Big Mistakes to Avoid When Submitting Your 10 Lakh Personal Loan Application

Personal loans have grown increasingly popular over the years, particularly in view of the quick rise in financial inclusion. For borrowers who need quick money for unexpected expenses including house repairs or medical crises, this is especially true. Their great popularity has come mostly from their lack of collateral or security requirements, low paperwork requirements, fast and almost instantaneous disbursal, and a total lack of restrictions on the ultimate use of the funds. While the unsecured nature of these loans usually causes lenders to be somewhat cautious while receiving applications, these features clearly show the best aspects of personal loans from reputable lenders.

Thus, try to avoid making these financial mistakes while applying for a 10 lakh personal loan to help prevent denial of it:

Neglecting your credit report

When examining a potential personal loan applicant, a lender first and most importantly looks at their credit score. Good credit scores are typically associated with higher loan approval rates since they are evidence of better credit discipline, which reduces the credit risk to lenders. Some lenders also give those with better credit scores better interest rates, so benefiting them. On the other hand, low credit score borrowers may be turned down or see lenders raise their interest rates to offset their greater credit risk.

Good financial practices thus ensure that you obtain the lowest personal loan interest rates and enable you to maintain and increase a high credit score. Keeping a good credit mix, paying off credit card debt and EMIs on time, keeping your credit use ratio under 30%, and keeping an eye on co-signed loan accounts are among these habits.

Ignoring the importance of loan tenure choice

Lenders review 10 lakh personal loan applications with regard to candidates' capacity to repay personal loans. To be qualified, the applicant's monthly EMI obligations including any new ones should preferably lie between 50% and 70% of their net monthly income. Borrowers should thus select a personal loan term that will enable them to maintain their monthly payments inside this range. Remember that applicants with EMI repayments often have less chance of their loan application being approved. One choosing a longer repayment period depending on more obligations will result in higher loan eligibility and EMI affordability, so reducing the effective EMI. Also, ensure to utilize the HDFC personal loan EMI calculator tool to help you arrive at the appropriate EMI amount as per the chosen tenure.

Not evaluating other potential lenders

Since so many lenders, including banks, fintech companies, and NBFCs, offer personal loans tend to have rather different rates, negotiating with the lender with the lowest Personal Loan Interest Rates can be challenging. Before applying for any personal loan, potential borrowers should absolutely compare the ones provided by several lenders. Therefore, begin your process by learning about the features of personal loans from financial institutions with which you already have a banking relationship. Just consider the given interest rates provided by the lenders when assessing the several options. Check other loan criteria including term, processing fees, loan amount, prepayment charges, and so on before applying to any lender.

Applying for loans straightaway to several lenders

Usually, all lenders get your credit report from the credit bureau when you apply for a loan and search for the lowest Personal Loan Interest Rates to assess your creditworthiness and repayment record. The credit bureaus are these "hard inquiries"—that is, requests for credit reports initiated by lenders. Your credit report notes each of these questions, and they somewhat reduce your credit score.

Moreover, quick answers to many questions could reveal a credit-hungry attitude, which would turn some lenders off your personal loan application. Therefore, try not to directly apply for loans to several lenders if you wish to minimise significantly negative effects on your credit score, which might lead to loan rejection.

Ignoring possible loan alternatives

People should take other possible loan options including digital/physical gold loan, home top-up loan, loan against FDs, ICICI Bank Insta OD, etc. when thinking about filling in financial voids with a personal loan. These ones are flexible since, unlike personal loans, they have no limit on future use. Generally speaking, most of these other loan options have shorter payback times and rather lower interest rates than personal loans. Therefore, before choosing one to ensure that you end up with the best 10 lakh personal loan option and lender depending on your financial needs and capacity to repay debt, it becomes imperative to evaluate several reasonable loan options.

Borrowing more than is absolutely necessary

Many people who seek personal loans commit a major financial error by borrowing more than they require. This is particularly true of borrowers with greater payback capacity, who might be tempted to apply for a larger loan should their loan eligibility be favourable. Many times, people forget that borrowing money—especially for a large sum like a personal loan—means paying interest in addition to the principal amount borrowed. Especially if you borrow more than you actually need, you will have to pay back more interest, which would be expensive. Moreover, overborrowing could force you to strain your resources more in order to pay back the loan, so raising the possibility of default.

Make sure you thus only borrow what you absolutely need and can easily pay back.

Furthermore, keep in mind that the lowest Personal Loan Interest Rates can be reached mostly by borrowing the maximum amount that fits your needs after considering your income, credit score, loanability, and other outstanding debt. Moreover, do not forget to use the online HDFC personal loan EMI calculator to know the expected EMI amount as per your required loan amount, rates applicable and tenure.

Changing careers frequently

Many lenders consider your work history and stability when determining your personal loan eligibility. Regular job changers could have trouble getting loans from lenders since it would be seen as proof of unstable employment. Additionally missing the lowest personal loan rates could be these individuals. Particularly if you want to apply for a 10 lakh personal loan in the next few months or so, try not to change jobs frequently.