Personal loans are easy to acquire and very convenient as well. They can help you deal with a number of essential finances. But getting a loan approved can also be tricky. There are many mistakes you can make when applying for a character; to lend.
Here are some common mistakes to avoid when looking for a loan.
Â·Don’t compare loan options
It is prudent to compare your credit options before submitting your personal loan application form. Don’t be fooled by bank credit offers and start borrowing just because they sound good or you like how they work. There is always another loan option that is better than the general horde of loans available in the credit market. We suggest that you carefully explore all the options available to you and choose the one that gives you the best returns at the lowest cost.
Â· Not assessing your CIBIL score
Your credit score plays a vital role in guaranteeing the lender your ability to repay the loan because personal loans do not require collateral. If you have a good and favorable credit rating, it means you have greater repayment capacity. This helps in getting more lucrative loans from lenders with more favorable terms. Likewise, those with low credit scores have a low probability of obtaining credit.
Â· Don’t settle for a high interest rate
No matter how good the banking incentives and lures are, don’t settle for a high interest loan. It is important to assess the real usefulness of the loan and its financial impact. You have a number of options to choose from ranging from secured loans to unsecured loans. Remember to evaluate every aspect before taking out a loan.
Â· Failure to make repayments on time
It is important to repay the loan amount on time for a number of reasons. Whenever you fail to pay your loan on time, it negatively affects your credit score. This can easily hamper your future prospects for loan availability. It is recommended that you ensure optimal financial monitoring and effectively manage your credit needs. Make sure you pay off your loans on time, either by setting a reminder on your phone or ensuring automatic payments so you don’t have to worry about payment deadlines.
Â· Disregard your budget
While applying for a loan may seem like a way to deal with immediate finances, you should also consider accumulated debts and overdue payments. It is never a good thing to be deeply in debt as it affects your personal, social, mental and financial well-being. Always manage your financial outlook responsibly and exercise due diligence. Make sure you are not borrowing an amount that exceeds your repayment capacity. Ideally, the loan amount should not exceed 15-25% of your salary. It is best to open a parallel savings account to help you meet your repayments.
Ultimately, you can face an urgent need for a loan at any time. Make sure you exercise enough caution and avoid making the aforementioned common mistakes when choosing a credit package.
(Rohit Garg is CEO and Co-Founder, SmartCoin)
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Posted: Thursday October 14, 2021 10:43 IST