Mistakes to Avoid When Taking a Personal Loan
Personal loans are unsecured loans which means they do not need to be backed by collateral or security and can be applied for with minimum documentation unlike home loans or car loans. You can use the funds from this loan for basically anything, be it your wedding, further education expenses like accommodation, flight tickets, etc., going on a vacation, buying a new, expensive phone, paying off your credit card debts, etc. The possibilities are endless! However, there are some aspects you should consider apart from personal loan interest rates and mistakes you definitely need to avoid.
- Do not accept a loan from the first lender who comes your way- there are many lenders in the market who try to entice you with offers and promises of low personal loan interest rates. Unfortunately, many people end up falling prey to them due to the lack of research and in-depth planning. Even if you desperately need the money and it is an emergency, do not accept a loan from the first lender you get. Compare and then decide. Keep in mind some parameters like tenure, interest rates, processing fees, etc.
- Do not borrow more than you can pay- this is a very common mistake people make. They borrow an amount that they cannot pay off and end up in financial debt. You need to remember that anything can happen at any time. For example, your child’s school fees might be more than you expected, or a family member falls terminally ill, etc. Be realistic about how much EMI you can afford to pay every month.
- Do not hide your existing loans- if you have any existing loans like a car loan or a home loan; it is not a good idea to hide them from your lender. The lender can easily find out about them by checking your credit history and in turn, will reject your application on the spot making all your hard work obsolete.
- Do not borrow more than you need- the thought of taking a personal loan and spending it on various things such as a new phone, a new laptop, or other frivolous things that you might not need, is very attractive to some people. Do not make that mistake. Borrow only how much you need and manage the rest of your monthly expenses with your income. Borrowing more than you need might seem like a good idea at the time but will prove to be costly for the future.
- Do not apply for a personal loan without careful and thorough consideration- before you take a personal loan; ask yourself whether you truly need it. Can your expenses be covered with your income and do you actually need a new laptop? As mentioned previously, some lenders might try to entice you with pretty offers and low personal loan interest rates. That does not necessarily mean it is a good idea. Of course, if you truly need funds and cannot afford to pay for certain things solely with your monthly income, then taking a personal loan is advisable.
We hope this article helps you in your search for the perfect personal loan for you. Remember to not make these mistakes so your process goes smoothly!