When you first think of getting a personal loan you approach a bank or NBFC for the same. During the loan process, the lenders run a check through your credit history and CIBIL score, subsequent to which a decision on loan approval will be taken. Hence, it is advisable to manage your credit and ensure that your financial decisions do not have a negative impact on your score.
A good credit score will get you competitive interest rates on your loan. So, here are a few ways to get a personal loan without hurting your credit score.
Avoid applying for a loan with multiple lenders or DSAs
The financial market has a lot to offer when it comes to loans. Many lenders claim to offer the best rates on loans. Whilst you’re promised the best rates, your interest rate will, however, be dependent on your score, and repayment history. Along with a good credit score, other factors like your income and age are also considered. Approaching DSAs [Direct Sales Agents] for your loan might be risky as DSAs send your application to multiple lenders.
This will lead to multiple credit checks which are symbolic for credit hungry behaviour. Hence, it is best to avoid approaching too many lenders to get better interest rates and simply risk your credit score.
Familiarize yourself with the available deals on loans
It is always a good idea to do research and look at all the options available to you. This will help you decide whether the lender you are applying for will be able to offer good deals. Ideally, you would want a lender that offers lower interest rates on a personal loan. So, have a look at the financial market, search through various lenders and make your decision wisely.
Choose a lender based on your credit profile
If your score is high, you will be eligible for low-interest rates on loans from reputed, private lenders. On the other hand, if you have a low credit score with multiple instances of late payments in the past you will be seen as someone who is not creditworthy and find it hard to avail a personal loan.
However, you can still avail a loan with a low CIBIL score, simply opt for a lender with easy eligibility criteria. There are many fintech companies that offer loans to individuals with low scores. The idea here is to choose a lender that will approve your application based on your current credit profile making it easier for you to avail a personal loan.
Opt for pre-approved loans
This is one good option to avail a personal loan with ease. If you are an existing customer and have a savings account with a particular bank for over 5 years, the bank does not resort to performing a hard credit check while processing a loan application. Based on your current financial track record, a pre-approved loan offer is made.
This will help you in avoiding any uninvited hiccups in your credit profile while availing loans in the future. The interest rates on pre-approved loans are generally less, this a plus point for the customers who’ve had long-term relationships with their respective banks.
Having a good credit score is important as far as getting your loan application approved mainly because personal loans are unsecured loans which mean no collateral or security is asked for. Your credit score is perhaps the most basic factor that helps a lender decide whether or not you are worthy for a loan.