You can take a personal loan for any reason and generally it’s not a herculean task to get a personal loan, but having said that it does not mean you can act casual while applying them. Let us get familiar with the common mistakes that you need to avoid while applying for a personal loan
Opting for more than one personal loan –
Well, one of the key things about personal loans that you need to remember is that it is one of the costliest forms of credit. You should go for a personal loan only when you are in dire straits and you have no other option of raising funds. Most of the borrowers, who are likely to take loans for every small reason, tend to service more than one personal loan at a time.
Remember, if you have taken more than one loan, you only end up damaging your finances and savings. And the worst part is that it can damage your credit score as well. Make sure you have a holistic comprehension of your requirements and then choose one bank or financial entity to apply for the personal loan. With our EMI calculators, you can also calculate personal loan EMIs.
Borrowing more money than what you can afford –
While you are borrowing money, it is easy to get tempted, especially when you can apply for a personal loan while using your smartphone. Technology has surely come a long way; now with the help of our online EMI calculators you can easily calculate your EMIs as well. You have to ensure you don’t commit a mistake of borrowing more than what you actually require and eventually find it difficult to repay it. You should know that a personal loan will help you but with a high rate of interest, the things can get tricky, especially when you have too much to repay.
Taking a loan without reading the documents –
How often do you read the whole document while availing any particular service? If you are signing the documents of your personal loan without reading them, then you are inviting trouble. It is quite simple; if you have signed the legal document without reading it then you will have to fulfill the obligations listed in the document. Make sure you have read and understood the loan’s terms and conditions including – interest rates, pre-closure charges, and pre-payment charges, etc. Take your time and ensure you don’t sign the terms and conditions in a hurry.
Opting for longer term –
The lender might be offering a longer term for the personal loan, but it is not mandatory to accept it. Various banks and financial entities offer a personal loan with a maximum term of 7 years. If you opt for a longer term, the repayable amount for the loan will also be higher.
You may feel good about the EMI on a longer term, but at the end of the day you end up paying more overall. So, it is important you have chosen a short term period instead of opting for a longer tenure.
Taking a loan without doing a market survey –
Whether you are taking a personal loan or day to day product, comparing and verifying other options always come handy. Before you finalise a bank or a lender, it is imperative you know what other banks are offering. Take some time out and do a comparison of the charges, interest rates, and prepayment clauses offered by different banks and lenders. You can always negotiate on the application processing charges and the documentation.
Not maintaining records –
Needless to say that maintaining the records of loan disbursed and payments you have made has great significance. It is important you should have maintained a record of waivers, negotiated interest rates, and processing fees. This should be done as the banks, at times, charge for the agreement copies and additional statements.
Not checking your credit report –
If your lenders have not updated the credit bureaus about your loan repayments, then this could lead to closed loans or paid off dues continuing to appear on your credit report. If there are clerical errors from lender’s part or credit bureau may lead to the inclusion of wrong information in your credit report. Most lenders take your credit score into consideration while giving an approval for the personal loan or deciding interest rates. Make sure you have checked your credit report and rectified all the errors prior to applying for the loan.
Not disclosing your existing debts –
Most of the borrowers tend to understate their existing debt repayments on purpose in order to have higher loan amount. However, most of the times this will backfire at you as your lender or the bank will cross check your credit report before revealing all your pending debts. In the worst case, the lender can reject your application.
So, make sure you have avoided making the above-discussed mistakes to make the most of the personal loan.