Are you applying for a personal loan? You should definitely bypass some mistakes that are common and often hamper smooth sanctioning of personal loans to borrowers. Personal loans come in handy for meeting various requirements whenever you need funds urgently. They are unsecured loans which do not need any collateral and can be obtained with minimal documentation. Personal loans are usually sanctioned and disbursed faster than other loans although since they are unsecured loans, they have higher rates of interest as compared to secured loans.
Here are the mistakes that you should bypass at any cost-
- Not analysing your repayment ability- Just because you are eligible for the personal loan on paper does not mean that you should jump into it straight away. The biggest mistake that you can make is to not analyse your ability to repay the personal loan. Taking a loan amount that you cannot afford to repay will land you in a financial soup where you will miss on EMI payments and this will hamper your credit score overall. Use an online EMI calculator to work out the amount that you can safely apply for within your own repayment abilities.
- Applying everywhere for a personal loan- Another huge mistake that people make is running out of patience, quite literally! They end up applying to multiple financial institutions for personal loans. However, hard inquiries are initiated by lenders each time you apply and these queries will naturally show on your credit report. Your credit score will be affected negatively as a result. Applying almost everywhere for multiple loans indicates that the borrower is hungry for credit and this is often disastrous when it comes to getting lenders to sanction personal loans.
- Hiding details of other liabilities- There are situations where people have not disclosed details of their existing debts and other liabilities to their lenders while applying for personal loans. Do not fall into this trap. Always let the lender know about your existing loans and debts without hiding any important information. You should be open about these aspects in order to increase your chances of obtaining a personal loan.
- Not reading the loan documents carefully- Most people only bother about the personal loan amount and rate of interest without carefully reading loan documents. This is a big mistake. Make sure you read all documents carefully in order to avoid unpleasant surprises in the future. Check the terms and conditions minutely and get everything clarified by your lender. Always check other fees and charges including processing fees, pre-closure charges and other costs that you will incur.
- Not comparing lenders- You should never apply for a personal loan without comparing available offers from multiple lenders, particularly in terms of interest rates and other terms and conditions.
- Choosing a longer personal loan tenor- Many people make the mistake of choosing longer personal loan tenors in order to pay lower EMIs. However, this leads to you paying more interest in the long run on your loan. As a result, try and choose the smallest possible loan tenor in order to keep interest costs on the lower side.
- Ignoring your credit score prior to applying- Approvals for personal loans depends on the credit score and report alike. As a result, prior to applying, check your credit score in order to make sure that you are eligible to get your personal loan sanctioned. Check your credit report and in case there are errors, get them corrected in order to improve the score. Also, if your credit score is low, you can take steps to boost the same before you apply.