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Are you feeling ashamed that you’re overburdened with a mountain of debt or credit bills, don’t worry having debt on your head doesn’t make you a bad person.

People going through a debt crisis can receive financial literacy along with freedom with the help of debt counseling. Yes, considering a debt counselor might work for you.

About Debt Counseling

Debt counseling is a financial service provided and crafted for educating people. People will cram and know how to pay off all debts and prevent evasions on their responsibilities.

Debt counseling offers a good understanding of what you are spending versus what you are earning every month and how much you pay in every budget category. You are advised on where to lower your spending for meeting all monthly commitments, thereby making the debt plan attainable and offering you a well-structured strategy for becoming free from debt.

What does a Debt Counselor do?

Here, the debt management team will provide a session involving a proper analysis of the customer’s financial situation. This analysis includes evaluating strategies for debt reduction, either for paying off or debt management, and educating people on budget management.

Debt counseling assists customers besieged with enormous debt but wish to make some changes and control their financial lives. A debt counseling session also evaluates and completes the analysis of the total expenses rate of interest and the outstanding balance.

After determining the economic circumstances, a debt management plan is put together, and when you are content with the whole proceeding, it is executed. The pending amount is paid off in small installments but through an extended period.

Steps To Follow While Considering Debt Counseling

• Contacting a counselor:
  The first step in debt counseling is getting a debt counselor from a renowned credit counseling agency.
• Finance reviewing:
  Debt counseling will result in two main things. First, it might end up finishing the call for visiting another counselor for a better understanding of financial health. The second goal is leaving with a plan of action. To achieve these goals, debt counseling sessions start with a complete review of debt finances, incomes, and other things.
• Getting recommendations from debt counselor:
  Everybody’s financial situation is diverse. Due to that, your debt counselor offers you personalized advice depending on your financial review.
• Decide and Begin your Journey:
  After receiving recommendations, it is your time to decide if you want to board on your journey towards freedom from debt. After accepting the plan, your journey starts.
• Several non-profit debt managing agencies provide you with some extra services for addressing your specific goals, which involves programs to assist you in repaying debt, rehabilitating delinquent mortgages, proper management of loan payments, and many more services.

Outcomes and benefits of debt counseling

Once you are done with your budget assessment, the debt counselor explains the debt management plan for reaching your financial goals.

A good debt counseling agency offers a service that helps you live a stress-free life by managing all your outstanding amounts on your behalf. Many of them provide free counseling sessions for those searching for debt-free solutions.

A good debt counseling agency offers complete information as an extra resource. If you require an explanation of any of the questions you might have, you can attend a free counseling session. In big words, financial education helps you to manage your money better and stay out of debt in the coming days.

What are the different benefits of debt counseling?

• Your money habits improve: This is one of the significant benefits of applying for debt counseling. It teaches you to use cash carefully and spend less. Once you have mastered it, you can easily create wealth without any debt.
• Debt reviewing becomes flexible.
• Your assets remain protected when you are under debt review: When someone applies for debt counseling, the counselor approaches the court to obtain an order to bind the restructuring plan negotiated with the credit providers. This stops recovery activity from the credit provider, debt collectors, and lawyers.
• Reduction of interest rates while under debt review: The whole restructuring plan includes relooking and decreasing interest rates with the credit providers.
• You have to pay a decreased affordable monthly amount that pays off all your accounts: While under debt counseling, the customer can pay one reasonable installment amount.

In simple words, a debt counseling session with a good
agency allows you to;

• Get a complete review of your financial situation.
• Reviewing creditor harassment you might be receiving and discussing how to reduce it.
• Know about various advantages and disadvantages of bankruptcy.
• Know about different spending habits and how to spend very wisely.
• How to prepare a better budget.
• Discussing the execution of the debt plan and making payment of an amount that you can afford.

 Know how your debt plan reduces harassment from
collecting agents and creditors.

So, if you are struggling with yourself for debt, it is often recommended to go for a debt counseling session. A good debt counselor listens to you for understanding all of your financial circumstances and offers you the best advice possible.

When you are happy to proceed with the debt management plan to pay an amount that you can afford, your creditor stops the harassment.

Money is the call of the day. It is impossible to run our day-to-day activities without considering money. A scarcity of money is the worst situation one would never be one to face. But such conditions do come around, where you might have a requirement to fulfil or execute and you need financial strength in that regard. That’s when you give yourself the thought of borrowing a loan. This instant monetary help will provide you with a significant boost in your prospects.

