“Congratulations, Your Loan application is approved!” We all are overwhelmed on hearing this statement. After all, it’s the time to feel behind the wheels of your dream car, walk into your new house, or feel the breeze of the new air conditioner. On receiving the loan amount and making our dream purchase, we think that our job is over. However, the real story starts from here! One of the most important aspects now is to pay off your loan installment on time and save yourself from the negative impacts of the bad credit. The reason why we call it the most important aspect is that your credit score is associated with the responsiveness of your payments. Skipping payments or late payments can negatively impact your credit score.
A poor credit score may have consequences worse than you may think. These days right from financial institutions to employers and landlords, everyone looks at your credit history before making a move. A bad credit history can put you in a situation where you cannot get approved for a future loan or a place to live or even for a job. These are just a few ramifications of bad credit score. Let us dwell on knowing more about the long-term consequences of bad credit score.
1. You will face difficulty in getting Loan Approval
Lenders look at your credit score before deciding to approve your loan/credit application. A bad credit score is considered as a high risk for the lenders. Therefore, it is less likely to find a willing lender who can lend you money. As a result, you would not be able to fulfill your aspirations and meet your capital requirements. At a young age, you might require funds for expenses such as a Wedding, higher studies, purchasing a new house, etc. Likewise, when you turn in your 30s, you might need funds for medical emergencies, children’s education, etc. A poor credit score will ruin all these aspirations. Hence, you must take credit score seriously and make every effort to build a positive score.
2. You will be subject to Higher Interest Rates
With a bad credit score, even if you get approval for the loan, you will most likely be required to pay the higher interest rate. Lenders eliminate their risk by making you pay a sky-high interest rate. The impact of higher rates can be enormous as the rate difference of even 1% can make a huge difference in the total cost of the loan. Let’s say, if you have a questionable credit score, you may be required to pay 15% interest rate, whereas a person with healthy credit score can get the same loan for 10% interest rate. Just imagine, if the total loan amount is Rs. 10,00,000 then you are paying extra Rs. 50,000 because of your poor credit score.
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3. You will be subject to Higher Insurance Premiums
Insurance companies consider credit score as an important factor in determining the premium amount. It is believed that people with bad credit score have an increased risk of high insurance claims. Therefore, credit history is particularly important to insurers. If the insurance company finds that you have a lower credit score, you will most likely be charged a higher premium than someone with a better credit score.
4. You might have trouble in getting a Job
It is becoming increasingly common for companies especially in the financial industry to run a credit check on the prospective employees as a condition of hire. A bad credit history may land you in trouble and it may be difficult for you to get a job you want. The situation can turn out to be a lot more challenging if you have a history of bankruptcy.
5. You might have trouble in Renting an Apartment
Even though it’s not very common but even landlords consider credit history to be an important criterion for renting an apartment to potential tenants. From the landlord’s perspective, people with lower credit score are statistically more likely to show patterns of late payments which might put the landlords at a greater financial risk. Therefore, if you have got a bad credit score, there are high chances that the landlord might be less inclined to approve your lease.
6. Hampers your Social Reputation
With the use of technology, today people have an access to a lot of information. Also, the power of social media is not hidden from anyone. Think about it, if someday your loan provider decides to issue the defaulter’s list in public. Not paying loan installments on time or defaulting payments can not only hurt your personal pride but also lead to a loss of respect in the society. Moreover, people will not trust you easily.
From the above points, it’s clear that the consequences of poor credit score are far more extensive than one can think of. Therefore, you should take every step possible to ensure that you are not defaulting on your EMI payment. A company like PaySense can help you build a sound credit score. You can quickly check your credit score for free on the Website followed by an instant approval. Then apply for the desired loan amount to buy your favorite mobile phone, laptop, furniture, bike, car or any other item of your need and pay later in affordable and hassle-free EMIs. Get in touch with us and we will be happy to serve you!
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