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31 Jul
  • Editorial Team

Cash crunch is a common problem for most of us but we often ignore those random calls and messages asking us if we need a loan. However, there are few occasions in life when we stop and listen what the loan executive on the other end is saying because we genuinely want a loan. No matter how enthusiastic the person offering the loan may sound, the actual process of getting it sanctioned isn’t as easy as it looks. So, to make sure that your loan approval is a hassle-free process, here are the key points to keep in mind before you fill your loan application.

Points to keep in mind before applying for a loan

  1. Identification of purpose

One can seek loan for various purposes from buying property or car to buying a motorcycle or funding one’s business. To cater to all these different needs, there are many types of loans available in the market. So, it’s important to first identify the purpose of the loan and then apply for the specific loan type.

For instance, personal loans are unsecured loans i.e. there’s no element of collateral in it and thus is given on a higher interest rate. On the other hand, home loans or LAP (Loan Against Property) is usually given to SMEs for fulfilling their working capital requirement by mortgaging their real estate property, has lower interest rates but strict process of documentation. So, choose according to need, affordability, and convenience.   

  1. Credit score 

Maintaining a good credit score is a pre-requisite for loan application. For instance, paying your previous loans on time, regular credit card payments, and keeping a decent balance in your account indicates that you are well-placed to repay the loan on time. This also helps to bring down your interest rate. You also can review your score on several finance-related websites before approaching the lender. Also, each application for loan is recorded and affects the score and so, it’s important to not apply for a loan unless your actually require it, else it might create a sense that you are in financial debt.

  1. Affordability

A loan you are not likely to pay off will reflect poorly on your credit score as you approach the next lender. So apply for a reasonable amount which can be repaid within the deadline after thoroughly weighing your income and expenditure, and your assets and liabilities. There are many online calculators available to give you estimation of how much money can be lent to you. 

  1. Right lender

Different lenders have their own loan charges and eligibility criteria. Before deciding on one, a comparison should be done online to know if you meet their eligibility criteria in respect of income, employment and repaying capacity. Before you apply for a loan from a particular lender, do proper research regarding reputation of the lender in the market. As online scam lenders are common these days, Lender’s License should be checked properly.

  1. Interest Rates

NBFC’s or financial institutions evaluate your credit history and repaying capacity. This is one of the criteria that affects the interest rate. So, as mentioned above, it is advisable to maintain a good credit score. Also, the lender usually offers you a range of EMI depending on the type of loan and amount. The higher the EMI, the quicker you will be able to pay off your loan. But asses your repaying capacity and ensure that these EMI’s fall within your budget. 

With fixed interest rate, the interest rate would remain the same throughout the tenure. While for a floating interest rate, it would vary according to the market rates. Compare the various interest rates being offered by the different lenders and opt for the one with lower interest rate and favourable terms.

  1. Documentation & Eligibility

For a hassle free loan process, it is mandatory to keep all the documents handy while applying for the loan which will speed up the loan process. It is advisable to carry all the original documents along with the copies for the bank. Documents will depend upon the type of loan applied for but basically includes:

  1. Identification proof

  2. Address proof

  3. Income proof

  4. Previously filed 3 years ITR

  5. Photographs

Do not forget to take along the person who will provide guarantee for you. Also, make a checklist of all the documentation required to ensure a smooth loan application process.

Following some simple steps will help you get a loan approved not only with ease and speed but will also provide better interest rates. 

Did You Know


The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.

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