Personal Loans have become the talk of the town because they provide immediate cash to the individual. It can be easily used for medical emergencies, dealing with educational funds, weddings, cash emergencies, debt consolidation or something else like planning an urgent trip. People prefer this loan because of various reasons like excellent rate of interest, and easy repayment tenure. There are various things a person needs to note down while making an application for this loan. A long and short-term personal loan both have their own aspects for loans and policies. Some minor mistakes may lead to the rejection and disapproval of your entire loan amount. So, in this blog, we come up with some easy-to-know mistakes you can avoid at the time of applying for a Personal Loan.
Top Mistakes to Avoid for Personal Loan
Ignoring the Criteria of Eligibility
Some people don’t check the basic eligibility criteria at the time of applying for their personal loan. It’s one of the major mistakes you should know. Next time, when you visit your lender or bank, check the eligibility first as it’s the foremost thing that decides whether your loan will be approved or not.
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The requirement of eligibility may vary from one lender to another. Most of them follow these eligibility guidelines:
- The individual should be a citizen of India.
- The age is between 21 and 60 years.
- Employment certificate or need a valid proof of income (Salary slips are also considered.)
- A credit score of 750 or above is necessary
- Bank Details
- PAN number
- Valid Bank account number
- Identity proofs
Applying for More Amount than Needed
It’s worthless to borrow loan more than you need because, at a later stage, you need to repay the same to your lender with a stipulated interest amount. This challenge is very big as it may end you up with a financial burden. It also becomes crucial for short-term Personal Loans.
If you miss monthly payments with your interest rates with delayed submission of your debts, may lead to a negative credit score. Sometimes, such issues end in higher interest rates for other loans that you borrow in the future.
It’s one of the major mistakes you can avoid. So, maintain a healthy relationship with your lender and pay your debts on time within a stipulated tenure.
Choosing a Longer Tenure for the Repayment
Some people think that a longer tenure for the loan repayment will be beneficial but it’s a mistake. A loan tenure is the complete time needed for the repayment of your loans. You should consider all your financial status before applying for a Personal Loan. A longer tenure of loan repayment sometimes impacts your monthly budget and payments. It will offer you a higher rate of interest and you were in financial stress that you have to pay loans the next coming month. It may be very heavy in your pocket.
Didn’t Focus on the Credit Score
A credit score or CIBIL is one of the most crucial factors while taking any type of loan be it secured or unsecured. It’s a three-digit number that contains all your financial history. It helps the bank or the lender to know about your status. It may lead to the rejection of the application if your credit score is below 750. It helps the financial institution to check the creditworthiness, credit utilization, new credit, and length of the credit history with the payment history. So, ignoring Credit score or CIBIL can bring you problems and rejection of your loan approval.
Not Checked the Terms and Conditions of the Loan
Before signing on the Loan document, you should check all the documents including the Terms and conditions. The fine print of any loan includes various points that a borrower should know. It’s like an agreement between a bank/financial institution and the individual taking the loan. The terms and conditions may vary from one lender to lender. It might be short or very lengthy based on their respective loan policy. So, if you want a lower interest rate, easy documentation and quick money disbursal, you should check all the terms and conditions of the bank or the lender.
Once you read the fine print of the company, you will automatically know the interest rate, tenure for repayment, agreement and policies, discounts, offers and other things.
Ignoring Penalities on Late Payments
It’s another important aspect an individual must know before applying for a Personal Loan. The penalties may vary from one bank or financial institution to another. Some lenders have prepayment penalties, which are levied if you pay the loan before the due date, while some consider monthly EMIs. If you close your loan before the due date, you may be charged as per the penalty policy of some lenders. So, it becomes very necessary to check the complete guidelines related to payment penalties.
Summary
Personal Loans are one of the easiest ways to finance your emergency needs. You can easily get a loan on your wedding, vacation trip, medical emergency, or any financial crisis in your home. A person should read the privacy policy, eligibility, debt consolidation, penalties, tenure etc to stay away from the risks and dangers of a loan.
