Instant Loans are all the rage these days. Almost anyone with a reliable source of income, KYC documents, and a mobile phone can apply for credit instantaneously. The process is extremely easy. All you have to do is- register on the app, upload KYC details, and income proof documents, and tap apply.
Well, on the one hand, availing of loans have become much swifter & easier, it has also created a set of problems for both lenders & borrowers. No bank executive will guide you on filling an online application.
Below are the most common mistakes you should avoid while applying for Instant Loans.
1. Not checking your repayment capability:
The abundance of Instant Loan availability as well as simple procedure has made many people apply for them at the drop of a hat. Always keep in mind that taking a loan is a big financial commitment. You should not be jumping to get a loan just because your phone is a bit old, and everyone is brandishing a new iPhone. Loans are meant for serious purposes and are a severe binding of your income for a set period of time. Apply for a loan based upon how much your budget allows. Do not be the person who is up to date on previous loan repayment but charged the monthly groceries on Credit Card because they ran out of budget.
2. Not updating KYC documents:
KYC documents include the PAN card and address proof in the form of your Adhaar card, Voter ID, Passport or Driving License. The sheer simplicity of Instant Loans is such that you may run through the entire loan application process only to realise later that your loan application got rejected because of the KYC document mismatch. In many cases, people use Adhaar card for instant loan apps like mPokket Personal Loans. If your mobile number in the Adhaar database does not match your application mobile number or if the spelling in some of your KYC documents fails to match with those of your PAN, your application may get rejected. Always double check your KYC documentation.
3. Not checking your credit score:
Your CIBIL score is the thermometer of your financial health. Every loan you take is reported to CIBIL. All your Credit Cards are also listed in your Credit Report. Every time you default in your payment or a lender checks your Credit Score; your credit score goes down. Every time you pay off a loan EMI, you strengthen your credit score. Similarly, instant loans like the FlexSalary Personal Loan are also given based upon your credit score. You can check your credit score online for free. Always check if you have a healthy CIBIL score before you apply for a loan.
4. Not comparing interest rates:
The sheer simplicity of the loan process with instant loans is such that many people simply do not bother to shop around for best interest rates. While instant loans are very affordable, there may be cases where other debt instruments might prove to be more affordable. Similarly, different Instant Loan lenders might also offer varying interest rates at different times. If you are not shopping around for the best interest rate when you apply for a loan, you are practically leaving money on the table. No one in their right mind should do so!
5. Not checking processing fees or hidden charges:
Every successful Instant Loan application will involve some amount to be charged as a processing fee, and yes, you have to pay GST on that as well. Many people, however, do not check this processing fee and other charges beforehand, and when their loan gets disbursed, they end up with less loan amount in hand than what they applied for and yet having to repay the entire amount. In the last few years, RBI has made lenders standardise and declare all loan-related charges and hidden fees beforehand, but money matters are best served with a buyer beware market. Check all costs before you apply for a loan and account for them in your instant loan application.
6. Not checking repayment modes:
In a number of cases, borrowers forget to check repayment options, which may cause them further problems. For example, some lenders may require manual payments of EMI through their apps or websites, while others may allow the borrower to set up an ACH standing instruction on their bank account from which EMI may be auto deducted. It is strongly recommended to check which repayment modes are available from which lender and by when should EMI be paid. Remember, missed EMIs attract heavy penalties, so gather this information beforehand and be ready with all requirements.
7. Not checking prepayment options:
Instant loan is like any other loan, and the faster you can repay it, the better it is for you. One mistake many people make is that when they take the instant loan, they do not check the prepayment options, lock-in period, and prepayment charges. It is always best to find out in advance about how and when you can pre-pay your loan, what will be the charges involved, and what will be the overall process.
8. Not reading the fine print:
While no one expects respected financial institutions to be sneaky in their fine print, not many people read their loan agreement either. Just like no one reads the license agreement of a software or instruction manual of their refrigerator! This can create a lot of problems if you end up in an uncommon situation with regard to your loans. Make sure you read the terms and conditions of the loan app, as well as the loan agreement thoroughly. This way if you end up in a complicated situation, you will know what to expect from the lender side and what will be your roles and responsibilities as the borrower.
All in all, don’t make these mistakes while applying for Instant Loans in India, and you will be extremely satisfied with this new and effective process of borrowing money.