Before sanctioning a personal loan, a lender analyzes your repayment capacity, your behavior towards your debts, credit score, the loan amount you have applied for, your debt-to-income ratio, your current, and previous employers.
Lenders use the debt-to-income ratio to know your ability to repay the loan along with your monthly payments. It is calculated as Monthly Debt Payments/Gross Monthly Income.
Credit Score Importance
A credit score lies between 300 - 900 and impacts your loan in the following ways.
- Application Approval/Rejection
The approval or rejection of a loan application depends on the credit score of the loan seekers. Most lenders prefer a credit score of 750+ to approve a loan. They can reject loan applications with a lower credit score.
2. Interest Rates
Credit score impacts the interest rates on loans. A higher credit score is an indicator of timely payments of dues. Therefore, a loan seeker can get a low-interest personal loan with a higher credit score.
3. Loan Amount
Good credit history is the result of timely payments that indicates your good financial stability. Considering your stable income, a lender can sanction you the desired loan amount.
4. Negotiating Power
With a higher credit score, you can negotiate with the lender for flexible options on loan terms. You can ask for more personal loan offers.
5. Pre-approved Loans
Lenders offer pre-approved personal loans to their selected customers. Customers with a high credit score are among these selected ones. You can get an instant and discounted doorstep loans depending on your credit score.
Lending institutions provide personal loans for innumerable financial needs. To take advantage, you can maintain your high credit score in the following way:
- Keep your credit utilization ratio at a low level, ideally between 10-30%.
- Make timely payments for your credit bills.
- Accept a credit card with the increased credit limit but still maintain a low credit utilization ratio.
Let your credit score support you. Keep on maintaining it at a higher level. You can avail of pre-approved offers for personal loans, home loans, and credit cards with Bajaj Finserv. Grab your pre-approved offer by just entering your basic details like contact number, PAN.