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What mistakes should you avoid when taking a CA loan?

  • Highlights

  • Multiple loans increase risk of default

  • Unplanned repayments

  • Incorrect documentation

  • An unhealthy credit score

Taking a loan customised for CAs is an easy way to finance a host of work-related needs. For starters, it has easy eligibility and offers quick disbursal of funds. Remember, though, that the following mistakes can lead to either a rejection of your loan application or higher EMIs:

1. Going for a loan that is not customised to your need

The loan for Chartered Accountants is a suite of three loans —

a. Personal Loans for Chartered Accountants- Plan a wedding, pay for a vacation, fund your child’s education, renovate your home, consolidate your debt, etc.

b. Business Loans for Chartered Accountants- Manage your working capital, hire personnel, open a branch office, upgrade your software and tools

c. Loan Against Property for Chartered Accountants- Fund any high-ticket purchases Identify the right product for yourself based on your requirements and apply for the right loan. Once you select the product, choose the format in which you want your loan. You can avail a regular term loan or take a Flexi term loan which allows you multiple withdrawals. Going for a general loan may not give you the best interest rate and you may miss out on features and benefits that you could avail of being a chartered accountant.

2. Borrowing multiple loans

a. Acquiring too much debt is risky and can adversely affect your overall creditworthiness, which in turn increases the interest rate on your CA loan. b. Borrowing multiple debts at one go can also put a huge burden of repayment onto your shoulders and can strain your earnings.
c. If you have borrowed more than you can repay out of your income or savings, it can also increase the risk of defaulting on payments.

3. Not planning your repayment in advance

a. Planning your CA loan repayment in advance allows you to be prompt with your EMIs and also improves your credit score.
b. It enables you to have a back-up ready when you are unable to make repayments (in case you face a dip in your income or need to spend on an emergency).
c. Knowing which saving instrument you can liquidate helps you pay on time, without defaulting on your EMIs. Not making timely payments leads to excess charges and a penal interest, which is sure to add to your repayment burden.

4. Not submitting the correct documentation

a. Since it is easy and fast to apply for a CA loan online, professionals often make mistakes in the last leg of the application: submitting the required documents.
b. Submitting incorrect documentation can instantly cause your loan to be rejected, so be aware of the list of required paperwork beforehand and be ready.
c. From your lender’s perspective, documentation is important as it authenticates your identity.

5. Not improving your credit score

a. Your credit score directly impacts your application’s approval, and affects the interest rates that you receive over the CA loan of your choice, be it a personal, business or a loan against property.
b. An unfavourable score decreases your creditworthiness in the eyes of the lender, and makes you eligible for higher rates of interest or lead to a downright rejection of your CA loan application.
c. It is important to take measures to improve you credit score. These include repaying all old debts, not applying for too many new loans at once and not clearing the outstanding amount on your credit card.

Mistakes to avoid when availing a CA Loan

Avoid these mistakes when applying for a Loan for Chartered Accountants to get easy approvals and enjoy a hassle-free application experience.

Mistakes to avoid when availing a CA Loan

6. Settling for the very first lender

a. Urgent monetary needs may tempt you to borrow from the very first loan provider you find. However, it is advisable to analyse the market closely for the best CA loan, and avoid settling for the first lender that you meet.
b. Doing your research thoroughly can educate you about the interest rates prevalent in the market, help you understand which lender is more transparent with all fees and charges, and identify one that provides good service.

c. You can then compare the CA loan features amongst providers and choose the one that is most affordable and convenient for you.

7. Not viewing the terms and conditions

Fine print of the loan document contains details about prepayment penalties or late payment charges. If you ignore the terms of the loan, you will not come across the charges that can increase the cost of your loan significantly. It is a good idea to ensure that the fine print answers the following questions:
-How much interest do you have to pay and what is your total debt?
-What is the tenor of the loan?
-What is the penalty for skipping/ late payments?
-Is there a prepayment facility and cost with it?
-Are there any other charges/fees associated the loan?
-What is the mode of repayment?

8. Disregarding the tenor of the loan

It is tempting to not pay attention to the tenor of the loan because it is something that you have to deal with only in the future. But, the tenor is crucial. For a personal or business loan for chartered accountant, a short or medium tenor may be feasible. But, when it comes to a loan against property, you need a long, flexible tenor. Ensure that your loan offers a tenor according to your ability to repay. You must not be financially stressed because you agreed to an inappropriate tenor.

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