Have you applied for a loan without understanding all the criteria set by the bank? Do you know how many documents are needed? And finally do you know how long would it take to get your application approved?
These and many more questions are always in our minds when we fill a loan application and send it for approval whether it is for an instant personal loan or a loan against property/mortgage loan. In the most general sense, your credit profile and personal profile will define if your loan application will be accepted or rejected.
Let us understand this case with an example.
Mr. Jigish Patel who just turned 25 is now planning to take an instant personal loan worth 1 lakh in the coming year. He calls his friend Amit who works in Ruloans to help him be ready with the perfect application. When Amit listens to all Jigish has to say, he gives him an advice to remember;
Amit: Jigish, I heard your plan and I must say, it’s a good plan. Now that you want to take a personal loan, I need you to understand a brief history regarding the perfect loan application.
Jigish: Wait, what’s there in a loan application for it to be perfect? It’s just basic details right.
Amit: No Sir. Unfortunately many a times, customers think this is a basic application and just fill it without giving more thought on it. Once their loan application gets rejected, they get disappointed.
Jigish: But why would it get rejected?
Amit: There are many reasons for it.
Jigish: Amit, do you mean to say even my application can be rejected?
Amit: Jigish, yes it can!
Jigish: But why?
Amit: There are many reasons for the bank to reject your application. But if you follow the steps I’ll mention below, you will be ready with a good loan application.
Jigish: Yes please Amit, that would be great.
Amit: Okay. Below is the list of 5 steps for you to follow;
- Check and clean your credit report: It is very important to not only know your credit score but also to clean the negatives. Once you have no negatives in your report, then you can apply for an instant personal loan.Multiple loan applications: When you apply for a loan with different lenders, it might be because you want the best rate, but you must know that this is perceived very negatively. Hence avoid this practice as it will affect your credit score.
- Unstable job profile: Incase your job profile shows unstability, this goes on the negative side of your profile. The Bank will be unsure of giving you a loan.
- Debt utilization ratio: Another step you must follow is your debt utilization ratio. Banks don’t offer loans to people generally who already have more than 40%* debt payment per month. Hence calculate your new loan EMI and add it to your monthly debt payments. If it is less than 40%, you can get a loan.
- Complete information and documentation: All the information that you furnish on the application must be correct. If not, then please expect a delay or in some cases even rejection of your application. The same goes for documentation. List of documents change from bank to bank. Hence please ensure you have all the KYC and documents.
Amit: So Jigish, I hope you have understood the importance of following these steps.
Jigish – Amit, I’m so glad to have called you and ask for help. I’ll surely keep these steps in mind before filling any loan application.
Hence, it is very important to follow these 5 steps in order to submit a perfect loan application. Be very careful with your credit and personal profile. Always pay your dues on time and it will help you in the future while applying for any new loan.