5 Mistakes to Avoid When You Avail a Personal Loan

Personal loans are popular solutions that you can apply for in case of emergencies or to plug monetary shortfalls. They are easily accessible as you can avail a personal loan without having to pledge collateral and many lenders today offer instant financing on easy personal loan eligibility terms too. However, when you’re in a hurry to get funding for your needs you may overlook certain financial best practices, and this can cost you in the long run. To help you stay prepared, here are 5 common mistakes you must avoid when you avail of a personal loan. 

Availing a Personal Loan Without Verifying Your CIBIL Score 

It’s recommended that you check your CIBIL score before applying for a loan. This is because your CIBIL score dictates, to a great extent, whether or not you qualify for funding, and on what terms. Personal loans are not backed by any asset and so, lenders look to your CIBIL score to gauge the amount of risk involved in lending. If you are a creditworthy applicant, having a CIBIL score of 750 or more, you stand a chance at securing a low-interest personal loan. Conversely, if your score is poor, your application may get turned down. 

Hence, it advisable to first check your CIBIL score, improve it if it is below 750 and then, avail a Bajaj Finserv personal loan with an excellent score, knowing that you have the power to negotiate for a favourable deal. 

Selecting a Tenor Without Much Consideration 

Thanks to technology, you can get approved for funding in moments and in the process of applying quickly, you may select the longest possible tenor without giving much thought to your decision. Interestingly, it’s advised that you pick as short a tenor as you can manage as doing so decreases the total interest payable. Conversely, long tenors reduce your monthly installments but increase the cost of borrowing. Hence, you should spend some time with the EMI calculator to arrive at a structure that keeps your installments budget-friendly as well as your total interest outgo to a minimum. 

Overlooking the Fees and Charges Related to the Loan 

As you avail a personal loan, it is crucial to read the fine print and go through the loan’s terms and conditions thoroughly. This is key to avoiding hefty fees and charges, such as administrative, processing, or foreclosure fees, and other penalties that inflate the cost of the loan. By assessing all costs before signing the loan documents, you protect yourself from an unpleasant situation in the future and sidestep expensive solutions simply marketed as low interest personal loans. 

Applying for Multiple Loans Upon Application Rejection 

When you apply for a loan, your lender consults your CIBIL report and score to obtain insights into your credit behaviour. This process incites a hard inquiry, which in turn, reduces your CIBIL score by 3-4 points. Hence, if your application is turned down, it’s best that you do not make multiple fresh applications haphazardly. Instead, take the time out to unearth the reason for rejection. This way you can identify where you fell short, with regards to your preferred lender’s personal loan eligibility criteria and also protect your CIBIL score from further damage. 

Choosing a Lender Solely Based on the Offered Interest Rate 

It isn’t uncommon for borrowers to settle on a lender solely on the basis of the rate of interest attached to the personal loan. However, before you avail a personal loan, it’s important to note that the interest rate is merely one facet of the loan. Other features also play a role in terms of your overall borrowing experience and as mentioned earlier, the promise of a low interest personal loan may just be a trapdoor to a number of unexpected charges. 

That’s why it’s ideal that you avail a personal loan through a lender like Bajaj Finserv who prioritises transparency and has a feature-rich offering. The Bajaj Finserv Personal Loan gives you access to collateral-free funding of up to Rs.25 lakh which you can repay over a flexible, 60-month tenor on simple personal loan eligibility terms. You qualify for the loan if you are a resident Indian citizen aged between 23 and 55 years, with a CIBIL score above 750, possessing a steady job and a regular stream of income. Bajaj Finserv also offers the Flexi Loan facility, which enables you to withdraw funds from your total sanction as and when the need arises, without having to fill multiple applications. 

So, as you avail a personal loan, avoid the common mistakes listed above to enjoy a hassle-free borrowing experience. As a final tip, consider that when you check your pre-approved offer from Bajaj Finserv you get access to an instant, customized personal loan deal.

Must Read: Pros And Cons Of Instant Personal Loan