Resolve your Old Debts before Taking a Personal Loan

A personal loan helps you in clearing any obligations that you have. It can help you travel the world, take your family for shopping, pay fees for college and many more things. Similarly, a credit card also helps you with extra credit throughout the month in case you are short of cash. Hence these two types of credit can help you in emergencies.

The difference in each of these credits is the interest rate. While a quick personal loan will have a lower interest rate (10-24 %*), a credit card’s interest rate for payments can go up to (35-40%*). Hence it is wise to use these options only when it’s needed.

In case you don’t pay the loan EMI or credit card bills on time, you end up paying late payment charges each month. This will have a direct impact on your credit score. To understand this, please read the below example;


Mr. Chintamani has a credit card which he uses from the past 1 year. This month, the bill has come up to 8000 rupees. The minimum amount to be paid here is around 1200 rupees to continue the card. Chintamani fails to pay the minimum amount before the due date. What happens next?


In this query, the minimum amount which is not paid now becomes a “past due debt”. The Bank will add this past due debt to the minimum amount due for next month. Since you did not pay the bill on time and failed to pay the minimum amount due, you will be charged a late payment charge as per the contract terms.

Impact of not resolving your past due debts:

In case you don’t repay your past due debts, the bank will keep penalizing you each time you fail to repay. This begins to affect your credibility. Your credit score will be affected each time you default on EMI payment or not paying your credit card dues on time.

Hence in the future when you will plan to take a loan like personal loan, the bank will check your income history and credit history very closely. If your credit score shows a lot of defaults in bill payments and an average score, you may or may not get the personal loan. This can be bad in case you need the funds very urgently.

What can you do to avoid this?

In order to make sure this doesn’t happen,

  • You can set up an automated payment schedule. Doing this will not affect your discipline in any way. On the set date, the money will be deducted from your savings and will be used to pay off your loan and credit card monthly bills.
  • You can use debt consolidation as a choice in order to convert all your smaller debts into one big debt. This can help you deal with repayment of the loan instead of being worried about repaying many smaller debts.
  • Finally, your main aim is to ensure that all your dues are cleared as soon as possible. As once you clear all your debts, you can focus on improving your credit score.

Ruloans Advice:

Always pay your bills due and loan EMI’s on time and maintain a good credit profile. In case you have loan requirements or loan inquiries you can always contact us. We provide you with the best services to ensure you get the best deal as per your requirement.

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