How Does a Good Credit Score Help You While Applying for a Personal Loan?
5 min read | 2 months ago
If you intend to apply for a personal loan, a question might keep coming up at times: how can I get good personal loan offers? The answer lies in your credit score. Your credit score has a direct bearing on your chances of approval and how favourable the terms on that loan would eventually end up for you. Your credit score is one of the key factors that will determine your eligibility for a personal loan. In this blog post, we will talk about how good credit scores can assist you when you are getting a personal loan. So, let's get started on the road to obtaining good personal loan offers.
Personal Loans and Their Key Features
Your credit score is a three-digit number that indicates your creditworthiness. Credit scores for CIBIL range from 300 to 900, with higher scores indicating better creditworthiness. There are three other major credit bureaus, Equifax, Experian, and TransUnion, that calculate credit scores based on various factors, including:
- Payment history
- Credit utilisation
- Length of credit history
- Types of credit accounts
- New credit inquiries
A good credit score typically falls within the range of 700 to 780. If your credit score is higher than 780, you have an excellent credit score, and you're likely to get the best personal loan offers and interest rates.
What is a Good Credit Score?
When you apply for a personal loan, lenders will consider your credit score to assess your creditworthiness and determine the loan terms you'll get. Here's how having a good credit score can benefit you:
- Payment history
- Credit utilisation
- Length of credit history
- Types of credit accounts
- New credit inquiries
A good credit score typically falls within the range of 700 to 780. If your credit score is higher than 780, you have an excellent credit score, and you're likely to get the best personal loan offers and interest rates.
How Does Having a Good Credit Score Help?
When you apply for a personal loan, lenders will consider your credit score to assess your creditworthiness and determine the loan terms you'll get. Here's how having a good credit score can benefit you:
1.Higher chance of approval
If you have a good credit score, you're more likely to get approved for a personal loan. Lenders consider borrowers with good credit scores as less risky because they have a history of repaying their debts on time. As a result, you'll have a higher chance of getting approved for a personal loan with a good credit score.
2.Lower interest rates
Having a good credit score can help you get lower interest rates on your personal loan. Lenders offer lower interest rates to borrowers with good credit scores because they're less likely to default on their loans. As a result, you'll save money on interest charges over the loan term with a good credit scores
3.Higher loan amount
If you have a good credit score, lenders may offer you a higher loan amount than they would to someone with a lower credit score. Having a higher loan amount can help you cover your expenses without having to take out multiple loans.
4.Better loan terms
Personal loans have fixed interest rates, but the loan terms can vary depending on your credit score. Borrowers with good credit scores typically get better loan terms, such as longer loan terms, lower fees, and more flexible repayment options.
Conclusion
In conclusion, having a good credit score is essential when applying for a personal loan. It can increase your chances of personal loan online approval and get you lower interest rates, higher loan amounts, and better loan terms. If you're planning to apply for a personal loan, make sure to check your credit score and improve it if necessary, before submitting your application.
FAQs
1.What is considered a good credit score when applying for a personal loan?
A credit score of 700 or above is generally considered good and can help you secure a personal loan with favourable terms and interest rates.
2.Can having a good credit score help you qualify for a larger personal loan?
Yes, lenders may be more willing to lend higher amounts to borrowers with good credit scores, as they are considered less risky and more likely to repay the loan on time.
3.What are some other benefits of having a good credit score when applying for a personal loan?
Apart from better loan terms and interest rates, having a good credit score can also help you get approved for a loan faster, as lenders may require less documentation and verification.
About Unity Small Finance Bank
Unity Small Finance Bank is committed to making banking simpler and more accessible for everyone. Our services include Savings Account, NRI account, Current Account, Fixed Deposits, and Personal Loans offering flexible tenures and attractive interest rates. We also offer financing options like MSME Loans and Microfinance to support businesses and underserved communities. Learn more about Unity Small Finance Bank here.
