Managing a loan account can bring you a good credit score which proves beneficial for you in times of need. With overdrafts, credit cards, loans, no cost EMI’s, etc. it has become easier than ever to access credit. All these facilities are the outcomes of the digitization of the finance industry. People no longer depend on traditional banks to meet their financial requirements.
Personal loans are a boon for people in dire need of funds. The personal loan interest rates are low which makes it the go-to loan category in case of emergencies. The proceeds from such a loan can be used to purchase durable utility items like TV, fridge, air conditioner or can be used to pay medical bills, business dues, and so on. Inability to manage a personal loan can leave the borrower in a pond of debt. Here are a few ways to manage your personal loan account:
- IMPROVE YOUR CREDIT SCORE: A credit score is a 3 digit number between 300 and 900. This score is an indicator of your creditworthiness. Anything above 600 is considered as a good credit score and will improve your chances of getting a loan with a low personal loan interest rate. However, you have to know your credit score in order to improve it. A balance between secured and unsecured loans, no default on EMI payments, and low use of the sanctioned amount build your credit score positively. A good credit score is basically a gauge of the reliability of the borrower. Ideally, you should check your credit score once a year. That way you can actually understand what is dragging your credit score down.
- USE YOUR LOAN PROPERLY: Back in time, taking a loan was considered to be a taboo. But now, loans are a common phenomenon. They can help you overcome a cash crunch. Some people use their loan amount judiciously, whereas others don’t put a thought as to where they are spending the loan amount. A loan is not for speculative purposes and using the amount in speculative activities can hamper your credit rating and your credibility to take a loan in the future. Use the EMI calculator to plan your monthly obligation towards the loan. Also, it has become a trend to keep an entire gamut of credit cards in the wallet. Instead, keep only 2 – 3 credit cards in your wallet and don’t break through their ceiling. Use them judiciously to up your credit rating.
- CHECK YOUR SPENDING PATTERNS: When you decide to arrange your expenses in order, that’s the time when you actually realize your spending patterns. Take your time out to review those patterns. This will help you to cut the overspending. Also, when you are saving towards a financial goal like buying a new car, gadget, or whatever, try to limit your credit card usage and set off all your dues. This makes you eligible for the best personal loans
- EMI IS BETTER THAN LUMP SUM: Today, you can purchase an item costing as low as Rs 1,000 on EMI’s. While it is not recommended to go for EMI option on petty purchases, it is highly recommended that you go for the EMI option on significant purchases like a club membership, gold, travel tickets and so on. This improves your credit score and improves your chances of getting the best personal loans in the future.
- INVEST REGULARLY TO ENJOY THE POSITIVE SIDE EFFECTS OF COMPOUNDING: Parents try to cultivate a habit of savings in their kids. This costs nothing but has huge upsides. When you save some amount from time to time, your bank balance grows. Investing in SIP’s can help inculcate a habit of saving regularly and you can truly experience the power of compounding. This habit also has a positive impact on your credit score. Investments build your financial portfolio and make you eligible for best personal loans with low personal loan interest rates.