A small personal loan is an excellent way to build your credit history. More so than any other type of loan because it is sanctioned at smaller amounts; due to this, your chances of approval become high even if you don’t already have a decent credit history or score.
So, if you anticipate an expense coming your way, think of availing of small personal finance rather than denting your savings. This will have a twofold benefit. Firstly, you’ll keep earning interest returns on your savings. Secondly, timely EMI payments on your loan will quickly earn you a substantial credit score.
How does a small loan for personal use help build credit history?
As a borrower, you’ll avail of small personal finance for at least a few months or a couple of years. This will have you pay regular monthly instalments for an extended period of time. Making steady payments will not only create your credit history but also boost your credit score. It will open doors for any future loans you wish to avail.
Simply put, credit history built on repayment of small personal finance today can make you eligible for a bigger personal loan or other types of loan to fund a big-ticket purchase tomorrow.
Additional read: Tips to Get a Personal Loan When You Don’t Have Credit History
How to increase my chances for loan approval without a credit history?
Personal finance is an unsecured loan, meaning you don’t need to pledge any collateral to avail of it. This is why lenders rely heavily on your credit history before sanctioning the loan. So, what’s a fresher with no credit history to do?
All you need are the following three things:
• Show a stable income source
If you have a stable job or business income, lending institutions will likely consider you a low-risk applicant, even without a credit history. Therefore, make sure you have salary slips with salary credited in a bank account for ideally 6 months before applying. You can also include alternative income sources, if any, to strengthen your application.
• Get a co-applicant/Guarantor
Don’t have a stable income source, but are financially supported by another individual? Worry not; you can still apply for a loan at affordable personal loan interest rates. All you need is a co-borrower with a stable income willing to file a joint application with you.
• Start with a low loan amount
Small personal finance is anyway offered at relatively lower amounts. It can start at a few thousand rupees and go up to a couple of lakhs. If you’re a first-time borrower with no credit history, begin at the lower end of the borrowing spectrum. By doing this, you’ll significantly increase your approval chances, that too, at low interest rates.
Additional read: Does the Purpose of Personal Loan Matter for Approval of the Loan?
Before you go
Build your credit history with small personal finance by Tata Capital. Our personal finance offering comes at affordable interest rates, flexible repayment tenures and minimal paperwork. You can also visit our official website or ping us on WhatsApp to start your online loan application.
So, what are you waiting for? Visit our portal, evaluate your potential instalments using our personal loan EMI calculator, and apply today!