Personal loans are currently the most popular way to borrow money. This is partially a result of how easy most lenders have made it to get one, but it is also because money borrowed through personal loans can be spent on anything that the borrowers want. There are no restrictions attached to the debt. Furthermore, for the most part, individuals do not need to have a perfect credit rating to get a loan. This having been said, one’s financial records do still play a big part in the terms and conditions that the lender will offer. Everything from the term of the loan to how much money can be borrowed and the interest rate is decided by looking at an individual’s credit rating. In other words, it is important to do a bit of financial housekeeping before applying for a personal loan, to ensure that you will get the best deal possible.

While it may not occur to some, the small financial decisions that individuals take when it comes to their purchasing habits can play a bit part in their credit rating. Anything from the number of credit cards that an individual owns to how often he uses them may increase or lower his credit rating. Here is what you need to do to get lower interest rates and borrow larger amounts of money through personal loans:

1. Use Credit Cards Sparingly

When lenders look at an applicant’s credit rating, they primarily look at his financial habits. The most important of these is how he manages his finances. Using credit cards too often usually signal lenders that an individual is dependent on the additional credit and that it might be difficult for him to repay a larger personal loan. As a result, they may offer a smaller deal or one that requires collateral.

Try, by any means possible, to use your credit cards as little as possible. While using them every 5-6 months to pay for a bigger purchase will not be an issue, treating them like running capital is not a good idea. Furthermore, always make sure that you keep your credit utilisation ratio under 30%.

• Only Keep One or Two Credit Cards

Most individuals have two or more credit cards, “just in case they come in handy”. However, having access to a lot of credit, even an unused one, will still lower your credit rating. Chose one credit card, preferably the one that has the best terms and conditions, and close the others.

• Repay Some of Your Smaller Loans

Lenders offer better terms to individuals who do not have a lot of debt. This means that paying off your smaller loans can have a big impact on the interest rate of the personal loan that you apply for. Start by paying off your credit cards, these should be the easiest to do. Next, take care of payday loans, and finally, any personal loans that you can repay early.

• Borrow Money Using Unreported Means

Borrowing money too often will also lower your credit rating, regardless of the amount that you’re getting. Avoid borrowing money, at least 6 months before applying for the loan. If this is not possible, consider using other means to borrow money, such as online lending services or P2P lending platforms.

• Do Not Miss Bank Payments

Lastly, never miss your bank repayments. Skipping or delaying one of these payments may seriously damage your relationship with the bank and cause the lenders to be more careful with future loans.

These are the 5 things that can take an individual’s credit rating to the point where he may get lower interest rates and higher value loans from banks, as well as other private lenders. However, the utility of these habits goes far beyond getting a personal loan. As time passes, they will help you slowly increase your credit rating up to the point where getting any type of loan will not be an issue.