In today’s time, taking loans from banks and finance companies has become quite common. Be it a personal loan, home loan or car loan, many times during the application you are asked whether you have used a credit card. But does it affect your loan application? According to experts, its effect depends on your credit history and salary pay pattern.
First of all, it is important to know that when you use credit cards and pay bills on time, it strengthens your credit rating. Banks and finance companies give importance to your credit score and payment history while giving loan. If you have used your credit card responsibly and have not had any defaults, it can positively impact your loan application.
At the same time, if the credit card bill is not paid on time or you are spending more than your credit limit, it can harm your credit score. In such a situation, the bank may reject your loan application or you may have to give the loan at a higher interest rate.
Experts say that credit card should be used in a balanced and controlled manner at the time of loan application. It shows that you have financial discipline and the ability to repay the loan. Apart from this, proper use of credit card can also give you benefits in interest rates and loan amount.
Some of the benefits are:
Strong credit history – Banks judge your trust by timely payments.
Ease of loan approval – A good credit score can help in getting the loan approved quickly.
Possibility of lower interest rates – Customers having good financial habits get loans at lower interest rates.
But caution is also necessary. Excessive use of credit card or delayed payment can cause problems for you. Therefore, it is very important to review the payment history and limit of your credit card before applying for a loan.
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