Personal loans given by fintech players in the under 1 lakh category have grown at a compound annual rate of 75 per cent between 2017-18 and 2022-23. After this rapid growth, there are signs of stress in fintechs' loan portfolios, especially in the under ₹50,000 ticket size, according to a white paper released by Experian in collaboration with the Digital Lenders' Association of India (DLAI).
Reckless use of an unsecured loan (personal loan or credit card dues) can lead to a default, which impacts the borrower's credit score negatively. This can lead to a situation where it becomes difficult or impossible for the person to avail further credit. Even if they get it, the interest rate is high.
What is a bad credit score?
Credit bureaus calculate the credit score based on an individual's repayment record and borrowing pattern. A low credit score, typically below 700 (out of a maximum of 900), can lead to the rejection of loan applications. Credit score falls when one defaults, delays repayment, or applies for multiple loans.
"Improving a poor credit score requires time and discipline," MC says Raj Khosla, founder and managing director, MyMoneymantra.com.
Get a secured credit card
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