A personal loan helps in many urgent and non-urgent situations. It pays for financial and medical emergencies, finances weddings and special family vacations, makes it possible to plan a foreign holiday with the family, and even lets you buy expensive home appliances and personal electronics. You can use the money upfront and pay for what you need in full instead of buying things on EMIs. And the tenure being shorter than other loans, the quick online loan helps you become debt-free much faster.
But there is a protocol to follow when applying for the instant loan. Are you applying for a personal online loan for the first time? Do read on to avoid the pitfalls that may lead to your application being rejected
1. Have a high credit score
Every lending institution, whether a traditional one like a bank or NBFC or an online loan app, starts the loan application process by checking the applicant’s credit score. The credit score is a number attributed to each individual based on their income, spending habits, repayment history (this includes monthly bill payments and loan repayments), amount of money retained in the savings account every month (the lender checks how many times you have not maintained a minimum balance in the account up to the time of application) and current income. Your credit score is higher if you have had a clean financial history, but on the lower side of the scale if you have defaulted on loan payments, or habitually pay bills past the due date, etc.
What to do: Before you apply for the personal loan to the loan app or bank, check your CIBIL and Equifax credit scores. The CIBIL score is widely considered for the application, and it should be a number between 750 and 900. If your score is below 750, it is better to wait and improve the score before applying. You can improve the score by repaying past loans, clearing all outstanding bills and retaining a healthy amount of money in your savings account for at least six months before applying for the instant loan. To get or know more about personal loan check https://www.cashe.co.in/
2. File your documents correctly
Though there are less documents to be submitted for instant loans, you must still submit the correct ones. Lending institutions have a list of documents that they require, and you must have the correct and latest ones to attach with your application. Any misrepresentation/falsification/missing data is swiftly flagged down. If your application is kept in abeyance for wrongly filing your documents, it can impact your chances of a quick approval. In some cases, your application might be rejected entirely.
What to do: Check the lender’s list of required documents. You can find this list on their app or website. Check whether you have copies of all the documents and whether any information in them needs to be updated. If not, you can self-attest the copies and upload them with your application on a leading online loan app. The documents list includes personal ID proof (Aadhaar number/Voter ID/driver’s licence), address proof (passport copy, utility bill showing your name as the flat owner OR leave and licence agreement showing your name as the lessee of the rented house you live in), income proof (latest salary slips), bank statement (last three months’ statement showing salary credit) and photograph (selfie or close up photograph from your phone gallery).
3. Do not have outstanding loans at the time of applying
Your chances of getting a personal loan are reduced if you have outstanding loans to your name. Suppose you have a home loan, car loan and credit card loan and you are servicing them every month. This means that your income pays three separate EMIs per month for these three loans. Add a quick loan to the list, and you end up adding one more EMI. This effectively means that your income is further reduced with a fresh loan, thereby reducing your repayment power. Lending institutions are circumspect about approving quick loans for those who already have loans to their name, because they may become potential loan defaulters.
What to do: Close all pending loans, or at least consolidate them under one loan for easier repayment. Do not apply for the instant loan for at least three months after closing all prior loans or consolidating them. Meanwhile, ask CIBIL to update your credit score based on the loans you have finished repaying. Wait for the updated status report (this can be emailed to you on request) before you apply for the personal online loan.
4. Do not apply without checking your eligibility
First time loan applicants are unaware of one important factor in the loan equation: loan eligibility. Your loan eligibility, or the amount of loan money you can get from the lender, is calculated based on your income, age, repayment history and credit score. You cannot get more money than your eligible amount. So if you require Rs 4lakh but your eligibility is Rs 3 lakh, you cannot get more than Rs 3 lakh despite repeat applications. Your eligibility is higher only with a higher credit score and increased income.
What to do: Wait to apply for the quick loan on the online loan app if a promotion and/or salary increment is due. This increases your eligibility. Check your loan eligibility on the app’s online calculator to get an idea of how much loan amount you can expect. Knowing the eligibility helps you plan your future course of action, and whether you need to raise more money from other sources. To get expert opinion on anything click here – https://expertateverything.in/
Conclusion
The four points mentioned in the article above explain the ways in which you can ensure a loan approval instead of getting a rejection. If your application is rejected, you may certainly reapply again after correcting the factors that led to the rejection.
Rhydian Choi