Financial Blog

Pitfalls to avoid while availing a personal loan

posted on 2019-08-16 10:26:53 by Admin

A personal loan can be the utmost solution for all your financial necessities. You can use your loan amount to take care of personal expenses, to pay off for an immediate medical procedure, to pay for expenses of a family function such as a wedding or to fund your travel plans. With the onset of online personal loans, the whole procedure of loan application, approval to disbursal is taken care of instantly within a few clicks. With these features, instant personal loans are turning out to be the premium go-to lending product for the majority of the Indian working class. Amidst the temptation and elixir of instant loans, we must remember these few ordinary pointers to make the most out of an Online Personal Loan.

Check Eligibility criteria

One of the important things to remember while applying for a personal loan is the eligibility criteria. Different lenders have different parameters in terms of age, income level, employment type, etc. Checking that you fulfill all the eligibility criteria is the first important step.

Monitor your credit score

Since a personal loan is an unsecured loan the lenders primarily check your credit score thoroughly before reaching any conclusion on your personal loan application. One should regularly monitor his/her credit score and make sure to maintain a good credit score for hassle-free approval of your personal loan application.

Compare and choose

While applying for a personal loan, many of us tend to go with the first available choice due to the dire need of funds. However, before applying its imperative that we browse and compare all available options. With a whole range of financial players flooding the market, chances are that you might miss out on the best offers if you apply without comparing.

Do not skip on Terms & Conditions

One major mistake we all do is skip the fine print on the loan agreement however it is advised that one should carefully go through all the regulations on your personal-loan to understand the terms of your loan and also be sure about service tax, processing fee, and any other additional charges.

Carefully choose your tenure

Most of us think that opting for longer tenures will be beneficial as it would lead to lower EMI amounts which would be affordable. What we overlook is that by opting for longer tenure the borrower ends up paying more in terms of interest charges. If you go for a tenure that is short your EMI amount is automatically spiked. So finding the right balance in terms of tenure is what we should look for as a borrower.

Take a loan only when you need

With their lucrative offers and e-approvals and pre-approvals, personal loans are turning out to be an easy way to avail instant-cash. But what we should remember is that a personal loan is at the end of the day, a debt to be paid off. Do not take a personal loan in case you don't need it. Missing out on repayments could have severe consequences on your CIBIL.

Multiple applications

When in urgent need of funds we tend to apply with multiple lenders for loans but what we don't realize is that too many hard inquiries register negatively on your credit score.