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8 Mistakes You Should Not Make While Applying for a Personal Loan

IndianMoney.com Research Team | Posted On Friday, June 28,2019, 06:03 PM

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8 Mistakes You Should Not Make While Applying for a Personal Loan

 

 

A personal loan is the best way to address financial emergencies. Availing a personal loan is really easy today, as banks offer pre-approved personal loans along with fast approval of loan applications and disbursals. However, personal loans are expensive and a single mistake may prove costly, impacting personal finances. Listed below are some of the mistakes that you must not make, while applying for a personal loan.

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8 Mistakes You Should Not Make While Applying for a Personal Loan

1. Lack of Clarity Regarding the Purpose of the Loan:

Carefully evaluate the purpose and utility of the personal loan, you are about to avail. If you are in no urgent need of cash and applying for a loan only to finance a lavish lifestyle, do think twice. Personal loans charge high interest. Make sure to check the total cost of the personal loan and the reasons for availing it.

See Also: Types of Personal Loans

2. Borrowing Beyond Repayment Capacity:

Banks sanction personal loans to people with good credit score. Do not apply for a personal loan only because you are eligible for it. Carefully evaluate your requirements and ability to repay the loan.

The personal loan EMIs must not exceed 10- 15% of your monthly income. Maintain a low debt-to-income ratio to pay off debt easily. Otherwise, you may land in a debt trap.

3. Accepting the Loan Without Comparing with Other Lenders:

A personal loan is easy to avail as the application is approved quickly and the disbursal of funds takes lesser time than other loans. A personal loan is the best solution to fund emergency needs. However, that does not mean you will accept any loan offer which comes your way. Compare lenders online based on various parameters like tenure, interest rate, processing fee and so on to make an informed decision. 

See Also: Personal loan in India     

4. Not Checking the Eligibility Before Applying for the Loan:

While applying for a personal loan, you must go through the eligibility criteria set by your lender. Banks offer personal loans to those with good credit score as these are unsecured loans. Lenders determine the personal loan interest rate and tenure based on various parameters like job stability, nature of employment, income, age and repayment history.

5. Not Offering Clarity on Other Debts:

An applicant must also reveal details of other existing loans, while availing a personal loan. Hiding details on your other loans may lead to rejection of loan application as banks will find out details of other loans, through CIBIL. If you urgently need a personal loan and can repay without defaulting on other loans, then try and explain your financial position to the bank. Seek a loan from the bank where you have a good relationship.

See Also: Get Personal Loans in Emergency Situations

6. Ignoring credit history:

Credit history is the most important factor which banks consider, before sanctioning a personal loan. Your credit history reflects creditworthiness and the way you manage debt and personal finances. A good credit score convinces the bank that you are a responsible borrower. Good credit history can get decent terms on your personal loan along with a lower rate of interest.

7. Applying for Multiple Loans at the Same Time:

Do not apply for multiple loans at different credit institutions. This may damage your credit score and banks perceive you as credit hungry. More often than not banks reject such personal loan applications.

See Also: Personal Loan In Bangalore

8. Signing the Loan Without Reading the Bank Terms:

Many borrowers ignore terms and conditions and sign the personal loan document, without even looking at the loan agreement. Make sure you read the fine print before signing the loan documents like pre-payment charges, late fees and so on. Once the loan document is signed, you have to pay for your ignorance. 

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