A credit card happens to be a tool with which you can gather these kinds of loans. You can use it for buying something or other necessary transactions. The money that you spend gets added to your credit balance. You have to pay back this money to the bank or other financial lending institution you are using the credit card of, with a stipulated interest. There is a specified period within which you have to pay back the loan. The part varies from banks to financial institutions, with natural interests ranging from 35 to 40%

However, have you ever thought about the various intricacies concerning taking loans via credit cards? If not, then this article is what you need to read. We will tell you all the necessary points, and you cannot overlook them while taking a loan via a credit card.

1. SIDE EFFECTS OF LATE PAYMENTS:

Let us say that you have applied for a loan. If you are inconsistent with paying back the loans, that can adversely affect your application. Or if you are using your credit card frequently without having any concern about repaying the money, that will harm your prospects. Indulging in late payments can adversely affect your chances of getting a top-up loan.

Though many banks and financial institutions provide a top-up loan to their credit cardholders, it is necessary to have a clean credit card history of making things smooth. Late payments of credit card bills will hamper your wishes for a loan in the future. That’s why even experts emphasize this aspect.

2. EFFECTS OF MAKING DEFAULT IN YOUR PAYMENT:

A default in your payment refers to your loan default and not your credit card default. A significant difference lies between defaults on credit card repayments and that of defaults in loan repayments.

A credit card default will have a significant impact on your credit score. However, a default on loan against your credit card is under the purview of loan defaults, and that will harm your future loan prospects.

3. CHARGES FOR PROCESSING:

While taking a loan against your credit card, there will be a processing charge attached to this particular function. It depends on the loan amount approved. Usually, the processing charge ranges from 1 to 5%.

4. THE INTEREST LEVIED ON TRANSACTIONS VIA CREDIT CARDS:

There is an associated amount which is the interest for your loan amount against the credit cards. When you repay your loan, this interest is an added amount that you will have to repay.

Let us say you have applied for a loan of around 70% of your credit card amount. Then the remaining amount becomes the interest you will have to bear. If you forget to or are unable to repay the loan within the stipulated time, a claim of around 35% per annum is applicable.

5. THE OPTION OF PRE-CLOSING YOUR LOAN:

Any individual can pre-close their loan before the expiry period of the card. You can do it in your case as well. As the experts say, if you pre-close your loan, it is unnecessary to inform the bank or the financial institution you are lending. But there are some pre-closure charges that the lender organization levies.

We hope that we could give you insightful information concerning credit card loans. Next time, you apply for a loan or go for a top-up, then make sure that you keep the above points in mind. It will help you prevent unfavorable circumstances.

• The number of credit cardholders in India amounted to 57.4 million as of April 2020.
• There are 5715 credit card defaulters in India.
• India saw nearly Rs. 25,000 crore wilful defaulter cases as of 14th July 2020.

Are you looking to consult CIBIL Score Repair Agency? Contact us.

Yes, there exist myths in debt collection as well specifically, when you use a third-party for collection of debts you tend to hear a lot of such myths. They can even make you hesitate in your decision to hire a third-party. Collecting debts can tire you to focus on while in the middle of business. Debt-collecting agencies come to your aid at this point. They can help you get back your money smoothly.

DEBT COLLECTION:

Almost 56% of businesses have known to write off more than 1% of their turnover and lent capital as uncollectible. This percentage has continued to rise since 2013. Though it’s an alarming fact, you can still sort out the problem. Hiring debt collection agencies can help you a great deal with this. Debt collectors turn out as inhumane rather than the fact that they are demanding what belongs to them in the first place!

So hiring people who can handle it in the right seems logical. Read further to understand some of the myths associated with debt collection. You can get to know the reality that prevails as well.

Myths and reality about debt collection:

We have discussed the top 6 debt collection myths below, for you to stay cautious from them jeopardising your decision.

1. MYTH: YOU WILL FIND DEBT COLLECTION EXPENSIVE

Reality:

You will find that most debt-collectors do not ask for payment unless they succeed. They work on a success only basis. You will also find that the price they commission is very minimal. When you compare it to the money, you would have lost if you had written off the debt as uncollectible.

2. MYTH: YOUR CUSTOMERS FIND IT UNFAVORABLE

Reality:

When you hire an excellent debt collecting agency, they prioritise your customer relationships as much as you do. They also take your brand very seriously and importantly, also just like you. At Kenstone Capital you will find the same. We aim and work towards a peaceful mediation when collecting debts, and we keep reminding and reaffirming them to pay.

Yes, they can shun at the fact that you hired a debt collection agency, but you have done it only to get back what they owe. The capital entirely belongs to you, and you have the most exclusive rights to ask for it. They also have a duty towards you and your debt.

3. MYTH: ONLY BIG COMPANIES HIRE DEBT COLLECTION AGENCIES

Reality:  

More than thousands of small companies today, hire debt-collecting agencies. They do not get time to focus on debt-collections as their primary focus is on the business. They work towards improving it and marketing their brand, also they have a small team when it comes to small businesses. Thus everyone plays multiple roles, and they can’t form a team debt-collection team too! So when you hire a debt collection agency, you can focus more on your business improvement.

4. MYTH: DEBT COLLECTION AGENCIES ONLY WORK FOR ANCIENT DEBTS

Reality:

Research studies conducted on debt-collection portray that time of old debt reference, and the chances of collecting the debt are directly proportional. When you refer to the debt as early as possible the chances of you recovering goes up. So you can refer to debts in their early stages instead of waiting for it to become old or bad debt. Thus refer to agencies faster than chasing debts for months in-house.

5. MYTH: YOU FIND SOLICITOR MORE EFFECTIVE

Reality:

Though there exists time and place for the legal system, you will find it very costly and time consuming. Instead, you can benefit from a good debt-collector and also avoid unnecessary problems.

6. MYTH: YOU CAN DAMAGE YOUR BRAND WITH DEBT COLLECTION

Reality:

When it comes to reality, you only need to find a top-notch debt collector. The person respects your brand and smoothly gets the process done. You introduce a debt collection agency as part of your standard credit control process. When you do this, the agency complements your in-house collection efforts while simultaneously putting pressure on your debtors. This way, you get paid, and also your brand continues to reign.

With MSME introduced in 2006 in India, it has become a pillar of the Indian economy, contributing a significant share of over 40 percent in its GDP and employment. MSMEs are vital in India and are also crucial for the global economy, where they have made substantial contributions over the decades.

While MSMEs are still investigating how loans can help unleash their full potential, they may require quick and carefully guided access to funds to support their enterprises to reach their full potential.

MSMEs stands for “micro, small, or medium enterprises.” Still, these smaller players are progressively ceding ground to larger companies because of the advancement in technology, and its adoption, which will help them scale up and stay competitive. The Indian government plays a significant role in its quickly growing status by assisting them to get their businesses started with inclusive initiatives and offerings.

See What Statistics Says….

According to the Union Budget 2021 – 22, Budget Allocation for FY 2021-22 for the MSME more than doubled to Rs.15700 crore vis a vis Rs.7572 crore in 2020-21.

A recent report published by Reserve Bank of India also suggested that the MSME sector can get INR. 5,000 crore stressed asset fund as better access to credit.

With these initiatives offered by the Indian government, MSMEs can focus on forging a bigger and better identity for themselves. MSMEs need faster, cheaper, and carefully guided access to funds, especially when they are still learning how loans and credits can help them and the enterprises unleash their full potential.

IMPORTANCE OF CIBIL RANK FOR THE MSMES BUSINESSES

In the last few years, the CIBIL score has helped MSMEs gain a better insight on loans and loan options that have helped them achieve faster and cheaper access to business loans. How? The CIBIL Rank allows us to understand the company’s future repayment capability, and it is a numeric summary of a company’s credit report and its past repayment trends.

This score helps lenders decide whether to approve their business loan applications or not. It also helps them decide how much loan they should sanction. Once MSMEs get a better hold of how the formal credit landscape works, they can be better prepared to boost their loan-eligibility criteria and thus can leverage business loan opportunities when they require it the most.

Below mentioned are three critical points that MSMEs should be aware of to build a high CIBIL Rank and become loan-readiness:

1. PAYING LENDERS TIMELY, EVERY SINGLE TIME

The relationship between a lender and a borrower is essential, as lenders play a vital role in reporting a borrowing company’s repayment patterns back to CIBIL.

It is also a critical factor that helps determine the CIBIL rank, which is why MSMEs should focus on paying back their lenders on time and within the credit period and avoid defaulted or late payments—making all the costs timely will contribute to building a good and higher CIBIL score.

So, next time they apply for a loan, a high CIBIL score will help them in their loan approval process.

2. Apply Vigilantly

While planning their growth strategies, MSMEs should look for a formal lending landscape while applying for credit. One should not resort to alternative lending sources to get faster and easier access to funds.

These alternative funding sources may demand various collaterals as a guarantee and cause MSMEs to put their valuables (even property) on the mortgage. Such types of loans usually attract higher rates of interest.

Thus, MSMEs should look for lenders with a formal credit landscape to get better offers and avoid the debt trap. Most importantly, they should choose their lenders depending on their company’s credit history and repayment capability. Also, to avoid getting into a debt trap, MSMEs should ensure applying for only as much credit as they truly need.

3. Examine the CIBIL Rank and Company Credit Report (CCR) regularly

A good/higher CIBIL score and a lower CIBIL Rank of an MSME represent its financial well-being and repayment capability. So, it’s crucial to constantly monitor the CIBIL rank and CCR of the company, which will, in turn, help them monitor their credit transactions and identify any errors. The lower the company’s rank is, the better the chances of their loan approval.

