Indians by nature are negotiators. While getting the best deal is something common to any individual across the globe, maybe Indians push for it a bit more. People can be seen haggling over prices whenever there is a room for it (at times even where the chance of price reduction is practically nonexistent). But should one be pushing it to the extent that self-interest gets compromised? Should not one know where to draw a line and how to actually go about the whole process?
Ravi Mathur was in need of a personal loan for renovating his house. He has wanted to do it for some time now and with the salary hike, he got the confidence to pick up a personal loan and get to work on his desire to redo the house. He did what he thought would help him pick up the best possible deal on the loan. He applied with most of the leading banks that he could. He thought that moving an application will help him negotiate with the banks and also pitch one against the other for getting even a better pricing and terms. Little did he know that this endeavor will land him into a situation where not only will he get rejected on his current loan applications but would also not be able to secure one in near future.
Let us first understand how it works. Every time one applies for a loan, the banks run an inquiry on the credit bureau. These inquiries get recorded and reflect on the CIBIL report. Multiple inquiries within a short span of time may get construed as "hunger for credit" or "financial irresponsible borrower" or in some cases as "fraud". It is like you get to know that your acquaintance who approached you for a small amount of money has also approached multiple other friends for it. Clearly you would see a risk in extending money to him. So is the case with the regular lenders. Multiple inquiries trigger suspicion with underwriters.
Equally importantly, multiple inquiries also impact the credit score negatively. So treading such a path is a big no.
Since any data point captured by the credit bureaus in India does not get purged over a time frame, these inquiries will also continue to be an integral part of the report. What is means is that it will continue to impact the underwriting process for some time.
Do not apply with multiple banks or lending institutions at the same time. If you wish to research there are various ways to figure out the best suited deal. Log in to the website of the lender and get the details, this could also be done through the platforms that give out comparisons or maybe connect with a credit expert who can guide on this front.
What should one be doing in case, on account of unawareness, the harm has been done? One has already made multiple applications with different lending institutions. The first thing to do is stop completely. If the loan applications are getting just stop applying for one. One has to be aware that a continued effort to seek loan may also land one's name getting updated in the negative list of the lenders which is akin to having one’s name in loan defaulter list. Do not apply for loans any further since you would not be able to secure one and it will become a vicious cycle of application and rejection. If the need is higher borrow money from friends or relatives. You would need to stay put for at least a year from the last inquiry date and before applying for another loan, first speak to the lender and apprise them of the situation. Apply only on getting a favorable response. Alternately, if you have a collateral to pledge as security go for a secured personal loan.
So the learning is that one should not take even the inquiries to be insignificant since they will also impact the credit profile.