A personal loan is an unsecured loan for which no collateral is required. Banks offer personal loans based on various factors, such as credit score, monthly income, job stability, debt-income ratio, and so on.
How Does A Personal Loan Impact the Credit Score?
Availability of a personal loan can initially impact your credit score. This is because, when you apply for a personal loan, the lender performs a more detailed credit verification known as a hard credit pull. This gets recorded on your credit report as a credit inquiry. Researching for loans to get the best one that suits you affects your credit score when you apply for multiple loans. But, these credit inquiries last only for a short period of time. If you avoid defaulting on EMIs and make repayments on time, your credit score will increase.
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