How does personal loan affect your credit

Know how Personal loan affect your credit and manage your loan through Loanyantra. Every now and then, you need a little help with your finances. A personal loan is one way to smooth your finances or get extra cash for a purchase. An unsecured personal loan can allow you to accomplish some of your goals without the need for collateral, or to share a specific purpose with the lender.

Personal loan interest rates, loan amount and tenure details – 

Bank Name Personal loan Interest Rate Minimum Tenure- Maximum Tenure Personal Loan Amount
Citi Bank 10.99% – 15.99% 1-5 years Max-30Lakhs.
Axis Bank 15.50% to 24% p.a. 1-5 years Min- Rs 50,000

Max-Rs 15 lakhs.

STANDARD CHARTERED BANK 10.99% – 14.49% 1-5 years Max- 30lakhs.
HDFC Bank 10.99% – 20.75% 1-5 years Max- 25Lakhs
FULLERTON 14% – 33% 1-4 years Max- 15lakhs
HSBC 11.29% p.a. to 17.5% up to 5 years Max- 30 lakhs
ICICI 10.99% to 22.00% per annum 1-5 years Max- 20lakhs
IDBI 12.75% to 13.75% up to 5 years Min- Rs. 50,000

Max-10lakhs

SBI 12.90% – 14.90% 5 Years Min- 25,000

Max- 15 lakhs

The above table lists the lenders with whom loanyantra.com has tie-ups. About every bank’s personal loan interest rates, you find at the end of the article.

But whenever you get any loan, it’s important to consider the impact on your finances and on your credit. It is always better to consider the personal loan affect on credit.
Before you apply for a personal loan, consider the credit score factors that are likely to be a part of the equation. Any debt impacts your credit — and that means a personal loan can affect your situation as well.
But that doesn’t mean the effects of a personal loan will be all negative. In fact, when used properly, a personal loan can have a net positive impact on your credit, and that means it can also have an effect on your life and finances beyond just your credit rating.

What happens to your credit when you apply for a personal loan? How does personal loan affect your credit?

When credit score calculated by CIBIL, there are five main credit score factors that each carry a specified weight:
Payment history: 35%
Amounts owed: 30%
Length of credit history: 15%
New credit: 10%
Credit mix: 10%
With a personal loan, the main things that affect your credit score fall under the categories “length of credit history” and “new credit.” When you apply for a personal loan, that represents an inquiry that will show up on your credit report and impact your credit score.

Things change if you are making a lot of credit inquiries in a short period of time, however. The more loans you apply for in a short timeframe, the bigger the impact on your credit history.
Your new credit will also have an impact on your credit history. Part of the calculation of credit history is the average age of your accounts. A new credit account, like your personal loan, brings down the average age of your accounts.
However, the impact shouldn’t be too huge, as long as you don’t have a lot of newer credit dragging on your score.
Once you get your personal loan, it’s important to pay attention to how you manage personal loan affect credit score, since that’s what will matter most to your credit score going forward.

Don’t let a personal loan bring down your credit score

Simply getting a personal loan isn’t likely to have a long-term negative impact on your credit. You might be surprised to discover that a personal loan can actually help your credit score in the long run.
Of the credit score factors, the most important item is your payment history.
As long as you make your loan payments on time and in full, your score will be impacted positively. The more on-time payments you have, the better your credit score.
With a personal loan, factors that affect credit score most are the payments you make and the mix that your loan adds to your credit profile.

Adding a personal loan to your credit mix can actually give your score a little boost. While credit mix is only 10% of your score, it can still provide a little help. Showing that you can handle an instalment loan as well as a revolving credit loan (such as a credit card) can add to your score.
The opposite is true, too. If you miss payments on your personal loan, you will be penalized. When you get any type of credit, it’s vital that you make regular payments in order to prevent damage to your credit score.
A personal loan is most dangerous to your credit when you don’t make payments.

Only borrow what you need

Any time you borrow money, it is important to limit your loan to what you need to accomplish your goals.
A personal loan can be a way to consolidate your debt to make it easier to pay off, or to help you smooth your cash flow while you restructure your finances. No matter what you use your personal loan for, don’t borrow more than you can handle and avoid paying late.
Your instalment loan won’t have the same impact in the credit utilization measure of your credit score, but it can still impact decisions about your finances in the future.
Lenders and others look at your credit file for red flags. If you have a large personal loan, it can affect your ability to get other credit and financial products, even if you have a good credit score. Lenders and others assess risk, and a large personal loan can make you a bigger financial risk.

Personal loans can help your finances, and even provide a boost to your credit, but you need to be careful about how you apply for and use them.

Personal loan interest rates (as of May 08th 2018)

Bank Personal Loan Interest Rates
Citibank 10.99% – 16.49%
SBI Personal Loan 12.50% – 16.60%
HDFC Bank Personal Loan 10.99% – 20.00%
ICICI Bank Personal Loan 10.99% – 22.00%
RBL Bank 13.99% – 16.00%
Canara Bank 13.65% – 13.65%
Dena Bank 13.00% – 14.00%
Union Bank of India 14.40% – 14.40%
Vijaya Bank 12.50% – 13.50%
Andhra Bank 13.05% – 14.30%
Allahabad Bank 13.10% – 13.10%
Bajaj Finserv 11.99% – 15.50%
Standard Chartered Bank 11.49% – 20.00%
Bank of Baroda 11.60% – 16.60%
Corporation Bank 12.75% – 13.75%
IDBI Bank 13.20% – 13.75%
Indian Bank 14.35% – 14.85%
IDFC Bank 11.00% – 19.50%
Axis Bank 11.25% – 24.00%
Tata Capital 11.99% – 18.00%
Fullerton India 14.00% – 34.00%
IndusInd Bank 11.99% – 23.00%
Kotak Bank 11.50% – 24.00%
IIFL 12.99% – 19.99%
Yes Bank 11.99% – 20.00%
Bank of Maharashtra 15.10% – 15.10%
Federal Bank 13.32% – 15.12%
Indian Overseas Bank 12.70% – 15.25%
Syndicate Bank 14.20% – 14.20%
Karur Vysya Bank 13.90% – 16.40%
Punjab National Bank 12.25% – 15.25%

