Personal Loan: Do’s and Don’ts for Onboarding Loan Application

Applying for a Personal Loan: What to Do and Avoid

A Personal Loan can be a helpful financial tool when used responsibly. Whether it's for a medical emergency, home repairs, education, or any other urgent need, it gives you quick access to funds without pledging collateral. But to make sure your loan journey is smooth, it's important to follow the right onboarding steps and avoid common mistakes.
Here’s a detailed list of do’s and don’ts you should keep in mind when applying for a Personal Loan.

Do’s for Onboarding a Personal Loan

1. Evaluate Your Loan Requirement
   Don’t borrow more than you actually need. Assess the purpose of the loan and calculate how much you need to cover it. Taking a higher loan only increases your repayment burden unnecessarily.
2. Compare Multiple Lenders
   Interest rates, processing fees, prepayment charges, and disbursal time vary across banks and NBFCs. Compare offers from at least 2–3 lenders before making a decision. This could save you a lot in the long run.
3. Check Your Credit Score
   Your credit score is one of the first things lenders check. A score above 700 is generally considered good. If your score is low, you might face rejection or get charged a higher interest rate. Check your credit report beforehand and resolve any errors if needed.
4. Use EMI and Eligibility Calculators
   Always check the total repayment amount, not just the EMI. Understand what you’ll pay over time—this includes the principal, interest, processing charges, and any add-ons like insurance bundled with the loan.
5. Keep Your Documents Ready
   Commonly required documents include:
• ID and address proof (Aadhaar, PAN, passport)
• Income proof (salary slips, bank statements, ITR)

Having these ready can speed up the process, especially for instant or pre-approved offers.

6. Read the Loan Agreement Carefully
   Before signing, make sure you read the terms in detail—interest calculation method, repayment schedule, charges on late payment or foreclosure, etc. Ask questions if anything is unclear.
7. Ensure Timely EMI Payments
   Once your loan is approved, ensure that EMIs are paid on time. Setting up an auto-debit mandate is a good idea to avoid missing due dates and facing penalties.

Don’ts for Onboarding a Personal Loan

1. Don’t Falsify Information
   Never misrepresent your income, job status, or debt obligations. Lenders verify every detail, and even one discrepancy can lead to rejection and hurt your creditworthiness.
2. Don’t Apply to Too Many Lenders at Once
   Submitting multiple applications in a short period reflects poorly on your credit report. Each application triggers a credit enquiry, which can lower your score and signal financial desperation.
3. Don’t Ignore Hidden Charges
   Focus not just on the interest rate but also on other charges—processing fees, prepayment penalties, documentation charges, etc. These can significantly affect the total cost of the loan.
4. Don’t Stretch Your EMI Beyond Budget
   Even if you qualify for a high loan amount, that doesn’t mean you should go for it. Your EMI should ideally be within 30–40% of your monthly income. Overcommitting can cause financial stress down the line.
5. Don’t Skip Reading the Fine Print
   Loan agreements can be long and loaded with terms you may be tempted to ignore. But skipping them can lead to nasty surprises later—like hefty charges on early repayment or penalties for delayed EMIs.
6. Don’t Delay in Submitting Documents
   Once your loan application is under process, submit all required documents quickly. Delays at your end can slow down the approval or even lead to cancellation of the offer.
7. Don’t Borrow Without a Repayment Plan
   A Personal Loan is a debt that you need to repay every month, regardless of your situation. If you’re unsure how you’ll manage repayments, it’s better to wait or borrow a lower amount.

Final Thoughts

Getting a Personal Loan isn’t just about eligibility—it’s about preparation, honesty, and smart decision-making. Follow the do’s and don’ts shared above, and you’ll not only improve your chances of approval but also make the experience far less stressful.
Use Personal Loans wisely—they’re best suited for genuine needs, not impulse purchases. Plan ahead, borrow responsibly, and repay on time for a healthy financial journey.