Applying for a loan should be an exciting step toward achieving your financial goals, whether it’s for a home, a car, or personal needs.
However, loan applications can go sideways fast if you’re not careful. Many people unknowingly sabotage their chances of approval or accrue sky-high interest rates by making some common (and avoidable) mistakes.
So how can you avoid these pitfalls? Don’t worry, let Big Grain Credit help.
We’ll walk you through the top 8 costly errors that can ruin your loan application and how you can steer clear of them.
The Don’ts:
- Not Comparing Loan Options
- Underestimating Your Credit Score
- Failing to Provide Accurate or Complete Documentation
- Skipping and Not Reading the Fine Print
- Biting Off More Than You Can Chew
- Borrowing from the Wrong Sources
- Applying for Multiple Loans at Once
- Not Having a Clear Purpose to Get a Loan
1. Not Comparing Loan Options
Would you walk into a shop, grab the first thing you see, and buy it without checking other options? Probably not. It feels like an unnecessarily rushed and risky decision.
Yet, many Malaysians make this exact mistake when applying for loans. They grab the first offer that comes their way without exploring alternatives.
Different lenders offer varying interest rates and terms. So just like with shopping, you should do your due diligence and survey the market.
- Use tools available online to compare interest rates, repayment terms, and fees from different lenders.
- Consult loan providers to help weigh your options.
In Malaysia, personal loan interest rates range from 5.5% to over 18% per annum. That’s why shopping around can make a huge difference, potentially saving you thousands of ringgit in the long run.
We offer competitive rates and flexible terms over at Big Grain Credit. We guide you through the process from comparing loans and giving detailed explanations to signing papers. Gain peace of mind and feel confident making a well-informed decision when you choose us.
2. Underestimating Your Credit Score
Credit score matters more than you think.
It is, for all intents and purposes, your life’s financial report card. Your credit score reflects your reputation, habits, and trustworthiness in handling money. And lenders don’t take it lightly.
A low score can lead to higher interest rates, or worse, a flat-out rejection. Ignoring your credit score is a common mistake that could cost you big time.
In Malaysia, the Bank Negara Malaysia’s CCRIS (Central Credit Reference Information System) and CTOS (Credit Tip-Off Service) track your credit score. They provide credit reporting used by all major banks in the country to assess your loan eligibility. Scores below 650 are considered risky and may result in a rejection. So ignoring your credit score can and will cost you big time.
Here’s what you should do:
- Regularly check your credit report on CTOS or CCRIS.
- Address any outstanding debts and ensure that your repayment history is solid.
- Keeping your credit score above 700 to improve your approval chances and secure better interest rates.
If you need help cleaning your messy credit history, we can help you fix it. We provide transparent guidance to help you improve it and put you in the best possible position when you apply for loans.
3. Failing to Provide Accurate or Complete Documentation
After finding the perfect loan, filling the application out, and then submitting it, You go on your merry way. Suddenly, you realise that you missed one small piece of paperwork.
Small issue, right? Wrong! Delays and even rejection can follow simply because of that. It’s a simple mistake, but it happens all too often.
One of the most common reasons for loan rejection is incomplete or incorrect documentation. Studies show that up to 35% of loan rejections in Malaysia are due to missing paperwork.
You’ll have only yourself to blame when it happens. We’re dealing with big numbers here, so accurate information and clear communication are non-negotiable. Banks need everything in order to approve your application swiftly.
What should you do?
- Ensure all the required documents are present before applying.
- Double-check your identification, income statements, proof of residence, and financial history.
- Submit a complete and accurate application to accelerate the approval process.
You can leave it to our team of professionals to make sure everything is in place to ensure a smooth and fast approval process without delay. We’ll guide you through the required documentation and provide quick feedback so there’s no room for error.
4. Skipping and Not Reading the Fine Print
Raise your hand if you’ve ever skimmed through the terms and conditions of an agreement and clicked “Agree” anyway.
You’re not alone. But when it comes to loans, skipping over the fine print can land you in a world of trouble.
Did you know that 26% of Malaysians don’t fully understand the terms of their loans? Hidden fees, pre-payment penalties, or fluctuating interest rates can catch you off guard and lead to unwanted financial surprises.
Remember to always:
- Take your time to review loan agreements carefully before committing to one.
- Pay close attention to any fine print, fees, penalties for early repayment, and any conditions that might change your loan terms.
- Most importantly, ask for clarification if something doesn’t make sense.
