Many people take personal loans easily these days. If you have a good credit score and a steady job, getting a personal loan is very simple. That is why it is called an emergency loan. But taking it too many times can cause trouble later. If you often apply for personal loans or use credit cards too much, your credit mix becomes poor. This can make it difficult for you to take loans in the future.
Let us explain in easy words what credit mix is, how it gets affected, and what problems it can cause if not managed properly.
What is Credit Mix?
Credit mix means the different types of loans you have taken, secured and unsecured.
- Secured loans are loans where you give something as security like gold, a house, or a car. Examples: Home loan, car loan, gold loan.
- Unsecured loans are loans where you don’t give any security. Examples: Personal loan, credit card loan.
If your loan profile has only unsecured loans like credit cards and personal loans, it shows banks that you often borrow money without keeping any security. This makes them doubt your financial health.
If you take both secured and unsecured loans in a balanced way and repay them on time, your credit mix remains healthy.
How a Poor Credit Mix Affects You?
When your credit mix is poor, it sends a signal to banks that you depend too much on short-term loans. Here’s what happens:
- Your credit score drops: Repeated unsecured borrowing can reduce your CIBIL score.
- Loan rejection chances rise: Banks may think you are not managing your money well, so they may reject your future loan applications.
- You may get a loan at a higher interest rate: Even if you get a loan, banks may charge a higher interest because of the risk.
- Lower credit limit on cards: If your credit mix is poor, banks may not increase your credit limit.
That’s why experts always advise avoiding taking personal loans or using credit cards unnecessarily.
Why Personal Loans Are Easy but Risky
These days, banks and NBFCs (Non-Banking Financial Companies) approve personal loans very quickly. You can apply online, and the amount is credited within hours or days. But this ease can become a problem if you don’t manage it wisely.
People often take personal loans to:
- Pay for weddings or vacations
- Buy expensive items
- Clear credit card dues
- Handle emergencies
But if this becomes a habit, it increases your financial burden. EMIs pile up, interest costs increase, and slowly, your credit history becomes risky for banks.
When Should You Take a Personal Loan?
A personal loan is helpful only in serious situations when no other option is left. You should consider it only when:
- You have an emergency like a medical need
- Your savings are not enough
- You have a strong repayment plan
- You don’t have any other loans running
If you already have a personal loan, try to repay it on time. Don’t take a second personal loan unless extremely necessary.
Tips to Maintain a Good Credit Mix
Here are some ways to keep your credit mix healthy and improve your CIBIL score:
- Mix your loans – Try to take a mix of both secured and unsecured loans. For example, if you already have a personal loan, take a gold loan next time instead.
- Repay on time – Whether it’s credit card dues or loan EMIs, always pay on or before the due date.
- Don’t apply for too many loans – Every time you apply, your CIBIL score may be affected slightly. Multiple applications show you are in financial stress.
- Limit credit card usage – Try to use only 30-40% of your credit limit. Full usage shows financial pressure.
- Avoid unnecessary personal loans – Just because it’s easy to get doesn’t mean you should take one. Control your expenses first.
CIBIL Score and Its Importance
CIBIL score is a three-digit number that shows your creditworthiness. It ranges from 300 to 900. A score above 750 is considered good.
Banks check your CIBIL score before giving any loan. A poor score means:
- Loan rejection
- High-interest rate
- Lower credit card limits
- Low trust from banks
Maintaining a good score helps you get better deals in the future.
Personal Loan Eligibility in India
Every bank or NBFC has its own rules, but here are some general requirements:
For Salaried Individuals:
- Age: 18 to 60 years
- Minimum income: Rs. 15,000 per month (can vary)
- Job stability: Should have worked at least 1 year in the current job
- CIBIL score: 750 or above
For Self-Employed:
- Age: 21 to 65 years
- Business age: At least 2 years of stable income
- CIBIL score: 750 or above
- Income proof: ITR, bank statements
You can check your CIBIL score for free once a year from the official CIBIL website.
What to Do if Your Credit Mix is Already Bad?
If you already have multiple personal loans or credit cards, don’t panic. You can fix your credit profile by following these steps:
- Stop applying for new loans
- Pay off your current EMIs on time
- Close high-interest loans first
- Switch to secured loans if needed
- Talk to your lender for EMI restructuring if you are under stress
Some banks offer debt consolidation where they combine your multiple loans into one with lower EMI.
Why Lenders Prefer Balanced Credit Profile
Banks always want to see if you can handle different types of credit. A balanced profile shows:
- You don’t depend only on unsecured loans
- You repay on time
- You manage both short and long-term loans properly
This gives them confidence to lend you more in the future with better terms.
Final Advice for Young Borrowers
Many young professionals start using credit cards and personal loans in their early 20s. While this helps build credit history, you must use them carefully.
If you don’t control your borrowing, it will affect your financial future badly. So borrow only when needed and always repay on time.
Source: Zee Business Hindi
