6 Common Personal Loan Mistakes You Must Avoid
April 6, 2021
A personal loan is an easy solution to your immediate financial needs or medical emergency. With hassle-free online processes and pre-approved loan offers, taking a personal loan has never been this easy.
However, one needs to be aware when applying for a personal loan, as a small mistake can lead to big financial trouble. Lack of awareness and carelessness can lead to a big debt trap and create a financial crisis that can severely impact your family’s future.
When applying for a personal loan, borrowers often fail to pay attention to some vital factors associated with it, leading to the rejection of the loan application. Let’s look at some common personal loan mistakes you must avoid so that you can manage your finances comfortably:
- Not Reviewing Your Credit Score Report
Whenever you apply for a personal loan, lenders check your creditworthiness by fetching your credit report from credit bureaus or you can also check your usda property eligibility. The report represents how responsibly you have behaved with credit in the past. A credit score which is over 750, is considered healthy by banks and different financial institutions.
In case a borrower’s credit score is less than 750, there is a high probability that their loan application might get rejected. You should review your credit report before submitting a loan application to prevent any possible error which may bring down your credit score, leading to a loan rejection.
- Submitting Direct Applications to Multiple Lenders
Once you submit the loan application directly to different lenders, they initiate a credit report request from credit bureaus. Such requests are termed as hard enquiries, and each of them gets listed in the enquiry section of your credit report.
Submitting multiple reports within a short period can significantly reduce your credit score. Rather than submitting direct loan applications, you should thoroughly research and compare different financial institutions and choose the most appropriate lender based on your credit score, income and other eligibility parameters.
- Not Considering Your Repayment Capacity
On one hand, a personal loan can help you get out of a financial crisis, while on the other hand, it may also cause one. Before applying for a particular loan amount, ensure that you can pay it back.
It is advisable that you should not borrow money beyond your affordability. You can use an online personal loan emi calculator to decide the loan amount according to your capacity to repay the amount in future before applying for a loan.
- Not Comparing the Options
While applying for a personal loan, people prefer to go to a bank they frequently transact with, which may be a mistake. While it might seem like an easy option, you must do your research and make an informed decision. Compare the interest rates, repayment clauses, and applicable charges on loans from different banks. Do not just limit your comparison to the interest rate.
- Not Disclosing Existing Loan Details
As a responsible borrower, you must disclose the details of all your financial obligations and existing loans to the lender because the loan amount will depend upon your commitment to other existing liabilities. If you will try to hide the details, there is a possibility that it could lead to the rejection of your loan or higher interest rates.
- Choosing a Longer Tenure with Lower EMIs
Borrowers tend to choose a more extended tenure period due to lower EMIs. But, remember one thing that the longer the loan repayment tenure, the higher amount you pay. Therefore, you should opt for the shortest loan tenure possible, depending on your monthly repayment capacity.
Get the most out of a personal loan, you must avoid these 6 common mistakes.
You can take a personal loan from reliable banks such as Axis Bank, as they offer a loan at affordable interest rates. They provide a personal loan from INR 50,000 upto INR 15,00,000 with minimal documentation. It is one of the best available options for loan if you need funds for an urgent basis or a short period.
Avoid these commonly made mistakes for a hassle-free experience!