Monitoring the CIBIL rank of the company is a crucial step, as some banks offer MSMEs business loans at a better, discounted rate of interest based on their CIBIL rank. Also, regular monitoring can keep them loan-ready and help leverage attractive offers when the opportunities arise.

Final Thoughts

It’s never too late to strengthen your credit rank and unleash your full potential. Starting today, MSMEs should focus on actively boosting their business’ loan-eligibility criteria and credit health by achieving a high CIBIL Rank- which is also a critical factor in determining your credit access in the future.

In recent years, India has noticed an increase in women consumers becoming a part of the credit landscape. There is a high rise in awareness and credit consciousness among women borrowers.

As per the recent update by CIBIL, self-monitoring women are the ones who make the real difference. The Indian credit market has seen a rapid penetration and participation of women customers. Comparing the share of women borrowers to overall borrowers is about 26% as of September 2016, which was 21% in September 2013.

See What Statistics Says…

According to TransUnion CIBIL Insights, with an increasing number of women borrowers in the Indian credit market, about 30 million women borrowers are getting access to several credit products.

Self-awareness and credit consciousness among the women borrowers have also seen a sharp increase, with self-monitoring women customers increasing by 62 percent between 2018 and 2019. It is double the 30% growth rate of self-monitoring makes customers as per the insights.

Talking about these findings, the COO of TransUnion CIBIL, Harshala Chandorkar told that

“The significant increase in the number of women who are seeking credit products is a promising indicator of the evolution of India’s credit market which has enabled increased economic opportunities for women borrowers. Financial institutions must unlock the significant potential that lies in customizing product constructs for women borrowers to further drive business growth and enable greater customer experience for women consumers.”

All financial institutions should unlock the substantial prospective that lies in personalizing all product constructs for the women borrowers to dive into business growth and allow a better consumer experience for the women customers.

TIER 1 CITIES HAVE MORE WOMEN CONSUMERS; WHY?

Most of the women consumers are from tier 1 cities. As per the recent insights of TransUnion CIBIL insights, about 56 percent of women self-monitoring their credit score are from the state of Maharashtra, Karnataka, Delhi, Tamil Nadu, and Telangana.

While Andhra Pradesh contributes only 5% to this sector, about 44 % go to avail a loan or a credit card within three months of going through their CIBIL Score and report.

It depends on several factors like an increase in women’s education, enhanced consumption of customer durables in tier-1 and tier -2 markets, and an enhancement in several working women.

As per TransUnion CIBIL, there will be further growth in demand for credit in the future among women. The research also states that an increasing number of business loans is seen from states having a maximum number of female MSME owners. This shows that they are credit conscious and are well-aware of the role of their CIBIL report for getting access to credit.

WHAT ARE THE VARIOUS ATTRIBUTES HELPING WOMEN’S POSITIVE CREDIT BEHAVIOR?

Different attributes stimulate the Indian woman’s growing use of credit, the choice of loan, and the credit-awareness. Some of them are:

• Socio-economic status and changes in it
• Attractive loans and credit card offerings by the banks and financial institutions that are specifically aimed at the woman consumer
• Various supported initiatives by the Indian government like Nidhi-Prayaas and Mudra Yojana Scheme that aim to increase women entrepreneurship

HOW ARE WOMEN LEVERAGING CREDIT?

The CIBIL score and report change every three months, and women keeping track of these apply for at least one loan account or credit card. The data suggests that more than 50% of women utilize credit in this way. Out of this 50%, more than 35% could open a loan account or credit card. Not only these, within six months of checking their credit report, women have demonstrated credit consciousness, and more than 40% of them have also improved their credit score.

The average Score of a good CIBIL is 734, and the data suggests that women self-monitoring their credit score have a High Score than the average CIBIL that is 726. Fascinatingly self-monitoring, millennial women customers have a high average score of 735, specifying that 64 percent of self-monitoring women customers are millennials.

The Indian Credit and loan sector lenders prefer to take an onboard credit-conscious customer who can obey the loan agreement and can repay the whole amount entirely on time. The CIBIL Score and report of any customer reflect their credit consciousness. It has been said by Sujatha Ahlawat, who is the VP and Head of Direct to consumer interactive, TransUnion CiBIL.

HOW CAN WOMEN HAVE ACCESS TO MORE CREDIT?

