Here’s how to find the best personal loan without hurting your credit score

If you’re looking for the best personal loan without hurting your credit score, here’s what you can do.

Thinking about applying for a personal loan in the near future? Want to pick the best deal without hurting your credit score?

If you’re wondering what’s being discussed, here’s something to get you started: When you approach a bank or financial institution for a personal loan, a credit check will be performed, after which a decision will be made on approving your loan. This is precisely why we are advised not to manage credit in a way that throws our credit scores out of shape.

What is least understood is that whenever you apply for a loan and a credit check is performed, your credit score is slightly affected. Surprised? Pretty uncomfortable, but true.

Technically, multiple credit checks mean clouds have reigned on the horizon. So to avoid your credit score suffering, you should prevent your credit profile from being checked multiple times.

If you’re looking for the best personal loan without hurting your credit score, here’s what you can do. Note that if you have good credit, you will always get a good interest rate on your loan.

Don’t deal with too many lenders and DSAs (Direct Sales Agents).

It is not new that every lender in the market promises you the best interest rates on your loan, without exception. While you are promised the best interest rates, your interest rate will depend on your credit rating and repayment history. Other factors such as your income and age are sometimes taken into account as well.

So while you’re promised fantastic prizes, you don’t quite get them. Seems like a farce? It really is.

If you’re thinking of choosing a DSA agent for your lending needs, let’s look at something relevant.

Approaching Direct Selling Agents (DSAs) for your loan is also a risky proposition, as DSAs send your application to multiple lenders, resulting in multiple credit checks being performed during the process. Most customers are not aware of this. It’s important to note that multiple loan requests from different lenders are a symbol of credit-hungry behavior and the speed at which requests are made will affect credit scores accordingly. This is clearly an unfavorable fallout that lowers credit ratings and jeopardizes the approval of future loan applications.

Knowing this, it’s best not to approach too many lenders to get the best interest rate on your loan application simply because your credit score will be in distress.

Do your research to familiarize yourself with available offers

If you want to apply for a personal loan with the lowest possible interest rate, make sure you do at least a little research to know which lenders can best serve your interests.

As you already know, there is a sea of ​​lenders in the market offering you loans at different interest rates. It is advisable to know the lenders operating in the market and make your choice accordingly.

Choose a lender based on your credit profile

Your existing credit profile is a paramount parameter influencing your loan approval or rejection – which is precisely why it is wisest to choose a lender based on your credit profile. Wondering what it’s about? Let’s find out!

If your credit score is good, you are eligible for low-interest personal loans from reputable private lenders (mostly top-rated private banks specializing in personal lending). However, if you have had multiple instances of late payments in the past, your credit score would have suffered, potentially rendering you ineligible for loans from leading private institutions.

If you’re on the other end of the spectrum, where you’ve had multiple instances of default, choosing a lender with simple eligibility criteria is your best bet. New-age lenders like fintech companies are also offering loans to those with low credit scores. Some popular fintechs that have significantly expanded their market presence are offering loans to individuals with credit scores of 600 and above.

The idea here is to choose a lender who will approve your application based on your current credit profile – this is to avoid a blot on your credit report due to a credit check where your application was rejected by a lender.

Opt for pre-approved loans if you are already a customer at a bank

In some cases, where a customer has had a savings account with a particular bank for over 5 years, the bank does not perform a harsh credit check when processing a loan application. A pre-approved loan offer is made based on the client’s existing track record, thereby not indelibly marking the credit profile, which can result in uninvited hiccups when drawing down future loans.

Interest rates on pre-approved loans are typically lower, which is beneficial for customers with long-standing relationships with their respective banks.

Also, fintechs have adjusted their offerings to offer interest rates that are almost as low as the best private banks. Some offer loans from 11.99% pa

Avoid canceling your loan after applying to a particular lender

This is especially true when you take out a loan from a top institution. Note that, as previously mentioned, the bank would have performed a tough credit check when reviewing your loan application. If you have been offered a particular interest rate and have agreed to it, canceling your current loan (which you were recently offered) to arrange a loan with another lender that offers you a much lower interest rate will affect your credit score . This can jeopardize future loan applications, as lenders assume that once you get an offer, you can easily switch loan providers — which doesn’t help make a good impression.

Needless to say, credit scores are very important in getting your loan application approved—especially since personal loans are unsecured loans and your credit score is perhaps the most fundamental (and also the most important) aspect to consider Banks get idea of ​​whether you are worthy of a loan or not.

Smart borrowers care deeply about their creditworthiness. You can also! Jump on the train!

(By Aditya Kumar, Co-Founder and CEO, Qbera)

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