Why go through Loanyantra for a personal loan –

Loanyantra, an online platform for all your financial needs. It is India’s first ever fintech company to manage your loan till the closure. Usually, you find personal loan interest rates are a little higher when compared to any other loan interest rates. Here is when loanyantra helps you getting a personal loan at the best rate and also get alerts as long as you are in the loan about the current market interest rates. Also avail wonderful offers like cashback and referral offers by getting a loan through loanyantra.com.

Credit Score and Home Loan

All that you should know about credit score

Buying your dream home is a dream come true and home loans have made it very easy for people to buy a home but, as easy it appears, home loan approval involves a series of steps and eligibility criteria which you need to fulfill to get the loan from the bank.

Banks and HFCs take into account a number of factors that define your eligibility for loan approval. One of the key parameters is CIBIL score or credit rating. Credit Score defines your credibility and how good you are in repaying your credit bills and EMIs. In other words, it describes how good is your financial health which in return increases the probability of your loan approval.

Detailed understanding of credit score –

CIBIL stands for Credit Information Bureau India Limited. This organization came into existence in August 2000 and looks after the credit ratings. It collects and maintains credit records of individuals as well as commercial entities. The credit records the borrowing payment relation. This includes all payments and borrowing related to loan or credit card.

On the basis of information collected, CIBIL assigns your credit score or CIBIL rating which banks reviews before approving the home loan. It’s a credit score of three digit numeric summary of your credit history. The credit score varies between 300-900.

Your credit report is available with CIBIL and can be availed by paying a nominal fee.

The credit report includes the following:

  • The history of the credit availed by you
  • Record of all the loans repaid by you and your credit card bill repayments
  • Late payments or penalties on past credit
  • Latest information about loan application and credit application by you
How Credit Score affects home loan eligibility?

Your credit score plays a key role in home loan approval. Once you submit the application for a home loan, bank checks your credit score and reviews your credit history.

Thus, if you have a good credit score, your home loan application will be processed faster, on the other hand, a poor credit history and score might get your application rejected.  Well, there is no universal score, every bank and HFC has different criteria and minimum credit score. But generally, a credit score above 750 is considered good by the majority of financial institutions. The score in the range of 350-750 is considered average or poor. Thus make sure that you check your credit score before applying for a loan.

credit-score-for-homeloan_loanyantraYour credit score reflects the following:

750-900    

  • Good score
  • You are likely to get loans at good interest rate
  • Both secured and unsecured home loans  can be easily availed by you

700-750    

  • Decent score
  • You are likely to get the loan from most of the banks but for unsecured loans, banks might conduct further review

550-700    

  • Low score reflecting delay in payment or irregular payment
  • Banks are usually dicey about approving loan
  • You might get your loan approved by some loan provider but at a higher collateral and low LTV
  • You might have to pay a higher interest rate

300-500

  • Poor score
  • Difficult to get loan especially from an established Bank or HFC
How is a Credit Score Calculated?

By now, we know that credit score plays a key role in home loan processing and approval.  You can check your credit rating on CIBIL’s official website by paying a nominal fee of around Rs. 470.

CIBIL’s Credit Score is calculated based on the following factors:

  • Repayment history of applicant: This accounts for 35% of the score. Hence make sure that you have cleared all your bills and loans. This helps in maintaining a good repayment history.
  • The credit balance:  This accounts for 30% of your credit score. This includes two factors, first how much credit has been sanctioned to you and second how much of that limit you have used. The credit utilization ratio is the balance which is outstanding on your loans and credit cards. If you have used most of the credit limit, you are considered a risky customer.
  • The duration of time for which you have used credit: This accounts for 15 % of the credit score. If you have taken for a long term and have been repaying the EMIS on time, it positively affects your credit score.
  • Application for new credit or availed new credit: This accounts for 10% of the score. Every time you make an application for credit, the lender checks your credit and if there are too many credit inquiries in line it can negatively impact your score.
  • Credit mix: This contributes 10% of the it. You should have a mixed bag of secured and unsecured loans, having a mix of both increases your credit score.
What if my credit score is low, how will I improve it?

There is a probability that your credit score might be low and bank rejects your application. However, this can be avoided if you work on the following steps:

  • Check your credit report regularly- Make sure you check your credit report regularly. It intimates you about any kind of defaults or delayed payments so that you can rectify it on time.
  • Timely repayment – The best way to keep your credit score right is repaying your credit on time. Timely and responsible payment affects your credit score positively.
  • Do not consistently apply if your credit has been previously rejected- In case your application has been rejected, give yourself some buffer time and then apply. Too many applications at a time can negatively impact your credit score.
  • credit-score-repair_loanyantra-comEnsure that you have a mixed bag of loans- While applying for loans do check that you have availed both secured and unsecured loans. Secured loans include car loans or home loans and unsecured loans include personal loan and your credit card as well.  Having both kinds of loans impacts your credit score positively.
  • Beware of joint application – In case you become a joint applicant with someone and that person defaults or have a poor credit score it might affect your credit score as well.

Always ensure that you are positive w.r.t Credit Score. Once you are on a safe side, it shows you are eligible for any kind of loan.

Know more tips about credit score and the impact on home loan by signing up with us.