How Your Loan Repayment History Impacts Your Personal Loan Eligibility?
There are times when you may need to borrow funds in order to meet your personal goals such as planning a dream wedding, sponsoring your child’s education, managing some unforeseen medical expenditures, or even to consolidate your existing debts. In such circumstances, a personal loan can come to your rescue. It is one of the most convenient & quickest financial options that provide financial assistance in times of emergency. Online applications have made it way easier for people to apply for a personal loan in UAE and get immediate funds in their bank account. Also, with amazing features such as personal loan calculator, it has become easier to manage and plan the loan applications.
However, most of the banks and financial institutions offer a personal loan in UAE on the basis of the applicant’s age, income, employment status, and repayment history. Like other factors, applicant’s repayment history plays a significant role in deciding the personal loan eligibility.
Before proceeding further, let us tell you that what exactly is repayment history and how it affects your personal loan eligibility.
What is Repayment History?
Repayment history of the loan applicant is a very important eligibility parameter that personal loan lenders look at very closely. Your repayment history actually shows that how consistent you have been with your past debt payments. It highlights clearly defaults and late payments to enable the lender to make the right lending decision by comprehending what kind of credit management you have maintained in the past few years. Any instance of late payment or default can severally lower the chances of the approval of your personal loan application.
It is recorded in your credit report & also affects your credit score significantly. If you make payments on the right time then your repayment history will be positive. If you miss on paying even a single EMI (equated monthly installments), no matter how long ago that was, it will still reflect in your credit report thus affecting your credit score negatively.
What is a Credit Score?
A credit score is basically an indicator of your repayment history over the past few years. It is offered in three-digit numeric form ranging from 300 to 900. Well, a credit score of 750 or above is considered an excellent credit score (for a personal loan) by most of the banks in the UAE, a credit score of 500-700 is considered to be good, and a credit score is below than 500 is considered as bad. Poor credit score might be the main reason behind the rejection of your loan application. The credit score is managed by credit bureaus such as CIBIL. The credit score can easily be determined by the banks & financial institutions when they need to check whether you are eligible to avail a personal loan in Dubai or not.
If there is no default in your loan repayment history then there are high chances that your loan application will get approved. But if you’ve ever missed paying your loan repayments then your CIBIL/credit score is affected negatively. As a result, your chances of procuring a personal loan in the future will also be lower.
The loan repayment history actually depicts that how reliable and credible applicant you are. If you have ever defaulted on your payments then you must know that is it a minor default or a major one.
Basically, a minor default is something when the payment is missed or delayed for less than ninety days. Well, the minor default affects your credit score/CIBIL score temporarily.
A major default is something when payments are missed or delayed for more than ninety days. If the major default happens then you account comes under the category of non-performing. Well, it affects your credit score/CIBIL score permanently.
If the applicant has minor defaults then he/she has the chances to improve his/her credit score.
Tips To Improve Your Credit Score
Now you have a clear idea of the importance of a good credit score. Let us take you through some useful tips that help you to improve your credit score:
- First of all, you need to understand the pain points in your CIBIL score and check in which aspects you are lacking in. If it is your other loan repayments or credit card bills, make sure you pay off your bills on the right time, and keep the track in the coming times. In addition to this, if you’ve ever defaulted on EMIs payments, you need to ensure that this thing does not repeat again because missing even a single payment can cause a significant toll on your credit score.
- If you’re currently pursuing a loan which is about to end. Make sure you clear off all the repayments on time. Once the loan tenure is finished, take at least a break of six months before applying for a personal loan in UAE. This will help the lenders know that you are not facing the financial crisis and you are capable of funding your daily expenses on your own in a hassle-free manner.
- If you carry one or more credit cards, be sure you pay the outstanding balance on time. Moreover, try to not use your credit card beyond 30 percent of your credit limit as this will ensure the lender that you are not in a financial crunch and enjoy a great level of liquidity.
We hope that you now have a clear idea about the importance of repayment history and how it affects your personal loan eligibility. So, if you are going to avail a personal loan in UAE make sure you pay your EMIs and credit card bills on time. Not only does it shows that you are a very responsible borrower but also that your financial health is good enough that you don’t need to fall behind on these payments. Another benefit of maintaining a good repayment history and credit score is that personal loan lender might offer you the low personal loan interest rate and flexible loan tenure every borrower craves for.