March 25, 2025

Avoid These 5 Common Mistakes When Applying for a Loan

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Applying for a loan is an important step, irrespective of whether a person is looking for funds to meet personal needs or to expand the business. One ends up making several mistakes that lead to a delay in processing the loan amount or the rejection. It is important to understand the reasons for the delay and rejection in order to secure a loan faster and on good terms.

At Instalment Express, we make borrowing easy and hassle-free for you so that you don’t have to wait to receive the funds. To process your loan faster, one should avoid these mistakes:

1. Ignoring The Credit Score

Credit score is the most important factor that the lenders take into consideration while reviewing the loan application. A poor score or lack of credit history can lead to rejection or higher interest rates.

Why it is important:

A credit score tells more about your repayment history and financial discipline.
A higher score (typically 700+) improves approval chances and secures better loan terms.
A lower score (below 600) can lead to loan rejection or expensive interest rates.

How you can avoid it:

It is important to check your credit score before applying.
Do pay off existing debts to make your score better.
Don’t apply for multiple loan applications at once.

2. Errors In Application Process

Many loans are rejected because there are errors in the application. Whether the form is incomplete, provided details are incorrect, or the documents are missing. This can lead to delayed approval or rejection.

Why it is important:

Every document is verified by the lenders before they approve a loan application.
Incomplete and incorrect information raises questions about the credibility of the person who is applying for a loan.
Incomplete and incorrect information leads to the loan application rejection.

How you can avoid it:

It is important to double-check the application before submitting it for approval.
Do check your name, address, and income details to see if they match your official records.
Upload all the necessary documents in the correct format.

3. Applying For A Loan That You Cannot Afford

It is important to know the borrowing limit in order to apply for a loan; this is where our loan calculator helps the individual to identify their borrowing capacity. Borrowing beyond your repayment capacity is a major personal loan mistake that can lead to financial strain and increased debt.

Why it is important:

Lenders check the Debt-to-Income (DTI) ratio to check the credit worthiness of the applicant.
It is important to have a monthly income that supports the request for the loan; if there is a big difference between these, the application can be rejected.
High loan amounts can lead to repayment struggles and credit score damage.

How you can avoid it:

It is advised to use a loan eligibility calculator to determine how much you can afford.
Do choose a loan amount and terms with manageable EMIs.
It is important to ensure that you have a repayment plan before borrowing.

Estimate your loan payments instantly with our Loan Calculator

4. Not Exploring Other Loan Options

This is one common mistake that many applicants make. They don’t explore other loan options because they are in urgent need, but the result is that they end up choosing a loan that has a higher rate of interest. They end up choosing the first loan offer they receive without comparing lenders and terms.

Why it is important:

Compare interest rates, fees, and repayment options from the different lenders
Study the loan terms wisely; otherwise, the wrong loan can lead to higher costs over time.
Many lenders offer faster approvals and flexible repayment terms, but you won’t get to know unless you explore the options

How you can avoid it:

Do compare interest rates, processing fees, and prepayment charges before applying. Many loan offers have hidden fees, and this comes as a shocker to many.
It is better to check for lenders that offer quick approvals and minimal documentation.
Do read the fine print to understand all terms and conditions of the loan.

5. Ignoring Prepayment And Hidden Fees

Many borrowers ignore the hidden fees such as processing charges, late payment penalties, and prepayment fees. They end up paying more than they thought.

Why it is important:

Total loan cost increases
Prepayment penalties may hit if you want to close a loan early.
Credit score will be affected, and it will increase your debt burden by late payment fees.

How can you avoid it:

It is advised to read all the terms and conditions of the loan agreement carefully before signing.
Do inquire about all applicable fees and charges.
Choose lenders with transparent fee structures and flexible prepayment options.