A personal loan is accessible easily and can be availed for any reason. They come at a good rate of interest and repayment tenure. However, there are many times that you are not prudent when applying for a personal loan. Do you know the common mistakes you usually commit when availing of personal loans?
When financial exigency occurs, a personal loan is one of the most common options for many to avail of funds. With demands going up for the unsecured credit option, unlike other loans, it is not cheap. The interest rate is generally higher, and the only way to attain better terms and conditions is through a good credit score of 750 and above.
A personal loan is an answer to your instant financial requirements. And with the hassle-free online procedures and pre-approved offers, availing of a personal loan never has been this simple. However, you must be cautious when placing an application for a personal loan because any single mistake can result in a big financial problem. Carelessness and lack of awareness when placing an application for a personal loan can result in a huge debt trap and lead to a financial crisis that might massively affect your future.
Learning from mistakes committed by others can assist you in moving quickly in life. Thus, do you want to become a smart personal loan seeker? Here, we have put a few common mistakes many often commit when applying for personal loans. Being aware of these mistakes can help you avail the best personal loan offer, may it be through banks or digital lenders like Navi loan or Paytm loan.
Failing to consider your repayment capacity
While a personal loan can assist you in moving out of this financial crisis, it might even cause one. Before you apply for a certain loan amount, make sure you hold the potential to pay the same back. Avoid borrowing beyond your repayment capacity. Take the help of an EMI calculator to determine your loan amount as per your repayment capacity before applying for a loan.
Approaching numerous lenders at once
Every time you avail a loan from a bank lender, a query generally is raised, and it comes up on your CIBIL report along with the date. Such queries reduce your credit score. When numerous such queries are raised in a short time span, you are looked upon as credit hungry. This lowers your chances of personal loan application approval or might result in a higher rate of interest.
Failing to disclose the existing loan details
Existing loan details and other important financial obligations should be disclosed to the bank lender as the loan amount would depend on the commitment to other liabilities. In case you are trying to hide such details, it is probable to result in loan rejection or a higher rate of interest.
Skimming through documents
Ensure to go through the fine print to understand about different terms and conditions linked with the loan. Assess the agreement carefully to understand the applicable interest rate and charges. It is important that you understand all necessary clauses to avoid the chances of any unnecessary charges.
Failing to compare options properly
Before selecting your lender, make sure you do complete research about all loan linked options available. Compare the rate of interest, prepayment clauses and applicable loan charges from distinct financial institutions and banks. It is best to use the financial aggregators for transparency and maximum ease.
Choosing longer repayment tenure for lower EMIs
Personal loan seekers often tend to avail a longer repayment tenure owing to lower EMIs. However, note that the longer the repayment tenure, the higher the amount you require to pay. Thus, it is recommended that you select the shortest repayment tenure possible based on your affordability.
Not reviewing your credit report periodically.
Loan application approval either through a bank or digital lenders like Paytm loan or Navi loan depends upon your credit score. Before placing an application for a loan, you should review your credit score and get any rectifications done. It is because having a low credit score of below 750 lowers your chances of a personal loan application. This rejection further lowers your credit score. Thus, it is crucial to review your credit report before placing an application for a personal loan.
Failing to read the fine print
Lenders may assure you of a speedy loan approval and high loan amount during your personal loan application. Avoid falling prey to these promises. Ensure to go through the terms and conditions to be thoroughly informed regarding the charges being charged upfront. In case the terms are unfavourable as per your repayment capacity, ensure to make the correct choice when selecting the correct loan.
Not reviewing your eligibility criteria
Distinct lenders have distinct eligibility criteria like age, income, employment, residential location, strong credit score etc. Placing an application for a loan after reviewing your loan eligibility criteria can assist you in ameliorating your personal loan eligibility and availing the loan at better terms and conditions.
Personal loan FAQs
How to know your personal loan eligibility criteria for a personal loan?
Lenders generally set an eligibility criterion for a personal loan. You can review your eligibility for a personal loan through online lending platforms.
What is a good credit score to avail of personal loan approval?
A credit score of 750 or more can provide you with a great offer on a personal loan with a low rate of interest and better terms and conditions.
Can you avail personal loan if your credit score equals 600?
Yes, you can avail of personal loan approval even after with a credit score equaling 600. However, the rate of interest, loan amount and other terms and conditions may not be in your favour.
The loan document is extremely long, nearly 40 pages. Should you try to read it thoroughly?
It is necessary to read the whole loan document to better understand what you are getting into. Note that it is a legal agreement, and you will not be able to change any conditions later.