Women can boost their eligibility to meet their financial goals by following these key steps:

• Ensure to create and maintain a positive credit profile
• Access credit cards cautiously and apply for loans or credit cards that are designed just for women
• Take a durable consumer loan to build a credit footprint and a favorable credit profile
• Pay your credit bills and EMI on time, every time
• Check and monitor your CIBIL Score regularly
• Be aware of your credit utilization ratio
• Maintain a balance of the secured and unsecured loan

Conclusion

Women are revolutionizing the credit landscape, and maintaining a healthy credit score can go a long way and may turn your dreams into reality. Also, this enhancement in credit demand and acceptance by women provides excellent opportunities to the whole credit industry to personalize products and services that can better meet the financial needs of women borrowers.

Having no credit history can keep you away from borrowing a loan. Whereas having a good credit score makes it easy for you to get a loan, what to do if you don’t have a credit score yet? Building a credit score from scratch can be very difficult. And if you apply for a loan with no credit score, there are high chances that you may not get a loan or even be charged with high-interest rates.

However, here are a few ways to help you build your credit score from scratch, especially when you don’t have a Credit History, a Credit Card, or Loan Account, to back your application.

HOW CAN YOU BUILD YOUR CREDIT SCORE FROM THE BEGINNING:

1. A new pre-paid card

Credit cards are an essential financial tool that helps its holders make additional purchases without fearing insufficient money as it gives you the luxury of paying back the amount later.

Credit cards come with an approved credit limit that can be utilized by the holder every month and can pay back the amount on the due date. The bank and the holder mutually decide the due date and is usually 40-45 days.

You can use these cards to make balance transfers and cash advances in various purchases. Remember that using a credit card requires maintaining a minimum payment to be made every month by the due date.

Besides this, it also helps you build a good credit score, but you can apply for one only if you have a credit history. Try using a credit card against a bank FD to begin your financial journey.

HOW DOES CREDIT CARD HELP BUILD A GOOD SCORE?

Make regular use of your Credit Card for transactions and pay your bills on time before each credit statement cycle. This will create a clean credit history of repayment.

The transaction report maintained by your bank will report this to the bureau, from where your credit score will be calculated based on this record.

Please make sure that you choose your first card with a low annual fee and payout your bills in time.

2. SECURED PERSONAL LOAN

Applying for a secured loan makes sense when you require cash urgently or are not eligible for a loan and do not have a good credit history.

A Secured Loan can be applied against any of your tangible assets such as Car, Gold, Home, Investments as well as deposits with your bank.

Your loan application is swiftly approved with collateral, even without a credit history. The details required for a secured loan include your proof of identity, address, and income proof to approve your loan application.

Make sure that you apply for a small cash loan for a short duration, build a credit score, and repay the amount conveniently. Your credit score will automatically boom up when you have successfully repaid the loan. You can apply for more loans and enjoy a low-interest rate with a better credit score.

3. EMI PURCHASING

Making a purchase on EMI from your debit card can also help create a good credit score in the case where you neither need a loan nor a Credit Card. Most FMCG products like TV, Electronics, Mobile, laptops are available at discounts and EMI plans.

You can choose an EMI plan for 6-18 months. The successful repayment done through this purchase will build a clean history of refund and credit score.

4. MAINTAINING  GOOD FINANCIAL HABITS

Maintaining good financial habits by repaying your loan amount timely helps build your credit score and thus improves your likelihood for loan approval. A good credit score enables you to avoid unprecedented financial emergencies. You always have your credit limit as a backup for urgent cash needs.

Adopt some good financial habits, as below, to have a good credit history:

• Repay regularly: To keep a track of repayment dates of different loans, credit cards, and purchases made on EMI, try automating your monthly repayments. Repairing all your credits in time will boost your score and make you a creditworthy bank customer.
• Low Credit utilization: Do not utilize your credit limit entirely as it may cause a drop in your credit score. Make sure you keep your average Credit Utilisation Ratio below 30%-40%. A low credit utilization ratio is considered as a positive credit behavior. A red flag is generated on your CIBIL Report when you frequently use your credit card, preventing you from taking the loan.
• Keep debt-to-income ratio low:A 50% net take-home income ratio is considered suitable for keeping track of your credit history. It will not impact your day-to-day spending and ensure enough cash flow for your spendings. A high debt to income ratio makes you ineligible for a further loan until you repay all your loans and ease your credit limit.
• Balanced secured & unsecured loans: Having a good balance of secure & unsecured loans improves your credit history. Fast loans are offered against collaterals, have a lower interest rate, and are easier to qualify for. However, unsecured loans can create a red flag on your report and makes you ineligible for another bank product.
• Credit history period:Do not close your old credit card as it will always stand as the best proof of good credit behavior. It may also help you plan by borrowing a high amount.

Adopting a disciplined financial life is the key to building a good credit score from scratch. Credit products like personal loans, credit cards, secured loans, and EMI purchases can help create a good credit history within 6 – 12 months only if you make the repayments on time.

