Personal loans tend to be of great use when one has to meet unforeseen or urgent financial expenses. Considering that a lot could be going on in the mind of the borrower at the time of seeking such kinds of loans, it is understandable that they make some mistakes along the way. This article will essentially take you through some of the common mistakes made by potential borrowers while indulging in the process of taking a personal loan so that you can avoid them while you’re trying to arrange those emergency funds for your needs. Read on to know more.
Borrow loans beyond their repayment capacity: Due to the fact that some forms of personal loans do not need any form of collateral for it to be granted, people tend to take on more loans than they can repay. The same would eventually cause an undue burden of credit upon the borrower and could also become a cause of them defaulting, which has a set of negative implications of its own. It is due to this reason that one must try to live within their means by not letting the EMI obligations exceed a particular threshold. As a rule of thumb, one must give away 10% of their net yearly income at the most as EMI instalments.
- Applying for a loan from the first lender they come across: It is advisable for an individual to compare the personal loan details and terms laid out by different lenders so that they can apply for a personal loan that they feel most comfortable paying. If a future borrower undertakes such a task, they might be able to save up on interest amounts and, ergo, it will be easier for them to get out of debt.
- Submitting way too many personal loan application forms: In a desperate situation, where one needs money fairly instantly, they can fill in multiple personal loan applications and submit them to various lenders. And, thanks to portals such as Finserv MARKETS, one can do that in a matter of a few moments. That is not to say that such portals are to blame. In fact, if used wisely, portals such as Finserv MARKETS can be extremely useful to those who are looking to apply for personal loans and credit cards quickly and in a hassle-free manner. However, one must remember that every time a loan application is received by an executive representing the lending institution, they instantly pull up their credit reports, and every time such a thing happens, credit bureaus such as CIBIL or Equifax tend to make a note of the same. If the credit history inquiries are received by these credit bureaus way too many times, the borrower, who is essentially causing the lenders to seek that kind of information several times, is deemed to be credit hungry. Once a potential borrower has been branded as a credit hungry individual, they tend to also lose out on credit score points, making it difficult for them to secure a personal loan in the near future.
- Ignoring the fine print: One must always check the fine print of the personal loan they are considering taking. Additionally, one must make sure that they are aware of any charges that have not been discussed explicitly when the initial conversations surrounding the same were happening. It is due to this reason that a future borrower must always go through the aforementioned document in great detail so that they can prepare for, or even avoid, any unpleasant surprises in the future.
- Lack of an established balance between one’s loan repayment tenure and EMI payments: One can always lower their EMI obligations by opting for a long personal loan repayment tenure. While this will most certainly reduce their personal loan monthly EMI obligations and subsequently reduce their financial burden, they must remember that such a step must only be taken if they anticipate difficulties paying off the loan within a shorter frame of time and not simply because they have that option.
A personal loan can bring a person the financial relief that they may have been looking for if they are used wisely. It is due to this virtue of a personal loan that one must know and understand everything about them and the ideal way of applying for a personal loan so that they can avoid any kind of pitfalls. You can always learn more about the same on portals such as Finserv MARKETS, which help people secure the kind of credit they need almost instantly.