to enjoy easy eligibility criteria and flexible terms. Get benefits like high loan amounts up to ₹5 lakhs, a 100% online loan process, competitive fees, speedy processing, quick approvals, and customisable repayment tenures. Best of all, you can manage your loan account online through digital features anytime, anywhere.
Get an instant personal loan online with IndusInd Bank today! Don’t let financial hurdles hold you back from fulfilling your goals.
Additional tips
| Improve credit score | You can improve your credit score by paying all bills and existing loans on time, as it shows your reliability in managing credit. Also, regularly review your credit report to check for errors and maintain a clean credit history. |
| Borrow only the right amount | Use a personal loan calculator to understand the potential EMIs for different loan amounts and tenures. This way, you can borrow only what you need and can comfortably repay. |
| Stable employment and income | Lenders value consistency in your financial inflows, as it assures them of your capability to meet repayment schedules. Keep bank statements, salary slips, or income tax returns ready to show your financial stability and boost your loan eligibility. |
| Lower Debt-to-Income (DTI) ratio | Before you click on the ‘Apply Loan Online’ option, consider reducing existing debts, like credit card balances or ongoing loans. A lower DTI ratio signals lenders that you have a healthy balance between your income and the debt you owe. |
| Bring a co-applicant | A co-applicant with strong financial credentials can add weight to your loan application as banks combine the creditworthiness and income of both applicants. |
| Limit loan enquiries | Each loan application can temporarily lower your credit score. So, select loan options judiciously and limit applications to those you are seriously considering and meet the eligibility criteria for. |
To sum up
Your credit score shapes the loan terms, impacts how quickly you can access funds, and may even influence the rate at which you repay the borrowed sum. A high credit score can bring benefits such as higher loan amounts, quick processing, speedy disbursal, and flexible repayment options. On the other hand, a lower score may limit your loan options.
Follow smart financial practices to improve your credit score so that you can secure more favourable loan conditions when needed.
