5 mistakes to avoid while applying for a Personal Loan

2. Not verifying your credit score

Since your personal loan does not require a collateral, your credit score plays an important role in assuring the lender about your ability to repay the loan. A higher credit score suggests better repayment ability and may prompt the lender to offer more favourable terms. The opposite holds true for those with a low credit score. Verify your credit score before you apply.

Additional Read: When Is It A Good Idea To Avail A Personal Loan

3. Not choosing the right tenor

You may wish to close the personal loan sooner rather than later. And this may mean choosing a shorter repayment term with higher EMIs. This strategy may have its pros and cons, but it is advised that you be practical. Don’t choose an unnecessarily high EMI plan, which could make your instalments unaffordable. A strain on your finances may even lead to loan default. Choose a repayment term that is realistic and reasonable for you.

4. Not checking the fees and charges

Most loan providers levy certain fees and charges when disbursing the personal loan. These can be processing fees, administrative fees, and foreclosure fees. Be aware of the charges involved and save yourself rude shocks such as high foreclosure penalties and other fees later on. Read the terms and conditions section of the offer document very carefully. Proceed with the lender only if you are happy with the fee structure.

5. Not preparing a budget

It is important to prepare a budget before you apply for a personal loan. You may be entitled to a high personal loan, but that does not mean you must borrow more than what you need. Calculate how much you require before you apply for a personal loan.
One more mistake that applicants often make is not keeping all their documents handy. Here’s a handy checklist of all the documents you need while applying for a personal loan.

Consider all available personal loan options and avoid these commonly-made mistakes. Check your credit score and see who offers the best repayment terms.