Don't make these 5 Mistakes when Applying for a Loan

Over the last few years, numerous individuals have been seeking to apply for loans in order to supplement their expenses or cover an emergency situation. There are multiple banks and NBFCs providing unsecured personal loans to creditworthy individuals with minimum documents and processing time.One can avail a personal loan for any possible reason, such as paying off a credit card bill, medical emergency, travelling, home renovation, and so on. Personal loans are unsecured in nature, as no collateral is required against the amount you wish to borrow. Due to this, the rate of interest are usually high (around 15% to 30%) as compared to traditional loans offered by banks.

Let’s discuss the mistakes you can avoid while applying for personal loans to increase your loan approval rate:

1. Loan eligibility

Contact the lender and check the minimum eligibility criteria and documents required to get your loan approved. Different borrowers process your loan application based on different criteria, including your income-to-debt ratio, credit score, age, job stability, etc. Explore various lenders and select the one that fits your criteria. Keep aside all the required documents for submission, and most importantly, ensure that your application form is filled correctly and meets all the required criteria prior to submission.

2. Lying in your application

It’s not advisable to falsify details in the loan application form. Banks and NBFCs use sophisticated algorithms to check the credibility of the borrower, based on various data points collected through loan application. Money lenders earn from the interest amount received from the borrower, and the lender’s profit is at risk unless the loan amount is completely repaid. If you do falsify information, you can rest assure that your application will be rejected immediately.

3. Borrowing more

Calculate your income-to-debt ratio, and apply for a loan amount which you’ll be able to repay without any significant strain or burden on your finances. Borrowing a larger amount means that you’ll have to pay higher EMIs every month. If you decide to opt for a longer period, you’re likely to end up paying a higher interest on your loan.

4. Compare Lenders

Currently, multiple banks and NBFCs provide loans at affordable interest rates in the market. Before finalizing on your lender, it’s best to do some market analysis and get loan quotation from at least 3 to 4 different lenders. Compare the processing fees, interest rates, terms & conditions and other charges offered by each lender. In the end, select the one who offers the best deal according to requirement and needs.

If you need a personal loan for an unexpected emergency or any other reason, please go through the above mentioned points and make sure to avoid them while applying. A personal loan application form without any mistakes or false information increases the chances of approval, making it a quick and hassle-free process.