With greater flexibility and hassle-free documentation process, personal loans are hugely popular. However, like all unsecured loans, personal loans too do not require any collateral or security to be submitted. While this makes it easier to apply for a personal loan, the eligibility criteria set by banks to approve a personal loan application is tougher. Which is why having a good credit score helps you get approval faster on a personal loan as it is the best reflection of your creditability.

Credit Score For Personal Loans

As such your credit score is checked for every loan application or a credit card application. However, for unsecured loans such as ,personal loans your credit score is one of the most important eligibility criteria as it reflects on your past repayment record. A credit score is a three digit numeric code that ranges between 300 to 900, wherein, 300 is the lowest and 900 is considered the highest and the best reflection of your creditability.

As such the minimum score for a hassle-free personal loan approval is above 700. You can always check your credit score online at Letzbank and get to know your credit standing before you apply for a loan. Also, if you have a good credit score above 750, you can easily negotiate on the interest rates and the loan terms. Banks are mostly willing to adjust with borrowers who have an excellent credit score.

Steps to take before you apply for a personal loan

Personal loans applications are not just accepted by judging your salary, age, spending, etc. Your credit score is a key factor that is considered before approving your personal loan application. Therefore you must always check your credit score before you apply for a personal loan. You can check your credit score by directly going to the CIBIL website or login to Letzbank and check your credit score online. A credit score check will also help you to determine whether you are eligible for a personal loan approval or not. If your credit score does not fall over 700 points, your chances of loan rejection are high. So, you must decide whether you are willing to take that risk by applying for a personal loan when you have a low credit score, as a loan rejection will further lower your credit score.

If you have a good credit score, you can easily go ahead with the personal loan application and also have the edge to negotiate on loan terms such as no penalty on foreclosure, lower interest rates, etc.

How do I ensure I manage a good Credit Score?

There are many ways by which you can build your credit score. If you have existing loans, it is important that you repay them on time. An over limit credit card is also a bad indicator on your credit score as it creates a bad impression on your repayment abilities. Ensure that you pay more than the minimum due every month and try not to carry forward balances in credit cards. This is because carrying forward balances not only accrue a lot of interest in your credit card but also lowers your credit score. Avoid multiple credit card debts and if possible stick to one and work towards repaying it as soon as possible. Repaying credit cards can drastically improve your credit health and is a positive reflection of your repayment abilities.

Being a loan guarantor for someone can also be a sticky spot in cases when the main borrower defaults and you are held liable for the payments. Not only will you be liable to repay that debt as a guarantor, your credit history will be dented with this information too.

People with a bad credit score can also get help in improving their credit score by taking professional help such as the one provided by Letzbank. . Letzbank has collaborated with Credit Clear, a management consulting services company that specializesin rectifying credit report information for individuals and companies. You can also take help of Credit Clear to settle any unpaid debts as they liaison with banks and financial institutions to provide you un-paid debt resolution.

Maintaining a good credit score can be made easier when you repay without any defaults and manage your credit card balance wisely. There are also some banks that want to help out borrowers who have a bad credit history and give them a personal loan. However, the personal loan interest rates in such cases are usually much higher and you may also not get the same amount of flexibility in your loan agreement. So, whenever you plan to take a personal loan, get your credit score checked and ensure that you work towards improving your credit history by making payments on time.

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