Top Six Glaring Mistakes to Avoid While Opting for a Personal Loan
At times of financial emergencies, a personal loan can come to your rescue. The unsecured loan is not cheap, unlike the other type of loans. The interest rate is usually higher, and you need to extra hard to get the best terms. However, it does have its advantages.
Sadly, most people commit a few mistakes while going for a personal loan, impacting their financial profile. To avoid those, here’s what you can do! Go through these mistakes we have listed right below and avoid them when applying for the loan.
Not Keeping a Tab on the Credit Score
Are you clueless about your credit card score? Then that’s a big financial goof-up which you need to avoid at any cost. Checking your credit score from time to time is very important because the lenders will check your credit score first and your creditworthiness before sanctioning the loan.
If your credit score is nothing to write home about, your loan appeal may get rejected, or you may get the loan at high interest. The only way to get your loan quickly and efficiently and sign on the dotted line is to improve your credit score. Only then, can you avail yourself of personal loans at a very lucrative rate?
One Personal Loan Too Many
Lenders are also likely to check your lending history. If you borrow often, the lender might know about it from an inquiry on your income, loan, and spending habits. While you may still get the loan, the interest rates could be high. So, if you have been taking too many personal loans, it will put your financial history under the scanner. And, of course, it will also impact your credit score in the bargain. Most lenders will hesitate to sanction the loan. So, ensure you do not take too many personal loans.
Do Not Settle for Less
Many people take a personal loan based on a referral or instant approval. Though it may not turn out to be a bad idea to consider, you may ultimately lose out on all of the best offers.
Instant approval personal loans may come up with a higher interest rate, and you may end up getting the same at a much cheaper rate from other lenders, so it is always useful to think about it, compare rates and then apply for the loan. Though it sometimes may take more time, it can certainly help lower your debt burden to a great extent.
Not Reading the Terms and Conditions Well Enough
The lenders may be eager to get you a loan that promises speedy approval and a high loan amount when you apply for the same. But, it would help if you took those promises with a pinch of salt. Comb through the terms and conditions carefully to get to know all about the extra charges levied upfront. If you do not find the terms and conditions per your requirement, it may be problematic and impact your repayment capacity.
Opt for a Longer Tenure
When you have zeroed in on a particular loan amount, and you choose smaller EMIs, you may want to opt for a loan with a longer tenure. But this may turn out to be a debt burden that you may not want in any respect. Also, you may have to be aware that you have to pay a loan constantly.
The longer the duration, the harder it is to endure, not forget you have to pay a higher interest. Smaller loan periods ensure a better interest rate and, ultimately, greater peace of mind. Nothing feels more satisfying than the loan paid, done, and dusted with. After all, who wants a debt burden? Not us!
Find Your Purpose for Taking a Loan
A personal loan is ideal when you need one when you are in an emergency. Understand you need the loan because if you want it for frivolous reasons, that debt may turn out to be heavier than you anticipated. For instance, if the loan was to throw an extravagant party, you might start regretting the decision as soon as the party is over. And that is because your finances will be in a total mess! So, the idea is to find your reason to get a personal loan, ensure you need to find the right one, and avoid the mistakes listed here.
The best way to evaluate this is by talking to your financial advisor. Coming from a professional, the logic behind why you should or should not go for a loan would make more sense!
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