Applied for a loan, but your loan got rejected? Well! Many reasons can cause your application for a loan to be left despite having a good CIBIL score. Applying for a loan involves a lot of documents, decision-making research that needs pre-preparation.

Being prepared not only saves time but also effort. You may be unaware of all the formalities and paperwork required for applying for a loan. It’s important to be loan-ready and it’s also important to know what all reasons can cause your loan to be rejected. This article will explain all the possible criteria that can hinder you to acquire your loan amount.

Reasons why your loan is rejected despite having a good CIBIL score

Below are reasons that explain various other factors for your loan rejection despite an excellent CIBIL score. Make sure you go through them carefully and solve your issues proactively to avoid getting rejected.

1. RECURRENT CREDIT BORROWING

Having a habit of borrowing frequently may get a bad impression on your credit behavior. The lenders (banks, financial institutions) may be doubtful of your repayment capacity. Even if you make repayments of multiple loans EMIs timely, the lenders may doubt your credit dependence and thus consider you a risky applicant. Furthermore, they will be reluctant to offer you a loan amount as they may think you may be overburdened with a new credit amount, making you miss or slow your credit repayment.

2. REMARKS MENTIONED IN YOUR CIBIL REPORT

Another factor for a rejected loan application by the lender is the remarks mentioned in the CIBIL report. The comments in the report like

• Paying EMI after due dates
• Requesting a lower rate of interest

Any other kind of comment stated depicts the casual behavior of the applicant or poor repayment habits of the applicant. Thus, it is strictly advised not to overlook the words in a CIBIL report. Lenders will mandatorily pull out the information or the applicant’s credit report before offering a loan or credit. Make sure you dissolve these comments either by negotiating with the creditors or asking for a goodwill deletion or by paying your debt in full.

3. UNSTABLE CAREER OR SALARY

Any instability in your salary or job can give a wrong impression about you and your organization. Apart from that, if you are changing your work, address, or position frequently, this can also negatively affect your credit score and may hamper your loan approval process. Any form of instability in the flow of income due to an unstable career can make your lender and financial institution more cautious of your loan application.

4. Details Matching Defaulter’s

In case any of the information required for loan approval like name, address, PAN details, age, or even gender matches with the details of the defaulter, there are high chances that your loan may get rejected even after having a good CIBIL score.

5. TAX PAYMENT HISTORY

Not paying your taxes on time is another primary reason that may cause the rejection of your loan. Failing to pay the income tax returns timely for the last couple of years can put you at risk for loan rejection.

6. HISTORY OF LOAN REJECTION

Credit score report shows all your previous and current history of rejected/approved loan applications made in the past. Whenever you request a new loan, the lenders pull out all your credit information done in the past to evaluate your credit details. If, in case, the lenders find out that your history represents frequent loan rejections, there are chances that your loan application may get rejected. Hence, it’s necessary that you settle all your previous loan debts before applying for a new one.

7. POOR CIBIL RECORD OF CO-APPLICANT

The details of a co-applicant while borrowing a loan will also be taken into account if you are applying for a joint loan. In case the CIBIL score of the co-applicant is found to be poor or has a history of unstable income or any mistake in the address, then you must settle; the chances are high that your loan application might get rejected. Thus, it is advised that you also check your co-applicant CIBIL status before applying for a loan.

8. UNSTABLE SECURE & UNSECURED LOANS

To obtain a fair credit score, it’s essential to maintain a balance between unsecured and secured loans. Any unstable balance between these two may cause lenders to think twice about approving your loan because they may consider you an applicant with credit-based debt.

9. ENQUIRING MULTIPLE TIMES

Making soft inquiries related to your credit score do not affect your credit report. On the other hand, if the lender pulls out your credit report to check your credit history is a hard inquiry made by the lenders. If these inquiries are made multiple times, the person must have applied for a loan multiple times, which is not a good practice and may result in a rejected loan application. Thus, it is recommended for a period to avoid loan inquiries before applying for a new loan.

10. INFORMATION ON YOUR INCOME

Failing to submit complete financial information may land you into loan rejection. Lenders very keenly observe your financial summary to understand your capability of paying back your loan amount. If the lender finds a loophole in the same, the chances of your loan rejection become very high.

11. INABILITY TO VERIFY DETAILS

Banks and financial institutions maintain the details of the defaulters like name, age, address, employment, loan history, and other things. If the lender finds any discrepancies with the facts you have provided, your loan application will likely be denied after undergoing a document verification.

