A personal loan can cater to immediate monetary needs. Whether in an emergency or otherwise, you can get quick cash without any collateral. The procedure from application to disbursal is a breeze with the top Indian banks. A good way to get the most out of this product is to learn about a few common mistakes that most borrowers make. It will help you:
- Stay protected against debt traps
- Make an informed financial choice
- Avoid unpleasant surprises down the line
- Manage the loan better over time.
Check a host of factors like interest rates, fees and tenure flexibility. Further, below are a few errors you must fix ahead of time to ensure minimal hassle.
1. Poor Credit Score
A personal loan is not secured by collateral. No co-signer or guarantor is required. The bank will simply determine your eligibility based on your creditworthiness. Make sure your credit score is 700 and above. This is considered ‘good’ and can assure the lender of disciplined financial behaviour. It might also help you score lower interest rates. Pay your bills on time, use your credit card actively and review your credit profile daily. These can help boost your score over the next 6-8 months.
2. Multiple Applications
Several loan applications within a short interval equals to many hard inquiries. This lowers credit your score and reflect credit hungry behaviour. It can adversely impact your loan application process and create a negative impression. Pick the best bank loan by comparing the terms and conditions, eligibility, documents and overall procedures. Read the policies carefully can choose the one that best meets your requirements.
3. Overlooking the Miscellaneous Charges
Suitable loan tenure and interest rate are not enough to determine if the loan is perfect for you. Make sure to know the associated charges with different services. For example, check the rates for EMI bounce, repayment instrument swap, duplicate no-objection certificate, stamping and document retrieval. Make sure the PL EMI calculator is free to use. Having a clear idea will help you prepare your finances accordingly.
4. Choosing a Long Tenure
Try to pick a small tenure if your income allows. This can save you from paying high-interest rates over a long period. But a short-term loan would mean higher EMIs too. So, use an online loan calculator to get an idea of the monthly instalments. This will help you plan the expenses accordingly without tugging at your pocket.
5. Over-Borrowing the Loan
This is a result of overestimating your repayment capacity. Instead, figure out the expenses and create a budget first. Use a personal loan EMI calculator to reach an amount that can be paid easily without entering a debt trap. Try not to borrow beyond your financial needs. Now you can avoid penalties for late payments that end up hurting your credit score. Being a little calculative can go a long way to reducing financial strains.
Get a personal loan without hiccups by putting these simple tips into action. Consult your bank executives to clear queries before applying.