It is very commonly seen that people used to take loans in time of need which is a good thing. Financial support is very important whenever a person is in need. Personal loan are mainly of two types secured personal loan and unsecured personal loan. So let’s know how a personal loan can affect your credit score and how you can avoid it.
Affect on credit score
When you want to increase your credit score the personal loan might be a game changer in this time but only when, when you repay it on time. For a better credit score one should apply the three tricks
- Must maintain a positive repayment history.
- Paying more than the minimum EMI per month.
- Make the loan below 30% from it as soon as possible.
These three trick help to boost your credit score which will be quite beneficial for you in your future need and requirement.
Secured personal loan– This is the personal loan in which collateral is required. It has a benefit that it provides longer time to repay it with very low interest.
Unsecured personal loan– It is just opposite of secured loan. In this no any collateral is required but the interest rate is little high and it quite difficult to get approved.
So, from this we can conclude that secured loans are more beneficial.
Affects on credit point
When you take the loan for the 1st time it will affect your credit score from the 1st month but when the repayment starts and it is done on time then this will boost your credit score and that will be quite beneficial for next time when you need the loan.
Benefits of personal loan
- It can help you to decrease your debt more fast.
- It may help you to make a credit better if you repay it on time.
- The credit score won’t affect much because it is an installment loan as much as by the credit card.
Repayment of the taken loan
When you get loan from any bank never try to deny the repayment this may affect your credit score adversely. Always try to pay the installment in time so that you may be able to take more benefits next time. While taking a loan you should follow some simple steps like – taking loan minimum requirement, this is important because when you apply for the loan you must apply for minimum requirement because loan may increase your burden at the time of repayment because a loan always take interest it might be more or less but must take interest so, if you get minimum then you will also pay minimum interest and try to repay your loan as soon as possible. You must give it 1st priority at the time of repayment.
The repayment on time will give a boost of 32% to your credit score. Going long delay in repayment affect your score adversely as well as you will be liable of taking legal action against you from the bank side. But, if you manage to pay the installment every month with at least minimum payment it may boost your credit score.