Personal loans are a convenient option to meet a number of financial requirements, but ever wondered how can you get the most out of your personal loan? Start by learning about the common mistakes that people make with their personal loan applications.
Some mistakes to keep an out for when starting your personal loan application journey are listed here:
1. Not comparing lenders
Compare the various options available to you before filling out your personal loan application form. Are you tempted to borrow from your bank just because you like how it functions? Or is there another lender offering better terms and conditions? Compare lenders and see if you can get the same loan at a lower cost. For instance, Bajaj Finserv offers some of the largest personal loans, of up to Rs. 25 lakh, at attractive interest rates.
2. Not verifying your credit score
Since personal loans do not require collateral, your CIBIL 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 you 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. 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. You can use a Personal Loan calculator to estimate your monthly EMI well in advance and plan your repayment accordingly. 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 unpleasant surprises 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 common mistakes. Check your credit score and see who offers the best repayment terms.
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