Quick personal loans come in handy when you need money to cover any of your planned or unplanned expenses. These are collateral-free loans that you can use to finance a wedding, home renovation, vacation, education, debt consolidation, medical emergency, or any other expense of your choice. There are no end-use restrictions to where you can use your approved loan amount.
Easy online applications, instant loan approval, and flexible repayment terms work together to make personal loans easily and quickly accessible to all. However, certain mistakes made at the time of borrowing a loan can stand between you and your approval. These mistakes can lead to loan rejection or high interest rates and harm your creditworthiness for the future as well. Therefore, understand these mistakes and avoid making them at all costs.
1. Missing Payments
Missing or delaying your EMI payments not only costs you penalty fees but also reduces your credit score. Creditors may report delinquency in your loan account if you are 30 days past due. Delaying your payments can knock off numerous points from your score, and it stays on your credit report for several years. There are ways to improve your credit score if it’s low, but that may take time. Therefore, make it a habit to pay your EMIs on time, as you would require a credit score of 725 or above while applying for a personal loan.
2. Not Checking Your Credit Report
Reading your credit report is imperative before applying for a personal loan. It may contain errors that might be holding your credit score down due to no fault of yours. After checking your credit report and identifying such errors, you can dispute them with the credit bureau and get them corrected. Once those errors are rectified, you will gain an instant boost in your credit score, after which you may improve your eligibility to get instant loan approval for a personal loan.
3. Ignoring the Fine Prints
Not reading the fine prints carefully can be a grave mistake that may bring you unpleasant surprises later. Fine prints often contain details of fees and charges, interest rates, penalties, and others. You must understand the loan terms and conditions entirely to make a wiser decision and get the most benefit.
4. Not Checking the Eligibility Conditions
In order to make quick personal loans easily accessible to the masses, lenders have simplistic eligibility conditions that anyone can meet. However, you still need to check your lender’s eligibility conditions to ensure that you are eligible.
Although most lenders have simple eligibility criteria regarding age, employment, and income, there are chances that you may not fulfil any of them. If you apply for a loan you are not eligible for, you will eventually get a loan rejection and harm your credit score. Therefore, it is crucial to check the lender’s eligibility criteria before applying for a loan.
5. Applying for Multiple Loans
When they need urgent money, many borrowers apply for multiple loans, hoping they will get approval from at least one of them. However, this is not the right strategy to secure quick personal loans. When you apply to multiple lenders, all of them make hard enquiries on your credit report at once, each enquiry reducing your credit score by a few points. While you are trying to apply for a loan, you would not want to reduce your credit score at any cost. Therefore, it is crucial to compare lenders and apply for a loan you are most eligible for.
6. Having a High Debt-to-Income Ratio
Debt-to-income ratio is the percentage of your earnings you spend on your debt repayments every month. No matter how much you earn, if you spend most of your earnings on your debt repayments, the lender will consider you a high-risk borrower and may reject your loan application. Therefore, before making any new loan applications, pay off some of your existing debts to reduce your DTI ratio.
7. Not Disclosing the Existing Debt
While it is crucial to have a low DTI ratio when applying for a personal loan, you must never hide your existing debt from your lenders. In fact, you cannot do that. When you apply for a loan, the lender will check your credit report and know how indebted you are. If you do not disclose all your debts at the time of applying, they will come to know about them later and perceive you as a fraudulent borrower. Therefore, mention all your existing debts at the time of the loan application itself. If you have a DTI ratio of less than 30-40%, you have a high chance of getting instant loan approval.
8. Opting for the Wrong Loan Tenure
Many personal loan lenders like Clix Capital allow you to choose your repayment tenure according to your budget and repayment capacity. At Clix Capital, you can choose a loan tenure of 12 to 48 months. You may use a personal loan EMI calculator to get an estimate of your EMI amount and select a loan tenure with EMIs you can easily afford. The longer loan tenure leads to smaller EMIs but higher interest outgo, while smaller loan tenure leads to bigger EMIs but lower interest outgo.
You must select your loan tenure according to your repayment capacity. If you choose a long loan tenure to keep your loan EMIs low, you may end up paying a high interest amount by the loan term-end. If you choose a short loan term to keep your interest outgo low, your EMIs may get bigger, and you may find it difficult to pay your EMIs on time. Therefore, assess your budget and repayment capacity and choose your loan tenure wisely.
Are you looking for a personal loan to meet any of your planned or unplanned expenses? Apply for a personal loan at Clix Capital and get instant loan approval within 15 minutes*. We offer personal loans of up to ₹ 25 lakhs at competitive interest rates. However, beware of making these mistakes to improve your eligibility and get the lowest interest rate personal loan for your financial needs.
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