Personal Loan attracts many borrowers because of its easy availability, fastest approval and last but not the least flexible options on offer. But, one thing that needs to be mentioned here is the fact that very often, personal loans become the most expensive form of debt because many times people fail to bear in mind some important points. So, read this article further to know about the mistakes that you should avoid while applying for personal loan.
Lack of Clarity
Well, one of the most common mistakes that people usually make is to have a lack of clarity. Yes, they fail to draw a line between lifestyle and essential personal requirements. However, as you all know that interest rates on personal loan are generally high, so one should avoid taking it to the greatest extent. But, if you want to proceed ahead, you should have the clarity in mind, and should be clear with your purpose.
No Research & Comparison
When it comes to buying the personal loan, people usually do not compare and research online. Well, it is one of the biggest mistakes that they make because comparison is the key here. Yes, it is highly important to compare different lenders, offering personal loan to you. With the help of doing so, you would be able to crack a good deal that comes to you with lower interest rates, minimum charges, simple documentation and so on.
Borrowing a loan beyond one’s repayment capacity
Before taking the personal loan, it is really very important to evaluate your repayment capacity in order to pay the EMIs regularly. You need to be fully sure when it comes to repaying the loan because if you are unable to do that and won’t pay your EMIs on time, you will be considered as a defaulter. Moreover, as per the thumb rule, the EMI of your personal loan should not be more than 10%-15% of your monthly income. This is so because you can easily repay the amount every month without harming your budget.
Selecting longer tenure with low EMIs:
Many people usually go for longer tenures with lower EMIs as it seems like an easy repayment option. But, instead of doing so, one should actually opt for an aggressive approach as loans with shorter tenures are more cost-effective. So, it is highly important to keep in mind your monthly budget and repayment capacity while deciding a tenure for personal loan.
Fail to Disclose Details of Existing Loans
Whenever you apply for personal loan, it is very important to disclose and share the details of all your existing loans with the new lenders. If you are thinking that you can avail the loan with higher amount through hiding the existing details, you are absolutely wrong. The moment lenders will get to know about this, it would become a major issue for you in the future. So, its better to tell the truth earlier rather than paying for it later.
Being Clueless about your Credit Score:
Maintaining a good credit score is surely helpful in the long run as it ensures that you are eligible to avail the personal loan easily. Moreover, before giving you loan, lenders do check your credit score, and if they find it low, it takes hardly a minute to reject your loan application. So, it is necessary to keep your credit score always up, only you would be able to avail the loan by fulfilling the eligibility criteria of the lender.
Not approaching a lender you have a previous relationship with
There is no harm in approaching the bank with which you are having a previous relationship in terms of salary account or any other long-term relations such as fixed deposits, previous loan etc. If you get in touch with your previous lender, it will definitely work in your favour.
Submitting multiple personal loans applications
You should always try to avoid submitting the multiple applications for personal loans. Yes, because multiple queries for loan create a negative impact on your profile. Before approving you loan, the lenders do check your credit report that clearly shows the dates on which the lenders made their checks. Thus, one should avoid doing this as it will impact your eligibility to get the loan in the future.
Signing without Reading Fine Print
Before putting your signature on any document, it is imperative to read and understand all the terms and conditions. Do not blindly sign on anything you don’t have an understanding. Clear you doubts first, and then go ahead with the final proceedings.
Not Informing or Discussing with Spouse/Family
You should discuss and inform your family/spouse, before you take the big decision of taking a personal loan. Yes, because availing a loan can also impact your monthly budget, hence the member of the family should also be aware about it. They can help you in maintaining a monthly budget so that you can easily give your EMIs. Thus, it is important to have a discussion with your family members first.