What Are the Most Common Mistakes That You Must Avoid While Taking a Personal Loan?

There are a lot of financial institutions who provide financial aid in the form of personal loans, whenever needed. A personal loan is one of the best options you can avail when you are in dire need of some funds. A personal loan can be beneficial in an emergency situation because the proceeds of a personal loan can be used in any way that the borrower wants to use. 

But availing a personal loan is not as easy as it sounds. There are proper procedures in place that you need to follow before you avail a personal loan. When you apply for a personal loan, you need to make sure that your personal loan application is not rejected. A lot of people usually make mistakes during their personal loan application. If you are thinking about availing a personal loan, here are some mistakes that you can avoid: 

1. Not being clear about the loan amount that is required: 

It is necessary that you are fully aware of why you are taking a personal loan. Most personal loan borrowers do not have an idea about how much money they will use. It is necessary that you apply for the exact loan amount. If you have an exact idea about how much loan you need, the lenders will have more confidence in you and will readily approve your loan application. 

2. Not comparing the interest rates: 

This is another mistake that you should avoid making. You should always check the interest rate that you are being offered by different financial institutions and choose the one which is offering you the lowest personal loan interest rates, as long as the financial institution in question is reputable and has good business practices and good customer service. This is because the interest rate that the financial institutions offer will affect the interest amount that you pay. 

3. Not checking your credit score: 

It has been made mandatory by the Reserve Bank of India to check the credit score of all the applicants before approving their personal loan applications. The banks will reject your loan application if you have a credit score or a CIBIL score below 750, whereas, the Non-Banking Financial Companies are much more flexible in terms of credit score. It is crucial that you check your credit score before you apply for a personal loan. 

4. Not disclosing your existing debts: 

It is vital that you disclose all your existing debts and liabilities to your lenders. If they find out about it through your credit report, they might lose trust in you or they might even reject your personal loan application. If the lenders are unaware of your other loans, they will set an EMI amount based on your income which will, in turn, result in a huge outflow of cash. 

5. Not considering your loan repayment capacity: 

This is, by far, the most important thing that you need to consider when you apply for a personal loan. You should take into consideration your monthly income and expenses before you agree on an EMI amount. Before you apply for a personal loan, it is necessary that you prepare a proper budget and stick to it as much as you can. Remember that apart from paying the EMI for the personal loan, you also need to save funds in case of an emergency. 

The aforementioned points should be kept in mind before you avail a personal loan. Even the smallest of mistakes can lead to a personal loan rejection. Always make sure that you avail a personal loan from a financial institution who has a good reputation in the market as you do not want to fall into a soup later on.

Must Read: Here’s What you Need to Know about Personal Loan Offers