Avoiding These Mistakes Will Make Your Experience of Availing a Personal Loan a Seamless One!
Personal loan is a preferred financing option to not just meet your financial goals but also bail you out during financial emergencies. Zero requirement to pledge security, flexible repayment tenures of up to 5-7 years, competitive rates, quick processing, and minimaldocuments required for personal loan are some of the important reasons for its rising popularity. However, such ease and suitable features often make you neglect some crucial aspects when applying for it.
Here are 4 costly mistakes you must avoid while you apply for personal loan:
- Not checking credit report periodically
The moment you apply for loan, lenders avail your credit report to assess your credibility and check personal loan eligibility. Some lenders also factor in your credit score to set your interest rate i.e., if you have a higher score of 750 and above you may get the loan at a lower rate and vice versa. Thus, ensure to regularly check your credit report as any mistake in it may lower your score, which further lowers your personal loan eligibility. Ensure to report the mistake to the concerned lender or bureau for correction. Once corrected, your score automatically enhances and thus your eligibility. Prior credit report fetches can also get you instant personal loan, a preapproved option available on your past credit repayment history and credit score.
- Avoiding loan comparison amongst multiple lenders
Not all personal loans in the market come with the same conditions, associated fees, and other aspects. Thus, not considering the available options may fetch you an unsuitable offer. To strike a comparison, ensure to visit online financial markets to avail offers as per your needs and personal loan eligibility. While pre-approved personal loan is a good choice in case of immediate fund requirement, it should be avoided if proceeds are not urgently required because it comes with higher rates than regular personal loans. Crucial aspects you must check when comparing a regular personal loan deal are applicable interest rate, processing charges, maximum loan quantum, repayment tenure etc.
- Applying directly with different lenders
Credit bureaus mention all your credit behavior and application in the credit report’s enquiry section. Applying for a loan directly with the lender is termed as a hard enquiry, which can lower your score marginally. Thus, submitting multiple such direct applications with many lenders within a short time can massively lower your score. As credit score is given the highest weightage when approving your personal loan, you must avoid applying directly with multiple lenders. Instead, approach the online financial market to identify different personal loan offers available to you based on your income, credit score and other eligibility parameters. While such markets also fetch your report from the bureau, such fetches are termed as soft enquiries, which have no negative impact on your score.
- Avoiding your repayment capacity
An optimum EMI indicates lowest interest outgo with no negative impact on your monthly necessary expenses, existing debts, and contributions to your life goals. Choosing a specific EMI without considering your repayment capacity enhances your chances of defaulting in future due to aggressive EMI schedules. Thus, you must use the personal loan eligibility calculator to compute your EMI as per your repayment capacity.
Being an unsecured credit option, personal loan comes with high rates, ranging anywhere between 10-24 percent p.a. based on your loan amount, credit score, tenure, etc. While you are always free to use the proceeds from personal loan as per your wish, employing it to fund unnecessary expensive items, recreational activities etc., usually should be avoided as much as possible due to its high cost. You must avail personal loan just to deal unforeseen emergencies or to meet monetary shortfalls in case of unavoidable financial goals.