Loans are needed solution sometimes. We can’t say that everyone will have prosperous finance in their life. People run short of money many times. Everyone has financial needs and these needs may be urgent or important. The need that has to be met in a short time is urgent need and the need that is to be met compulsorily is important need. If you want to buy a vehicle you can apply for vehicle loan and buy a vehicle. The vehicle may be two-wheeler or a four-wheeler which you need for sure to reach your office and back to home daily. The finance needed to meet this situation is called an important need. On the other hand if you are about to apply for a course or a college degree, you can apply for educational loan to pay the college fee. But you need it in a short time in the beginning of the academic year so that you can pay the fee and join the course. This is called urgent need. In both the cases you can avail loan.
Loan system is a solution to get money in the time of need. It is given by banks and private finance companies. The person who avails the money for credit through loan is called as borrower and the person who offers it for a rate of interest is the lender. Usually banks offer loan for a reasonable rate of interest whereas the private finance companies charge high rate of interest than the banks. The rate of interest will vary according to the type of loan we avail from them. There are different types of loans like personal, mortgage, educational, automobile loans and housing loans.
To avail any type of loan you should have eligible credit score. The credit score is calculated by a statistical analysis of the probability of loan repayment. If a person is eligible to repay the money then he or she has good credit score and if the person is not eligible to repay then he or she has bad credit score. If it is a first time for you availing the loan probably the loan will be sanctioned based on your income and the proofs and documents you provide. But if you avail more than one time then your credit score compulsorily matters.
- Don’t avail loan frequently unless it is not necessarily needed. The dues you have paid and the repayment you have made will influence your credit score.
- Pay your loan dues, the rate of interest and the principal amount on time.
- Always keep your credit card limit low so that you get good credit score. Better pay cash than using credit card.
- Try to pay more than the minimum principal amount to be paid monthly.
The type of credit you have will affect your credit score. If you have availed your previous loan from bank then you can get good credit score but if you have got the loan from private finance company then you will get low credit score. These are they ways to improve the credit score and since your credit score is very important to avail loan, pay more attention and try to cut short your credit length. .