Your Old Personal Loans and Their Impacts

Your Old Personal Loans and Their
Impacts
Personal loans are fit to be used for any kind of personal need of fund. May it be
marriage expenses, taking a vacation, home renovation, paying school fees,
buying gifts and what not? Unlike a home loan or education loan, one can use a
personal loan for different kinds of purposes. The lender will never ask you a
question on the usage of the amount. If one can prove his creditworthiness, the
lender happily lends the desired amount to the applicant.
Being multipurpose is the primary reason behind the popularity of a personal
loan. Such personal need of money may arise again and again in a person's life.
One can avail multiple personal loans in within the age of 21 years to 60 years.
One can have more than one personal loan at a time or after closing one loan
account another can be applied. Whether you have closed your loan account or
it is an ongoing one, it will always have an impact on your freshly applied
Personal loan.

One may be shocked knowing that a loan which is closed long ago has a role to
play in your present loan application. Yes, it is true that all your old personal
loans, credit cards, secured loans all make an impact on the present loan
application. Let's understand how it happens?
Whenever a loan application comes to a lender, he checks the credit report of
the applicant. A credit report is a report provided by the consumer credit
reporting agencies such as CIBIL or Equifax. A credit report is the detailed
report of an individual’s credit history. Each and every credit related activities
of an individual is recorded by such credit agencies. There are a number of
credit agencies which are working on publishing credit report of individuals.
Equifax, CIBIL, Experian, TransUnion are some of the leading credit bureaus.
Each of the companies collects consumer’s personal details and their bill paying
habits to create the credit report. Every lender checks the credit report of the
applicant to check the credit behavior of the applicant. Here are the major points
which a lender checks in the credit report hence it makes an impact of it in your
present loan application.
Loan Default- Defaulting a loan is past gives a big hit to your credit score. The
credit report is certain to fall. One may improve the score by working constantly
on it for a year or two. Though the credit score may improve in coming days but
your credit report will always reflect that you have defaulted a loan in past. This
may make your lender think twice before lending you.
Late Payment- Late payments of loan EMI or credit card bill are also causes of
spoiling the credit score and being marked by the credit bureau. These are the
negative remarks about a person’s credit behavior. When such negative remarks
are added to a person’s credit report, it becomes difficult for the person to get a
new loan.
Multiple Applications Of Past- As there as many lenders in the present credit
market who are offering personal loans, some people commit a mistake by
applying for a loan with multiple lenders. As mentioned above, all of our credit
activities are recorded by the credit bureaus including the loan applications.
When a lender gets to know that you have done multiple loan applications in
your past, the lender may assume that you have a credit hungry behavior. A
multiple loan application in past may result in rejecting the present loan
application.

Existing Loan- If you are servicing an online personal loan at the time of
applying for the present loan, your borrowing capacity will be decreased. The
borrowing capacity of a person is determined by FOIR. This is a calculation
which is used to find out the ratio of your present financial obligations including
the applied one to your net monthly income. The total outgo of a person must be
less than 50% of the total income. So, the existing loan will make a person
borrow less.
The day when any person becomes debt free is really a special day for the
person. But being debt free is important as how you have spent the days while
you were paying your EMIs. A financially disciplined person makes a personal
loan a tool to improve their credit report whereas the same personal loan can be
the reason for spoiling the credit rating of many borrowers. The same day
personal loans are very easy to avail, but one has to be very careful while
servicing the same. The impact of your loan will always be there in your credit
report.