Find the Best Personal Loan without Damaging Your Credit Rating

Your CIBIL score is one of the significant eligibility criteria required to avail a personal loan. A 750+ credit score will make you a valid customer to receive unsecured financing.

These loans don’t require collateral, so your credit score acts as a form of security for the lenders. A high score means you are creditworthy – you have handled all your credits responsibly and repaid them in due time.

All of the information related to your credit accounts is present in your credit report. Thus, your credit report determines your score.

The credit score will decrease if you have failed to pay your loan EMIs or credit card bills in time. There are also several other factors that can lower your score like:

• Using more than 30% of your credit card limit.
• Paying the minimum amount due on your credit card bill.
• Converting your credit card debt into EMIs.
• Settling a credit.

Factors that can Lower your Score before you Avail a Credit:

Multiple credit application

Lenders perform credit inquiries whenever you apply for a loan or credit card. These credit checks lower your credit score. Hence, numerous enquiries will negatively affect your credit score.

Credit application rejection

Your credit score decreases when a lender rejects your application. There can be various reasons for such refusals, which can include not fulfilling the eligibility criteria or providing the necessary documents.

The lender will add a note about the rejection in your credit report. Another financial institution may also refuse your loan based on such rejections in your credit history. Thus, your score will decrease even more.

Hence, applying for a loan involves a considerable risk of damaging your CIBIL score.  However, you can receive a loan from two sources without lowering your credit rating.

These Include:

1. NBFCs

Non-banking financial companies or NBFCs are gradually becoming one of the most popular lenders in India. These have less stringent rules and regulations for sanctioning personal loans online compared to other financial institutions. You also don’t run the possibility of lowering your credit rating.

NBFCs also provide you with various features and benefits when you opt for personal loans like:

High Financing Options both for the Salaried and Self-Employed

While salaried customers can avail up to Rs. 25 Lakh, self-employed customers can benefit from even higher loan amounts of up to Rs. 30 Lakh.

You can utilize these funds in any way you like for:

• Higher education
• Wedding
• Purchasing a vehicle
• Home renovation
• Debt consolidation

Flexible Repayment Tenors

NBFCs provide flexible repayment tenors ranging from 12 to 60 months on personal loans. Choose a tenor that will make it easier to repay the loan. Clearing the loan in due time will improve credit rating (score).

Minimal Documentation

You can avail a personal loan by providing a few documents like KYC documents and bank account statements of the previous 3 months.

Lenders will also require your salary slips of the last 3 months and employee ID card if you are salaried. You have to produce your income tax returns and audited turnovers by a CA of the previous years if you are self-employed.

Simplistic Eligibility Criteria

You have to be between the ages of 22 and 55 years to apply for a personal loan. Also, you have must have a job with an MNC or private/public company if salaried. On the other hand, you require a business vintage of at least 3 years if self-employed. NBFCs also need a CIBIL score of 750 or more to sanction a personal loan.

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2. Peer-to-peer (P2P) lending

Peer-to-peer lending platforms provide customized personal loans to you based on your requirements.

Lenders bid to provide you with the ideal loan terms as per your requirements. You can opt for financing from one or multiple lenders. Availing loans from P2P lenders will not lower your CIBIL score. Do check if a platform has a Certificate of Registration (CoR) from RBI before you choose their services.

Ensure that you can repay the loan in due time irrespective of the source from where you avail it. Also, check the processing fees and interest rates on the loan before you apply.