Personal loan mistakes you should avoid.
Personal loans are great. If you ever find yourself in a financial ditch, you can always rely on a personal loan to get you out. So if it’s a medical emergency or if you’re falling short for your travel plans or you require money to cover a wedding in the family, just get yourself a personal loan and things will work out. Just make sure you do not make these mistakes when applying and repaying your loan!
1. Applying without comparing.
If you’re applying for a personal loan, chances are you need money and need it fast. However, this doesn’t mean you skip on comparisons. You should check what all the different lenders have on offer in terms of personal loan interest rates, loan amount, tenures & processing fees before you make a selection. This will help you find the best deal out there.
2. Not calculating your exact needs.
You need to work out exactly how much you need. If you base your borrowing decisions on guesstimation, you could borrow more than you need. This means paying interest on money you don’t need or struggling to repay an EMI that’s over your head.
3. Not using an eligibility calculator.
This could turn into a very costly mistake. Because, not using the eligibility calculator leaves you open to the risk of applying for more than you can, resulting in your application being rejected. Apart from the disappointment of the fact, it would also mean you processing fee didn’t get you anything! Also, use an EMI calculator so you are to handle your personal loan repayments with a good amount of foresight. This is much better than taking your EMIs as they come.
4. Not checking your credit score before.
This is another mistake that could cost your application. Even if you have a good score, you should check your score. This is because there is always a slim chance that your latest report has an error pulling your score down. You could also take steps to bump up your score – this will help you get higher loan amounts or lowered personal loan interest rates.
5. Tenures you can’t handle.
Sure, short personal loan tenures ensure you pay less interest. However, they also mean much larger EMIs which will demand a large amount of your salary every month. So, only opt for short tenures if you can afford it, or else take longer tenures and pay smaller EMIs. Over time if you hit higher salaries, you can always choose to prepay and save money.
6. Not reading the terms.
This is a big mistake. It’s definitely not the most interest reading material but one must go through it. No skim through but actually read it. If you can’t, then hire a financial expert to do so and explain the potential pitfalls. This will ensure that there are no unexpected shockers mid-way through your repayment process. Also, go through the lender’s rules when it comes to late payments to ensure you can avoid any unwanted penalties.
As long as you avoid these 6 mistakes, you should enjoy a smooth personal loan experience. We hope this article has been helpful, good luck and happy borrowing!