At Big Grain Credit, we believe in full transparency. We make sure you fully understand your loan terms and any accompanying fees before signing any papers, so that no unpleasant surprises can ambush you down the road.
5. Biting Off More Than You Can Chew
Borrowing more than you can realistically repay is one of the biggest mistakes you can make when applying for loans.
In the rush to get approved, many potential borrowers apply for larger loans than they can comfortably manage. Unfortunately in Malaysia, there are many cases of borrowers holding monthly loan payments that exceed 30% of their income. It’s simply not sustainable.
Sure, it’s tempting to take out a larger loan to cover more expenses, but this can lead to financial strain and, in extreme cases, default.
Default occurs when a borrower stops making required payments on a debt. It gets reported to credit bureaus, damaging your credit rating. Your ability to buy assets like properties or cars will be severely affected. Credit card companies will avoid you like a plague, and it’ll take years for you to rebuild a good credit record.
That’s why it’s important to:
- Use a loan calculator to figure out exactly how much you can comfortably afford.
- Consider your income, expenses, and any other debts before committing to a loan.
- Make sure your monthly loan payments don’t exceed 30% of your income.
Everyone has different circumstances that may require different approaches to borrowing money. Big Grain Credit can create customised loan solutions that fit your financial situation and repayment capacity. We help you assess how much you can borrow without putting unnecessary stress on your finances.
6. Borrowing from the Wrong Sources
Did you know that 5% of Malaysians have fallen prey to illegal moneylenders at some point?
We get it. There are times when you need cash quickly. But never, ever turn to loan sharks or any type of unlicensed lender.
Loan sharks may offer fast cash, but they come with dangerous demands. Unlicensed moneylenders in Malaysia have been known to charge astronomical interest rates. These lenders operate outside of the law, meaning you have little to no recourse if something goes wrong. Before you know it, you’re trapped in a vicious cycle of debt with no way out.
Always choose a licensed lender like Big Grain Credit to ensure that you’re protected by law. Licensed lenders follow ethical lending practices under Malaysia’s Kredit Komuniti system, have reasonable interest rates, and don’t engage in predatory lending.
The Importance of Licensed Lenders: What is Kredit Komuniti? |
| In Malaysia, all licensed lenders must adhere to regulations set by the Ministry of Housing and Local Government under the Kredit Komuniti (formerly known as licensed moneylender) system. This system ensures that lenders operate ethically and transparently, protecting borrowers from predatory practices such as excessive interest rates or hidden fees.
Licensed lenders operating under Kredit Komuniti are required to:
Big Grain Credit adheres to all the regulations set out to protect your rights as a borrower. You can be confident that your loan terms are transparent, legal, and fair. |
7. Applying for Multiple Loans at Once
“Don’t put all your eggs in one basket” is an advice often heard in investing. But does the same apply to loan applications?
Some borrowers think applying for multiple loans will increase their chances of getting approved. Well, think again!
Each loan application results in a hard inquiry on your credit report, and too many in a short period of time can damage your credit score and chances of getting approved.
What you should do instead is focus on finding one lender that offers the most favourable loan terms for your needs. We help you evaluate your financial needs upfront, so you can minimise the need for multiple loan applications. With our tailored solutions, you only need one lender.
8. Not Having a Clear Purpose to Get a Loan
Lenders want to know why you’re borrowing money. Are you using it for home renovations, hosting a wedding, consolidating a debt, or something else?
If your loan purpose is vague or unclear, it can raise red flags for lenders. They may think that you’re in over your head and haven’t thought things through, so they end up rejecting your application.
In Malaysia, lenders are more likely to approve loans with a specific purpose. And that’s exactly what you need to do.
- Clearly define the purpose of your loan before applying.
- Show you’re responsible with money and have a solid financial plan in place.
Should you require assistance, our exceptional customer support can lend a hand. We help identify your financial needs and come up with customised loan solutions that align with your goals. We make sure your loan application has a clear, compelling reason behind it that lenders can’t say no to.
Gain Big With Big Grain Credit’s Loan Application Solutions
Avoiding these 8 costly errors can drastically improve your chances of getting your loan approved and securing the best terms.
From comparing loan options to making sure you borrow from a licensed lender, a little preparation and thoroughness go a long way.
At Big Grain Credit, we give you access to the tools and support you need to make smart financial decisions. Contact us today for a free consultation and experience our transparent, flexible, and customer-focused services firsthand.
Now, go on and avoid those pitfalls like a pro and get that loan that’s just right for you!
Recent Comments