Decoding Personal Loan Cancellations

As compared to previous year, there is an increase in the application of Personal Loan. However, many borrowers cancel their loan request even after receiving approval owing to a plethora of reasons.

Wondering if you can cancel your Personal Loan application? The answer is yes. Read on to learn about the reasons behind Personal Loan cancellations and their effect on your credit score.

Common Reasons for Personal Loan Cancellation

Following are some of the prominent reasons why borrowers choose to cancel a Personal Loan and terminate the agreement:

• Other Sources of Funds: Many times, borrowers meet their extra fund requirement from various sources other than Personal Loan. This can include gifts, bonuses, and even withdrawing a certain portion of their investments.
• Better Offers from Other Lenders: Situations might arise where you will find that other lenders are offering lower interest rates and more flexible terms. Then, you will want to cancel your application with the present lender.
• Improvement in Financial Condition: Your finances might improve after applying for a Personal Loan, owing to a promotion or massive profits. Under such circumstances, you will no longer need to turn to credit for sourcing extra funds.
• Problems with the Loan Terms: After applying for a loan, borrowers might not be comfortable with its terms and conditions if the lender refuses to negotiate. In such situations, they might back out of the contract and request for loan cancellation.

Impact of Personal Loan Cancellation on Credit Score

Cancelling a Personal Loan application can have a prominent effect on your credit score. This impact varies with the stage of application of where you are at the time of cancelling your loan.

The effects of Personal Loan cancellation on CIBIL score are as follows:

• After Submitting the Loan Application

If you cancel your credit request after sending the application but before the lender requests your credit report, there is no impact on your credit score.

• Before Disbursing Loan Amount

You have the flexibility of cancelling your loan request even before disbursement of the credit amount. Since the lender has already made an inquiry by then, it would not reduce your credit score any further.

• After Disbursing Loan Amount

You also have the option to cancel your loan request after receiving the credit amount. However, it must be done within the cooling-off period mentioned in the loan agreement. Beyond this period, your loan cancellation request will not be processed.

Other Factors That Impact Your Credit Score

Apart from loan cancellation, several other factors can negatively affect your credit score. These include:

• Missed EMI payments: Missing out on monthly instalment payments paints a negative picture for the lender. Hence, you get assigned a lower score, framing you as a risky borrower. So, try to pay all your monthly instalments on time.
• Huge Existing Debt: Having a huge existing debt can make it difficult for you to arrange the money to pay the monthly instalments for all the credits. Also, you might miss out on the due date of the EMI payment. Hence, opt for one loan at a time.
• Numerous Credit Enquiries: If you apply for multiple loans, lenders will make numerous enquiries about your credit history. This can negatively impact your credit score.  So, apply for a loan only when you are in urgent need of funds.
• High Credit Utilisation Ratio: If you use the maximum credit limit available for your account, it projects you as a credit-hungry borrower. This can lead to a significant drop in your credit score. Hence, try to maintain a credit utilisation ratio of 30% or lower.
• Poor Credit Mix: In case you keep applying for a particular type of loan, that is, either a secured or unsecured loan, it can drop your credit score. So, maintaining a healthy credit mix becomes imperative if you want to boost your credit score.

Application of Personal Loan

Once you are aware of the factors negatively affecting your credit score, make sure that you take necessary measures to avoid them. As soon as your credit score improves, you can reapply for a Personal Loan to access funds instantly:

• Step 1: Click on the ‘Apply Now’ button to move to the application form.
• Step 2: Enter the necessary personal, financial and contact details accurately.
• Step 3: Upload all the necessary documents in the specified format.
• Step 4: Go through the information once to minimise errors and click on the ‘Submit’ button.

Also Read - What is Personal Loan? Things You Should Know

Things to Keep in Mind When Reapplying for a Personal Loan

If you have made up your mind to reapply for a Personal Loan, you should keep certain points in mind:

• Make sure to pay your EMIs on time.
• Foreclose your loans to minimise overall interest.
• Apply for Personal Loan only from selective lenders.
• Do not make multiple loan applications within a short time.

Also Read - Tracking your Personal Loan Application Status

To Conclude

Instead of going for Personal Loan cancellations, make sure to go for a thorough comparison of lenders and a careful analysis of your financial health. This minimises its negative impact on your credit score. Otherwise, it would take you a long duration and strict financial discipline to improve your credit score and stand eligible for a Personal Loan.

Unlock your dreams with a Personal Loan from Poonawalla Fincorp.

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Personal Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply