Today, instant Personal Loans are gaining immense popularity among consumers across the country. If you experience a financial crunch, a Personal Loan can help you cover various expenses without any restrictions. These loans are great financial products for those who want to cover big-ticket short-term expenses or want to make a long-term investment.
These loans are unsecured; hence you don’t have to submit collateral as security. You can also avail of these loans at competitive interest rates through online applications. However, it is important to have a healthy credit score while applying for an instant Personal Loan.
Let’s understand what a credit score is and why it is needed for Personal Loans.
What is a credit score?
Your credit score is a three-digit number that ranges between 300 and 900. This score is calculated by credit agencies such as CRIF Hi Mark, Equifax, TransUnion CIBIL, Experian, etc. The metrics used for calculating your credit score include:
- Your financial history
- Credit mix
- Ongoing loans
- Outstanding debt
- Past repayment patterns
- Credit utilization
- Debt vs. Income ratio
The score is used by lenders and financial institutions to evaluate your creditworthiness for loans. Your credit score will greatly impact your ability to secure an instant Personal Loan Online. In addition to this, it also affects the loan amount and interest rate.
| Credit score Range | Comments |
| 300-550 | Poor: Borrowers having a credit score between 300 and 550 might face trouble while availing of loans. They might also get a smaller loan amount with a high-interest rate. |
| 550-620 | Average: Borrowers having a credit score closer to 620 might be considered eligible for loans. However, the loan terms may vary regarding the interest rate and tenure. |
| 620-680 | Acceptable: Borrowers having a credit score within this range are generally eligible for an instant Personal Loan. Lenders might go in for extra scrutiny but eventually, approve the loan. |
| 680-740 | Good: Borrowers having a credit score between 680 and 740 can get their loans approved instantly. They can also get a chance to negotiate the interest rates on loans. |
| 740-900 | Excellent: Borrowers having a credit score within this range are considered reliable borrowers. Lenders might also offer a lower interest rate based on the concerned person’s borrowing habits. |
Tips to improve your credit score for Personal Loans
Since credit score is one of the most important aspects of the eligibility criteria for instant Personal Loans, it is advised to maintain a healthy credit score within the range of 750-900. This will not only ensure fast loan approval but also enable you to get a lower rate of interest.
Maintaining a good credit score is crucial not only for the current loan application but also for future instances where you might need funds. In general, there are no predefined criteria regarding credit scores for instant Personal Loans, but a score above 700 is recommended.
To maintain a good credit score, one should:
- Make payments on time: Making timely payments of your monthly EMIs will improve your credit score. This shows that you are a responsible borrower and can manage your credit instruments easily.
- Not apply for multiple loans: Each time you apply for a loan, the lender initiates a hard inquiry on your credit report. This could bring down your credit score by some points. Hence, make sure you only apply for one loan at a time.
- Have a good credit mix: A mix of different credit instruments such as credit cards and loans shows that you are a responsible borrower who can handle debt mindfully.
- Utilize credit sensibly: If you have an adequate credit balance, try not to use it all at once. Using credit efficiently maintains your credit score.
Moving ahead
Maintaining a good credit score is crucial for getting approval for any type of loan you wish to apply for. It is the first criterion that lenders take into consideration when you apply for a loan. You can also use a Personal Loan amount eligibility calculator to determine your eligibility amount. This will help you manage your finances and cut down on any extra expenses.
Personal Loans are effective if you wish to cover short-term expenses. These loans can be used for debt consolidation. Carefully choose a lender who is offering attractive features and benefits with instant Personal Loans.