12. AGE OF THE APPLICANT

Another reason that your loan might get rejected is your age. Applying for a loan closer to the retirement period (more than 60 years) and less than 21 years can cause loan rejection. Lenders and financial institutions may feel reluctant to offer loans to such applicants due to zero chances of loan repayment ability. That’s why check your age criteria and loan tenure, and the amount before applying for a loan. Especially in the cases where you are closer to your retirement period.

Bottom Line

The reasons for personal loan rejection vary from bank to bank, as every bank has its eligibility criteria for loan approval. So, it is better to check the requirements with your bank before applying for a new loan.

The eligibility to get a loan is highly dependent on your CIBIL score. It is one of the most significant factors that lenders look for when sanctioning a loan. An ideal credit score value must be above 700 so that you can apply for a loan from a reputed lender. If it is lower than the required value, then there are several ways you can try to improve your credit score fast.

You may be saddened to see your credit score dip even when you are paying your EMI’S, bills, or any other payments on time. There are many reasons why your credit score may have dipped recently. Even getting approved for new credit can negatively affect your credit score.

One should keep in mind that the credit score is not just a fixed number and it keeps changing from time to time. We have curated a list of many potential explanations that may help you understand why your credit score drops and how you can address each of them.

1. RECENTLY APPLIED FOR A LOAN

When you apply for a loan, lenders pull out a hard inquiry on your credit report to evaluate how well you manage your finances. They also do this to check whether you are regular with your repayments before lending you a loan. A hard inquiry made by the lenders may temporarily lower your credit score.  However, you can lower this risk by making regular payments of your EMIs.

Applying for a loan and repaying the credit on time is one of the most successful tips to build your credit score. Hard inquiries are not so bad and are okay if done in moderation. However, to minimize the number of hard inquiries on your credit report do this:

• Try comparing between different lenders first and choose the best one for applying for a loan
• Do not apply for several loans at a time
• Research properly and choose a lender that best suits your eligibility, requirements, and budget
• If you want to apply for multiple loans, spread your applications out over time and wait as long as possible while applying for a loan
• Apply for a loan only when require especially if your score is already low

2. RECENTLY MADE AN EXPENSIVE PURCHASE ON CREDIT CARD

To avoid paying the entire cost upfront, many people use their credit cards to make large purchases. This could leave a large balance on your credit card and a high credit utilization rate, thus, reducing your credit score. You must keep your credit utilization rate to the minimum since using most of your available credit limit can pose you as a high-risk borrower. Minimum credit utilization is around 30-40%. Utilizing your credit limit above this value can make lenders reluctant to sanction a loan amount.

Ensure that you pay off your credit card bill before the end of the billing cycle, especially when a large purchase is made. Because carrying a large balance on your credit card will increase your credit utilization rate and cost you a high-interest rate.

3. MISSING YOUR LOAN EMI

Lenders check your payment history before offering you a loan. So, it is one of the most critical factors that determine your credit score. Missing a single loan EMI can immediately negatively impact your credit score. Also, lenders pay more attention to your repayment habit while lending a loan. If you miss your repayments, lenders may consider you a high-risk borrower and may hesitate to provide you with the loan.

Not paying EMI on time or missing them can cause a drop in your CIBIL score. However, you can quickly retrieve it by making the payment early along with the interest rate charges for late payment. A good history of repayment means an excellent CIBIL score.

4. PAYING OFF AN EXISTING LOAN

Paying off your credit card balance may undoubtedly increase your CIBIL score. However, if you are paying off an installment debt, you may observe a drop in your CIBIL score. This is because paying off a loan means one less loan to pay and a low credit score. On the other hand, having different types of credit under your profile, including secured, unsecured, short-term, or long-term loans, can make a large percentage of your credit score since it shows that you can manage different types of credit responsibly.

Make sure you do not avoid paying off your loans due to the fear of losing your credit limit. Being debt-free can improve your financial health and retain your loans.

5. CLOSING AN OLD CREDIT CARD

Closing an old credit card can significantly hurt your overall credit score. It not only brings down your overall available credit limit but also reduces the credit history age. Remember, the older your credit history, the larger the percentage of your CIBIL score. This is why many experts suggest starting building credit from an early age and retaining old cards and bank accounts even if you are no longer using them. The more extended your credit history you can keep, the better it is for your score.

So, now that you have learned the top 5 reasons for your CIBIL score drop. Make sure you keep all these points in mind to get a loan quickly. Remember that most CIBIL score dips are temporary and easy to recover. Keep a check on your CIBIL score from time to time and be alert whenever you suddenly notice a reduction in your score.

Debt is the total amount of money that someone owes to others. This includes a loan from a bank, borrowed money from family and friends, or any private lenders. Nobody likes to be in debt, but sometimes circumstances force you to borrow money from others and owe them.

