5 tips that make you a responsible borrower

Credit facility today is available for consumers at the click of a button. Banks and non-banking finance companies (NBFCs) are both seen developing their credit portfolio in a big way to cater to the growing credit needs of the average consumer. Credit card loans and personal loans are now available easily from the lender's website or mobile applications within the least possible duration. However, this aggressive nature of the lending market is not an out-of-the-blue phenomenon. This has been a result of an increasing number of responsible borrowers in the country.

The average Indian has now started considering loans for things that are beyond his regular ‘needs’ bracket. Initially, loans were majorly sought for acquiring land/home, jewellery or for daughter’s marriage. Using it for anything more, like buying luxury items was frowned upon. With the dawn of millennial generation, people have shown a rapid increase of interest in seeking finance for luxury products too. These include borrowing for travel, personal luxury vehicle, holiday, destination wedding, and appliance purchase among other things.

However, to ensure that the loans provided don’t go bad, lenders are focussing on offering loans on mutually agreeable terms to only responsible borrowers. Being a responsible borrower is no herculean task. All you need to do is follow these financial tips to help you look more responsible to the lender.

5 Tips that make you a responsible borrower

Keep your dues under check

While availing credit is good, having multiple credit dues in your name might affect your CIBIL score. Keep a tab on the various dues you owe and pay them regularly. This includes your credit card dues, equated monthly instalments (EMIs) and other utility bills. Don’t pile up the dues even if the amount is small or negligible. Similarly, when the amount due is high, try to pay the maximum, if not full due amount, at the earliest. This will ensure nothing is carried forward to the next payment cycle.

Clear all your dues within the due date

Lenders often check your past payments to verify how responsible you are in repaying your dues. Therefore, it is essential that you pay all the dues before the due date to avoid any negative remark in your credit history. You can automate your payments if there’s a possibility for it. This way you would not just clear your dues on time but also avoid any penalty on late payment levied by the lender.

Have a mix of different types of credit

Having a mix of secured and unsecured loans in your credit history report assures the lender that you are a genuine borrower. You don’t overly rely on the unsecured loans which offer easy accessibility but also high interest. Having a secured loan against your home or property increases your favourability with the lender and the chances of getting a new loan are higher.

Review your credit history at regular intervals

Almost every lender will look at your CIBIL TransUnion score and your credit history to get a sense of your financial behaviour. Ensure that you check these at regular intervals (at least twice a year) for any discrepancies. Sometimes your lender might make a mistake or forget to add about a payment you already made and that could affect your borrowing capacity adversely. If you find any such errors, discrepancies or missing entries; get it rectified immediately before applying for a new loan.

Keep a tab on your credit exposure

As the traditional Indian belief says, “save for it and then buy”. Practice this whenever possible. Don’t go in for a loan when you can delay the purchase and save for it or can arrange funds through a family member. This is because having excessive credit exposure even though you repay it back on time is a red flag for the lenders. It shows that you may not be able to handle the funds you earn. Hence, smartly plan the loans you wish to take and the purchases you can save for.

Being a responsible borrower is not a difficult task if you plan it right. These 5 tips can help you become a responsible borrower for the lenders. It gives you the power of negotiating the terms as well as availing a greater loan on a lower interest rate.