Here are five crucial ways your credit score can make a difference to your personal loan journey:
Boosts approval chances
A strong credit score immensely raises your prospects of personal loan approval. Most of the lending institutions look for credit scores above 750 to greenlight loan or credit card applications. All such applicants are viewed as lower-risk, transparent with repayment, and trustworthy.
Secures favourable interest rates
Interest rates are fundamental to personal loans. The lower they are, the better the loan terms. Applicants with higher credit scores generally enjoy lower interest rates, making borrowing more affordable and pleasant. Additionally, those with credit scores above 750 often receive not only competitive rates but also better terms and conditions from leading banks and financial companies.
3. Influences the loan amount and repayment tenure
The individuals who showcase stronger credit profiles and avail higher loan amounts can even enjoy more friendly repayment terms and conditions. Conversely, lower credit scores generally limit both the sanctioned amount of the loan and the entire repayment period.
Speeds up the approval process
A reputable and robust credit score leads lending institutions to expedite the loan approval process. The focus then shifts towards minimising documentation. Hence, with streamlined verification, financially responsible borrowers experience smoother and shorter wait times for disbursal of funds.
Minimises additional charges and collateral demands
A weak credit profile that has a history of defaults or missed payments may trigger conditions such as higher processing fees, requests for collateral, delays in processing, or the need for guarantors. Lenders implement these steps to make up for and compensate for the perceived financial risk in lending to lower credit score holding applicants.
Hence, managing your credit score can help you secure better personal loan opportunities and a smoother borrowing experience while you continue your search for the most appropriate lending institution.
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Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards, and credit scores. Mint does not promote or encourage taking credit, as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