When you opt for debt because of any medical emergency or purchasing a car or home, it is worthful in the end because you get ownership of that thing. But several other debts are not worthful and can be a trap for you. It is because of this debt trap that your finances will get worse.

The main reason why your debt becomes your debt trap is when your debt repayment is a never-ending process. It happens when loan repayment in EMI goes as interest, and there is no reduction of the principal amount.

There are several products and services available in the market that will give you temporary relief from debt.  But in reality, they are debt traps that will make your financial condition worse. Have a look at these ten common debt traps and a few tips on how to avoid them:

• Credit cards: Even though they are helpful, but they must be used with caution. One of the best ways to avoid the use of credit cards is to know the terms and conditions by going through the agreement and paying bills on time.
• Overdraft protection programs: They are helpful but sometimes it may push you into more debt. In this case, it’s also better to go through the agreement and ensure you are repaying the overdraft amount to minimize all fees.
• Mortgage refinancing: It does not make sense for all. Make use of an online calculator for determining what makes sense for you.
• High-interest loans: Stay away from high-interest loans like payday loans, renting to own, car title loans, and tax refund loans.
• Emptying a savings account to pay off debt: Using a savings account to pay off high-interest debt, is a strategy that can backfire, and lead you into a debt trap. Avoid going into debt for every unexpected expense as it can be disheartening. Always keep adequate financial reserves to pay for emergency expenses.
• Difficulty learning financial basics: most people do not understand financial basics and find themselves trapped in debt. Unawareness of interest rates that are charged on loans or the total cost of buying something through a rent-to-own agreement can lead to a debt trap for many people.

Apart from proper handling of debt trap products and services, here are a few tips you need to keep in mind for avoiding the debt trap:

• Identify the problem: If you have more numbers of credit cards and have exceeded or are about to exceed the credit limit in one or more than one credit card, you will be in debt. One of the most significant risks is when you miss EMI payments and other charges in enormous quantities.
• When you can’t pay off your debts regularly and recognize that you can’t do it soon, it becomes a debt trap for you when the total amount of debt from several sources is more than your liquid assets, investment amount, and institutes significant portion of your salary.
• Prioritize your debt: Debts can be short-term or long-term. Credit cards and personal loans are short-term debt, and home loans are long-term debts. Give priority to the loan which is with high-interest rates, overhead costs, and fees after dividing debt by tenure. Long-term loans like home loans have a low rate of interest. Credit card loans have high-interest rates, which are as high as 35-40%. When you fail to pay the credit card bills timely, it incurs interest and other fees, increasing the overuse risk.

• Fill up the gaps and prepare a payment strategy: You can initiate by keeping a soundtrack of your expenditures when you face trouble saving money. Decrease your spending on some of the expenses on items that are not important such as leisurely trips, luxury procurements, movies, etc., try to create some of the imaginative ways for decreasing your daily costs like carpooling, taking a taxi to work, or consumption of homemade foods rather than ordering from outside.
• If time permits, you should consider taking some side jobs to supplement your income. Even though it’s a challenge, always keep in mind that it’s temporary, and you will not have to limit yourself till your finances are on track.
• Have ample insurance coverage: Buy suitable insurance for protecting yourself and your family from all types of shattering incidents. The more quickly you buy insurance, the lower your premium amount will be. Insurance helps you invest all of your money in paying off all debts rather than worrying about the increasing cost of healthcare.

• Extend your loan term: You can ask your bank to increase the loan terms when taking a home loan. While this will enhance your interest rate, it will decrease your EMI payments and offer you more time to pay off your debts.
• It would help if you also tried negotiating your interest rate with your bank when you have a long-term partnership with them. You can also try moving the existing loan to any bank with a low-interest rate in alternate ways.

• Debt consolidation: Rather than examining various loans with various interest rates, you must consider debt consolidation. This helps in simplifying your life and getting you out of the debt trap. It is one of the best ways to have a healthy financial status. Here all of your outstanding amounts get consolidated into one single payment in the form of a personal loan.
• Construct an emergency fund: Saving is always a healthy habit. Besides that, you must also create a special fund for managing emergency expenses. Like for instance, you met an accident, and you are out of work for several months, then you will require money to survive yourself.
• An emergency fund helps you to manage all of your expenses comfortably. With an emergency fund, you can easily navigate difficult times without falling back on a loan.
• Increase your payments and Emi contributions: If you want to pay your loans faster, you can increase your contribution towards EMI payments in proportion to the salary hike.

Conclusion

Debts are good until the purpose behind them is good. Every loan is not bad. An individual leading a disciplined life in terms of finances never gets into the trap of debt; instead, they end up making out the maximum from the loans they have burrowed. You must consider all things to avoid the debt trap.