Applying for a personal loan for a short term need is simple. And it’s a practical choice, too. It is a better option to exercise instead of dipping into your savings or liquidating an investment. The loan is repaid in simple EMIs over a few months – most lenders offer a short tenure for personal loans – so the debt is repaid faster as well. Several canny individuals use personal loans to consolidate their credit portfolios. This makes loan management and repayment much simpler.

But as easy as it is to apply for the loan and get it, you may still make unintentional errors that cost you the application. Your inadvertent mistakes or lack of awareness of how the loan universe works may result in loan rejection instead of approval. We list four important ways to ensure that your personal loan application is approved on the first try:

1) Have a good credit score.

Unknown to you, the lending institution you apply to starts by checking your credit score upon receiving the loan request. It takes them just a few seconds to punch in your Aadhaar and PAN credentials and receive your credit report from the CIBIL credit rating bureau. All banks and most NBFCs rely on the CIBIL credit rating before processing the loan request. If your score is below 600, you are considered a ‘high risk’ candidate for the loan. A score between 600 to 750 is good, while a score above 750 is excellent and will get you to the next stage of the application at once. However, some leading loan apps process loan requests even from those whose credit scores are between 0 to 100. These are often people who have never applied for institutional funding and have a relatively low salary. It is better to ensure a high credit score, but if you cannot, you can get a personal loan from a good loan app with more flexible approval terms.

2) Repay unpaid debt before you apply for a personal loan.

Unpaid debt eats into your monthly income consistently. The more loans you have to your name, the more your income is eroded through multiple EMIs. In contrast, not having loans results in more of your income remaining intact for you to use on other expenses. Lending institutions are averse to loaning money to applicants who service more than one loan at a time – they view the applicant as someone who has a reduced repayment ability owing to multiple loans. Since the personal loan is an unsecured product, an applicant with a lower repayment ability is a risk because the lender cannot attach any physical security or collateral if the loan is unpaid or defaulted. Multiple unpaid loans also reduce your credit score. Keep all these issues at bay by repaying in a greater part, if not fully, all the unpaid loans you are currently servicing. You can do this by pre-paying larger sums of money to foreclose the balance loans. Wait for a couple of months after all the older loans are repaid before applying for the instant personal loan.

3) File your documents correctly.

Filing documents correctly to get the personal loan seems like a no-brainer. But you would be surprised at how many people get this step wrong. Some applicants submit documents that have old information that requires updating. Others file incomplete applications, where some of the required documents are missing. Others furnish documents that do not stand up to background checks, for example, if you state your current address as XYZ, but you have shifted out of that location or have no proof of being based there at all. Even the most flexible loan apps have stringent background check processes. Any attempt at falsification or misdirection is flagged down at once, and your application may be summarily rejected. Reapplying may not be allowed, or you may have to wait a few months to reapply.

4) Do not make ‘hard inquiries’ for credit cards or personal loans if your credit score is low.

Not many loan applicants know this, but if they have a low credit score, reduced repayment ability, or even loan defaults in their credit history, they should not apply for new instant personal loans or credit cards. Every inquiry that you make is recorded in your credit report. This does not bode well for you if you have unpaid loans or a low credit score – hard inquiries give the lender the impression that you are reckless with your finances and not interested in loan foreclosure before applying for fresh loans or credit cards. Desist from doing so till you have cleaned up your credit score first.