Saturday April 4, 2020
Home Business Applying for ...

Applying for a Personal Loan? Don’t Make These 9 Mistakes

Most personal loans are unsecured, which means that lenders do not ask for security or collateral during loan approval

0
//
Loan
Longer loan repayment period translates to lower equated monthly installments (EMIs). However, this also implies more money as interest payouts, thus, raising the cost of the loan taken. Pixabay

Personal loans may be sought for myriad reasons like funding a dream vacation, paying off sudden medical expenses, house restructuring, etc. And, getting a personal loan these days is not difficult considering several financial institutions are marketing their loan products at competitive rates. Moreover, the freedom to repay the loan by choosing a loan tenure suiting your requirements makes it even more attractive.  

Common Personal Loan Mistakes

You can apply for a personal loan online or go to the nearest branch of the lender to fill a loan application form for the loan amount. However, irrespective of the ease of getting personal loans approved and sanctioned, there are common mistakes that borrowers make while filling in their loan application forms. Some of them are:

  • Unsure about the loan amount: Easy availability of personal loans does not mean you can get a loan by filling out any random number as loan amount. You need to be aware of the loan amount you are eligible to get based on the eligibility criteria of the financial institution and the documents you can submit. Filling an amount that is higher than the amount you are eligible to can lead to application rejection of your application or higher personal loan interest rates.

 

  • Not comparing lenders: A lending institution may promise you a pre-approved loan within 15 minutes of the loan application. However, this must not be the sole cause of ignoring the interest rates and benefits offered by other lenders in the market. Comparing interest rates helps as you may gain from cheaper personal loans availed by others. A careful observation of your potential lender’s terms and conditions will ensure considerable savings.

 

  • Not taking care of your credit score: Most personal loans are unsecured, which means that lenders do not ask for security or collateral during loan approval. It explains why lenders are inclined to know your credit score. You must maintain a high credit score for quick loan approval apart from getting the loan approved at low-interest rates. 

 

  • Opting for prolonged loan tenure: Longer loan repayment period translates to lower equated monthly installments (EMIs). However, this also implies more money as interest payouts, thus, raising the cost of the loan taken. It is essential to adopt an aggressive approach when it comes to loan repayment to benefit from the lower burden of interest.

 

  • Ignoring excess charges: Many lenders charge extra under the guise of providing better online service or additional levy charges as management fees or processing fees. Check for the supplementary costs involved. Also, a potential high windfall in future means that you would like to prepay your loan. If the lending institution charges extra for foreclosure of the loan amount and if so, how much! 

 

  • Signing loan form blindly: Be it for a personal loan or any other purpose, it is essential to read the fine print. Many people sign the loan document without making sure of the loan details. The misconception that your lending institution can do no wrong can spell a substantial financial loss in the long run. 

 

  • Hiding Existing Loan Details: If you have taken another loan and are repaying it currently, it is vital to share details about the same. Withholding information about your current loans can adversely impact your credit history, thus, making it difficult for you to apply for loans in future.
Loans
Personal loans may be sought for myriad reasons like funding a dream vacation, paying off sudden medical expenses, house restructuring, etc. Pixabay
  • Withholding loan details with family members: Bearing responsibility is one thing and hiding the burden of loan from your loved ones is different. Before applying for a personal loan, you must discuss its details; including EMI payout information the loan interest payment each month may affect your family’s budget. 

ALSO READ:  Reliance Jio Grabs Top Subscription Base Despite Voice Call Charges

Apart from the above, rushing for a personal loan without checking the lender’s credentials may be risky. It happens in cases when fraudulent lenders announce nominal rates to entice new customers. It is beneficial to approach a lending institution you have a long-standing relationship and ask them for the prevalent personal loan interest rates to avoid financial hassles in the long run. 

Next Story

A Beginner’s Guide to Building Credit

Building your credit requires discipline and sticking to a plan

0
Credit
A Credit card is one of the most used means of building credit for beginners. Pixabay

Creating a credit from the start is such a hectic task. Not many financial institutions can trust you without a credit history. Here is some of the critical information to know about building credit.

How to Build Credit with a Credit Card 

A Credit card is one of the most used means of building credit for beginners. Use your credit card regularly and making repayments on time. The more you use your credit card and repay on time, the higher your financial discipline hence the possibility of good credit. 

You have to understand though that you won’t qualify for some of the major credit cards in the earlier stages. As a start, consider the different cards offered by the stores. These cards work similarly to a credit card. To help you land the best credit cards to build credit, consider store cards that work with the credit bureaus. 

How to Build a Credit without a Credit Card

Building your credit depends on your ability to manage loans. For most credit cards provide the easiest ways to get loans. For others, though, credit cards are not their best option. If you don’t fancy a credit card, you still have several avenues of getting and managing a loan. 

The first step towards creating the credit is by paying all your bills on time. While in most cases, the regular bills like rent, water and electricity don’t affect your credit, reporting them allows for consideration. Paying off your college loan also helps in building your credit. The other options include seeking for any regular loans like a mortgage or car loans and repaying on time.

How Credit Score affects you 

As long as you will be looking for financial support, then your credit score must play a role. No financial institution can trust you with their money if you have poor credit records. Other than the big financial institutions, other lending facilities like care lending also look into your financial records. Even though it is not a requirement for most jobs, working in the financial sector and dealing with sensitive information requires a stellar credit record. 

Mistakes that Impacts Your Credit Score 

Building your credit requires discipline and sticking to a plan. Any error that affects your credit can stay on your records for as long as seven years. You must, therefore, avoid making such mistakes at costs. One of the main mistakes first-time credit card holders commit is taking credit that you cannot afford. Before you take in more debts, understand how you will repay them. Failure to repay or late repayments have adverse effects on your credit score.

Credit Card, Withdrawals, Calculation, Bank, Card, Don
The more you use your credit card and repay on time, the higher your financial discipline hence the possibility of good credit. Pixabay

Credit card churning is another mistake that beginners are prone to. While taking up different credit cards due to the sign-up bonuses and rewards, servicing them, later on, can be quite hectic. Lastly, failure to protect from credit card fraud makes one susceptible to criminal activities using their details, thus damaging their financial reputation.  

ALSO READ: Current Pandemic Set to Hit Financial Performance in Q1 2020: Twitter

Bottom Line 

A sound credit card is not a gift that anyone hands to you. You need a deliberate plan to grow the credit, with or without a credit card. The more responsible you are at managing your finances, the better your credit score.