Various factors are considered by the financial institutions (banks and non-banking financial companies) before granting a personal loan. A personal loan is provided to extend a helping hand and providing funds to individuals and entities to satisfy the personal needs without asking for any collateral. The financial institutions (banks and non-banking financial companies) assume a higher risk with an unsecured personal loan and have to base their decision majorly on the credit score of the borrowing individual or entity. The other factors involved in checking the personal loan eligibility are the age and income. The individual must be a minimum of 21 years of age to apply for a personal loan, and must have a stable source of income. Now, the most crucial factor is the credit score. A credit score is a three-digit summary of the creditworthiness of the individual or entity. A third part usually performs the task of recording the details, updating, and maintain the credit report of the individual or entity. This credit report is just like the horoscope of a person. It has the entire history of the individual or entity. The credit report includes the credits taken repayment pattern and the amounts outstanding after the due date. Any delays or defaults made by an individual or entity will be clearly mentioned in the credit report and ultimately affecting the credit score. The credit score is between 300 and 900. A higher score is preferred by all financial institutions (banks and non-banking financial companies). Ideally, the score of an individual or entity has to be 750 and above. SBI personal loan policy is available for individuals or entities with a credit score of 650 and above.
The decision of financial institutions (banks and non-banking financial companies) is based on the credit score an individual or entity has and this is why the credit score is an important part of the personal loan eligibility criteria. What if the credit score is low or does not meet the required level of the score?
In scenarios where the individual has a lower credit score, there are certain options offered by the financial institutions (banks and non-banking financial companies). The options are as follows:
1. An individual can always apply for a lower amount of personal loan in case the criteria of credit score have not been met. This way the financial institutions (banks and non-banking financial companies) would not hesitate while sanctioning the loan amount.
2. A secured personal loan can be applied for by the individual or entity. With collateral, the risk of default would be mitigated for the financial institutions (banks and non-banking financial companies).
3. The most convenient option would be of adding a co-applicant or a guarantor, who would take responsibility on behalf of the individual or entity. Including a co-applicant would increase the possibility of getting a personal loan of the large amount with a low personal loan interest rate.
SBI personal loan policy is one of the policies with the most attractive terms and conditions. The personal loan interest rate charged on SBI personal loan is 10.50% per annum.
Credit score plays a pivotal role in getting a personal loan as well as after the personal loan has been granted. The credit score of an individual determines the loan amount as well as the personal loan interest rates that the financial institutions (banks and non-banking financial companies) would charge. The individual and entities should have in mind that the financial institutions won’t turn their backs on you but it is your duty and for your benefit that your credit score should be maintained and should improve from time to time.
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