10 Common Mistakes You Should Avoid While Applying For Personal Loan
Applying for a personal loan without comparison
It is one of the most common mistakes people make when applying for a personal loan. People tend to apply for a personal loan with the bank they have bank account with, without shopping around and comparing rates from other lenders. Features like rate of interest, processing fee, prepayment charge, repayment tenure, quantum of loan etc. vary from lender to lender. You may get a personal loan at more favorable terms from other lender than the lender you are applying with. It is important to research for the best loan in the market and make informed decision. You should conduct detailed market research to know the pros and cons of personal loans offered by different lenders and apply with the one that offer the best deal.
Taking more than one personal loan
As getting personal loan has become simple and fast, many borrowers are prone to borrowing credit, especially personal loan, for every small reason. However, repaying more than one loan can be a difficult proposition. It not only pressurizes you financially, but also dents your credit score. Therefore, don’t run the temptation of getting more than a loan for any small financial requirements.
Ignoring the importance of credit history
Lenders use your credit history to determine your eligibility for a personal loan. As personal loan is an unsecured loan, it is very important to know how responsible you have been with your financial transactions. If you have a proven record of maintaining financial responsibility, you would have a good credit score and lender would consider you as a less risky customer. On the other hand, if your credit score is low, your application may get rejected. Before applying for a personal loan, you should check your credit score to make sure your application will get approved.
Hiding details of an existing loan
While applying for a personal loan, you must be honest about your financial details, especially about your income and other liabilities you might be having. Lenders will anyhow find out about the information about your financial details. Hiding information or forging documents will lead your personal loan application to rejection. Therefore, it is important to reveal every financial detail to the lender.
Opting for a long tenure
Longer the tenure, the less EMI. Thinking that they can easily pay the small EMI on a longer tenure, people end up paying a higher interest rate. As per flow of your income, choose for the shortest tenure that is comfortable for you and doesn’t eat a big chunk of your monthly income.
Multiple loan applications
While looking for a personal loan, borrowers apply with many lenders to find the best deal. Every time you apply for a personal loan, the lender checks your credit report with credit bureau and the credit bureau adds this inquiry to your credit report. If a borrower applies with many lenders simultaneously, lenders may doubt his/ her intention and consider him / her as an irresponsible customer. In this situation, chances of your application for a personal loan getting approved are trimmed and your credit score takes a beating. You should conduct online research and comparison to avoid this kind of situations because lenders don’t know about the soft searches.
Borrowing more than your repayment capacity
As applying for a personal loan is fast and hassle free now, people tend to borrow big amount. Don’t run the temptation of over borrowing, because you might not be able to repay the loan on time.
Signing blank documents or form
After we apply for a personal loan, bank representative visits to the borrower to collect the documents and get the form signed. We become lazy and sign bank forms, leaving it to the executive to fill in the detail. Avoid doing this because when you fill the form yourself, you will know the terms and conditions in fine lines and it will save you from getting into potential trouble. In a personal loan process, you should get involved in every step.
Ignoring the fine prints
While filling any form, people tend to ignore the fine prints just considering them unimportant. Fine prints on a loan application may contain the fees and charges that borrowers need to pay in certain conditions. For example, if you have been approved for a personal loan of Rs. 4 lakh, you may get only Rs. 3,95,000 to your account after some defined deductions. As other than processing fee, there are other charges as well, such as late payment charge, cheque swapping charges, stamp duty & other statutory charges etc.
You should read the entire loan application carefully and if there is any dispute or misunderstanding, you should report them. Without reading the fine prints, if you have signed the form, you would have to fulfill all the terms and conditions defined.
A personal loan application without any mistakes and discrepancies will lead to a faster and hassle-free approval.
These are the some of the most common mistakes personal loan borrowers make while applying for a personal. You should avoid making these mistake to get an instant and hassle-free approval and save yourself from future disputes.