A Personal Loan is a perfect solution to all your financial needs. Today with the options of digital banking, it has become a child play for anyone to apply or find the best possible deals on personal loans. However, you should be cautious while applying for a personal loan, as a single mistake or misinformation in the loan application can land you some financial trouble. Lack of awareness or an even a silly carelessness while applying for a loan, can get you entrapped in a big debt, creating a financial crisis, which might impact your future. Personal Loan Interest Rates in India can go from reasonable to unreasonable depending on the financial institutions that you might choose.
Applying for a loan is not a very complex process, but one can never be too cautious, and you should never take chance in the matters of money, especially if it’s your first time. So we have listed some of the most common mistakes which you can avoid by simply reading this article.
5 Common Personal Loan Mistakes You Should Avoid
Not giving enough Time on Research and Comparison
Research is one of the most crucial things while applying for a loan. There are multiple banks in the country, which gives a rise to competition. With dozens of banks in the market, they offer some of the best loan deals. So make sure to study all the options that you have in the market. Make sure to compare banks based on these interest rates, features, and other details.
Most applicants skip this step and jump to the first available option, which can end being a really poor choice. Always analyze interest rates, HDFC and ICICI currently offer interest rates of only 11 – 14 % which is a very reasonable price.
Not Considering Repayment Capacity
Most applicants have a false dilemma while applying for a loan, that is sanctioned just once for every individual, so they end up asking for a huge amount, without considering whether they would be able to repay it or not. Avoid borrowing beyond your affordability as it can land you in a financial crisis. You can use EMI calculators online of analyzing and selecting the perfect loan amount, in accordance with your capacity, before applying for the loan.
Hiding Information from your bank
Most applicants especially the newbie’s feel afraid to share all their liabilities with the bank, fearing that this might discourage the bank from investing in their loan application. However, they forget that bank run down a private check on all applicants to verify and analyze the information that they have disclosed to them. So sooner or later the finance is able to identify all your lies and liabilities. This might make them loose their confidence in the applicant. So, rather than being over smart and silly, act matured and be as transparent about your financial conditions and needs as possible with the bank officer.
In case you have any exciting loans or obligations make sure to share those details with the bank, as they might offer you a better plan, or advice to work things better in a different way.
Opting Longer Tenures with Lower EMI’s
Borrowers often opt for longer tenures as they involve lower EMI’s but they forget to consider that during these longer tenure periods they will be wasting so much of money on the interest of their loan. So, remember you will be paying a higher amount if you opt for a longer tenure. So technically you should consider opting for shorter tenures, depending on your monthly financial capacity. Avoid opting for a high EMI as well, as for some reason if you are unable to pay the installment you will be considered as a bank’s defaulter.
Ignoring Your Credit Report
Most banks check the credit score of individuals before granting them the loan. You can simply check your credit score online, using any bank’s website. A good credit score usually ranges between 300 – 850 higher credit score represents higher creditworthiness. Make sure to check your credit score before applying for a loan, in order to make the necessary chance which can help you get it the ideal range to get the loan. A credit score can directly affect your chances of getting an approval or a disapproval of your loan application.
These are some of most common mistake made by applicants while they are applying for a personal loan. As you can see these mistakes can be easily avoided without any trouble. Another thing that you can keep in mind while applying for a loan is to make sure that you go through all the documents thoroughly before signing anything, to ensure that you agree with everything and all the details mentioned the form is also correct.