Personal loans are simple to acquire and quite convenient too. They can help you in meeting a number of essential finances. But getting a loan approved can also prove to be a tricky affair. There are many errors that you can make while applying for a persona; loan.
Here are a few common mistakes to avoid when seeking a loan.
·Not comparing lending options
It is prudent to compare your credit options before submitting your personal loan application form. Don’t be allured by a bank’s credit offerings and start borrowing just because they sound good or you like how they operate. There is always another lending option that is better than the general horde of loans available in the credit market. It is suggested that you cautiously explore all the options that are available to you and choose the one that gives you the best returns at the lowest cost.
· Not evaluating your CIBIL score
Your credit score plays an essential role in guaranteeing the lender about your capacity to repay the credit loan as personal loans do not necessitate collateral. If you possess a good and favorable credit score, it means you have greater repayment ability. This helps in obtaining more lucrative loans from lenders with more beneficial terms. Similarly, those with a low credit score have low probability of receiving credit.
· Don’t settle for a high interest rate
No matter how good the incentives and banking lures sound, do not settle for a loan with a high interest rate. It is important to evaluate the actual utility of the loan and its financial impact. There are a number of various options to choose from ranging from secured to unsecured loans. Remember to assess every aspect before settling for a loan.
· Not making timely repayments
It is important to pay back the loan amount on time for a number of reasons. Every time you miss paying your loan on time, it reflects badly on your credit score. This can easily hamper your future loan availability prospects. It is recommended that you ensure optimum financial monitoring and manage your credit requirements efficiently. Make sure that you repay your loans on time either by setting a reminder on your phone or ensuring automatic payments so that you don’t have to worry about payment deadlines.
· Failing to consider your budget
While applying for a loan may seem like a way to manage immediate finances, you must also consider the piling debts and outstanding payments. It is never a good thing to be deep in debt as it affects your personal, social, mental and financial well-being. Always manage your financial prospects responsibly and exercise due diligence. Make sure that you don’t borrow an amount that supercedes your repayment ability. Ideally speaking, the loan amount should not be more than 15-25% of your salary. It is best that you open a parallel savings account to help you meet your repayments.
At the end of the day, you can face an urgent loan requirement anytime. Make sure you exercise sufficient caution and avoid making the aforementioned common mistakes while choosing a credit package.
(Rohit Garg is CEO and Co-founder, SmartCoin)
