We’ve been hearing all the time how personal loans make the best borrowing deal being unsecure & easily available. Plus, anyone & everyone can apply for a personal loan, belonging to even the smallest corner of the city. On the top of it, it entails upon the flexibility to use the loan amount as per convenience, especially if you’re stuck bad.
The important question unanswered here is whether your loan repayment history affects your personal loan eligibility in anyway. It’s nothing short of something valuable to have a personal loan whenever you’re financially maxed out. It is extremely simple to apply for a personal loan as it is 24*7 available.
Loan Repayment History is an important Personal Loan Eligibility Criteria
Did you know that if your loan balance is high, your new loan application could be rejected?
The loan repayment history is essentially the track record of all the borrowings till now. Every record reflects in the borrower’s credit report & majorly influences your credit score. If you’re regular with loan repayments, then your repayment history will be positive as well. And so will the credit score. However, if you’re not paying loan installments on time, or miss even a single payment, it will show in your credit report and credit score. Infact, it affects your credit score.
Getting a loan application rejected even after a good credit score can be discouraging. While maintaining a good credit score is important to avail a personal loan, there are other important components as well which lenders consider before approving a loan. One of such components is also the loan repayment capacity of the borrower.
If your loan balance is high, a loan company might be hesitant to give you another loan, even though you’re paying on time. According to lenders, having too much existing debt can make it harder for you to take on a new repayment. Paying down your loan balance can improve your chances of getting another loan.
Banks and other lenders want to understand if the borrower has enough income to pay monthly instalments on time. A regular income and job help to understand borrower’s financial condition, but lenders also look at the total debt burden to ascertain if borrower can afford additional monthly instalments.
Lenders consider the total existing monthly payments (which may include personal loan EMI, two-wheeler loan EMI, credit card payments, consumer durable loan EMI or any other monthly payments) against the monthly income of the borrowers to understand the debt ratio. Lenders may hesitate to approve another loan if the debt ratio is high.
“So, a borrower can increase the chances of personal loan approval by reducing the loan balances and utilizing a portion of the total credit which can be offered by all lenders.”
Your future credit standing depends on your credit score
A credit score is one of the prime factors which confirms your eligibility for a personal loan. In essence, whether you’ll be approved or not. The Credit Information Bureau of India Limited (CIBIL) has all the possible records of the repayments made towards instant cash loans and credit cards.
If your repayment track record is clean, then you have greater chances to have your loan approved. However, if you’ve failed to repay in time, then your CIBIL will be low along with low chances of approval of your personal loan.
How does your loan repayment history help lenders?
A full track of your repayment history depicts how dependable you are as a borrower. When you have a good repayment history, it boosts confidence of the lending institutions. Once a defaulter, always a defaulter. Therefore, lenders feel safe to provide loans to such an individual as compared low score borrowers. So, this way you can evaluate the credit standing as well.
Instant Cash loans are easily available on lending platforms. This can hugely assist in getting immediate funds for emergencies. So, to avail it’s important to meet a few basic eligibility criteria including your loan payment history. This way its best to keep your records clear & clean!