What is the role of my credit score in securing a personal loan?

Your credit score plays a significant role in determining if you can secure a personal loan and how good the terms of the said loan would be. Here's a closer look at the detail:

Determining Eligibility and Interest Rate:

Your credit score serves as a critical factor in determining your eligibility for a personal loan from various lending institutions in India.

Higher credit scores often increase your chances of loan approval.

Borrowers with higher credit scores are more likely to secure personal loans at lower interest rates compared to those with lower scores.

Assessing Creditworthiness:

Financial institutions use your credit score as a tool to assess your creditworthiness.

A higher credit score indicates responsible financial behavior, such as timely payments and responsible credit utilisation.

Conversely, a lower credit score may raise concerns about your ability to repay the loan.

Favourable Loan Terms:

Borrowers with higher credit scores often enjoy more favourable loan terms, including lower interest rates, higher loan amounts, and longer repayment periods.

Lenders are more inclined to offer competitive terms to individuals with excellent credit histories as they pose lower risks of defaulting on the loan.

Therefore, maintaining a healthy credit score by practising responsible financial habits, such as making timely payments and managing credit utilisation, is essential for securing favourable loan terms.