Avoid These Mistakes While Applying For Personal Loan

Personal loan applications are quite easy. Lenders have even gone digital and are offering personal loans online. Since the loan has simple eligibility criteria and is also unsecured, you can make an application online and get the loan approved instantly. However, despite the fact that availing a personal loan is easy, there are some mistakes which you should avoid when you are applying for the loan. These mistakes include the following –

1. Not comparing before availing the loan

Almost all banks and non-banking financial companies offer a personal loan because these loans are very popular. Every lender has a different rate of interest charged on the loan. To get the loan at the lowest interest rates, comparing is essential. You should always compare the personal loan offers of different lenders before finalising the loan. When you compare you can see the different interest rates charged and then choose the loan which has the lowest interest rate so that you can save money.

2. Borrowing more than what is required

You should always know the exact amount of loan which you need before applying for it. Since the loan is easily available without collateral you might be tempted to avail of a higher quantum of loan. Don’t make this mistake. Borrow only what is required and not what you can get. Borrowing higher amounts is not financially feasible as you have to pay unnecessarily higher premiums. So, always analyse the financial requirement and borrow what is needed

3. Not judging the affordability of the loan

Personal loans come with high-interest rates since they are unsecured in nature. That is why it becomes important to know whether the loan EMI would be affordable for you to repay or not. An unaffordable EMI would be a financial burden. It would not only incur high-interest charges, but it would also damage your credit score if you fail to repay the loan on time. That is why you should always calculate the expected EMI of the loan before applying. Calculation of the EMI can be done through personal loan EMI calculators which help you in calculating and fixing the most affordable EMI for your loan. So, always use the calculator before applying for the loan.

4. Not paying attention to the terms and conditions of the loan

There are a lot of terms and conditions which are attached to a personal loan. You should always read and understand these conditions to know what to expect from the loan. If you don’t read the finer details of the loan, you might face unpleasant surprises later on. For instance, not knowing the charges associated with the loan would prove financially costly later on. So, always understand the terms and conditions when applying for the loan.

5. Not checking your credit score

Personal loans are offered only if you have a credit score of at least 650. If you don’t check your score before applying for the loan and if the score is bad, your loan application might be rejected. So, not checking your score is a mistake and you should check the score before you apply for the loan.

So, these are the common mistakes which you should avoid when you apply for a personal loan.

A passionate finance writer loves to write about banking and loan services.