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20:14 BST, August 8, 2024Anyone who knows the basics of how personal loans work knows that they are related to one’s credit score. However, do personal loans help improve your credit scores? The answer is ‘yes’.
If you plan your personal loan repayments well, you can improve your credit score to a great extent, thereby improving your chances of availing a personal loan in the future.
Benefits of Choosing Personal Loans
Digital personal loans, especially those offered by IndusInd Bank serve various purposes – from helping people overcome a financial emergency to extending a line of credit to small business owners for the short term. The following table enlists the features and benefits of instant personal loans:
Feature |
Description |
| Affordable interest rates | IndusInd Bank offers personal loans with affordable interest rates |
| Digital application process and instant approval | You can apply for a digital personal loan through a 100% paperless process without visiting a bank branch. IndusInd Bank also offers instant approvals and speedy disbursal without any delays |
| No collateral required | Personal loans do not require the borrower to pledge any collateral |
| Flexible repayment options | IndusInd Bank offers repayment tenure options ranging between 12 and 48 months |
| High loan amounts | You can get a digital personal loan ranging between ₹30,000 and ₹ 5,00,000 with IndusInd Bank |
| High accessibility | The Indie app allows you to access your loan details at all times |
How can personal loans improve your credit score?
You can improve your credit score using your personal loan in four ways:
- Repay your personal loans on time: If you repay your personal loan via timely and consistent Equated Monthly Instalment (EMI) payments, your credit score will increase over time. Be sure to make these payments before the due date. You can also choose to automate your personal loan repayments via your bank’s mobile banking app to avoid any late payments.
- Assess your ability to repay a loan before applying for it: Before you sign up for a personal loan, check your future EMI amount using a monthly installment calculator. If the amount is too high, you might want to reduce your loan amount or consider increasing the tenure. Loan and principal interest calculators help you plan for your personal loan’s repayment in advance. A personal loan EMI calculator is a free, online tool that helps you estimate your EMIs before signing up for a loan.
- Regularly monitor your credit report: You must regularly check your credit report for any inaccuracies. Doing so can help you bring up any discrepancies with your bank at the earliest.
It’s important to note that personal loans can also negatively affect your creditworthiness. This happens when you haven’t repaid your personal loan EMIs on time. Late EMI payments result in a low credit score, which translates to an inability to take on more debt in the future.
Factors to consider while getting a personal loan
Here are some factors that you should consider before getting a personal loan:
- Check the interest rate charged by the bank: A higher interest rate results in higher monthly EMIs in the future. This is where the affordable interest rates provided by IndusInd Bank can help you budget better.
- Assess if you need to consolidate your debt: If you are burdened with high-interest debt, you can consider consolidating it using a personal loan.
- If you need finances for a major life event, a personal loan can be helpful: If you wish to finance a wedding in the family or need to cover the expenses of a medical emergency, you can consider opting for a personal loan.
In Summary
A personal loan can help you improve your creditworthiness over time if managed well. For this, you must repay your loans on time, assess your ability to repay a loan before opting for it, and use a personal loan EMI calculator to budget efficiently. You should also regularly monitor your credit reports to detect any discrepancies regarding the repayments.
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