Personal loans are a great way to address emergency needs or bridge a financial gap. These unsecured loans come with competitive interest rates, and you get the funds in a matter of days if not hours.
But the easy accessibility is conditional and based on your eligibility. So, not meeting the requirements may result in rejection. Moreover, a poorly planned personal loan can result in financial stress instead of relief.
Thankfully, both of these scenarios can be avoided, and you can ensure that your borrowing experience and repayment is a breeze. How? Simply avoid the common mistakes listed below when applying for a personal loan.
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Overlooking your budget
Your budget is of paramount importance, and this includes your current as well as future budget. Why? This is because your finances determine the loan amount you should get, and the repayment amount you can manage.
By overlooking your budget, you run the risk of either getting too much or too little, both of which can be detrimental to your finances. So, consider your income, expenses, and current debt to understand the repayment amount you can manage and borrow accordingly.
Neglecting your credit score
Your credit score is the primary check that lenders run to determine whether you are a high-risk or a low-risk borrower. With a low score, you pose a higher risk, and this may result in lenders offering you less than your required ask or charging you a higher cost. Conversely, having a score closer to 900 enables you to borrow quickly and affordably.
So, check your credit score before applying. Then, if needed, take the necessary steps to improve your score. This way, you can borrow smartly and without compromising on your needs.
Skimming through the fine print
It is said that the devil is in the details, and when you skip over the terms and conditions of your personal loan, you may get blindsided by hidden costs and terms. Personal loans come with processing charges, secure fees, EMI bounce fees, prepayment charges and more.
All these charges can increase the cost of borrowing and cause financial strain, so knowing about them and accounting for them is key. Ensure you read the fine print carefully to understand the repayment structure and any additional costs.
Finalising without comparing
Do you compare the price and features of, say a smart TV, before you buy it? Do the same with personal loan offers! Such loans come with different features and costs in the form of interest rates, processing fees, part-prepayment charges, and other fees.
By comparing loans from different lenders, you can find the best deal based on the amount you need and choose the most cost-effective option. This helps you make the most of your loan and can also manage repayment with ease.
Missing out on pre-approved offers
These days, a majority of lenders roll out pre-approved personal loan offers. These are usually given to select individuals or existing customers and are based on your credit profile. The advantage of such offers is that they allow you to get more competitive interest rates.
Moreover, since the offer is pre-approved, the processing time is less, and you get quicker access to funds.
So, make sure that you check your pre-approved offer with your preferred lenders before applying. This will allow you to reduce your borrowing costs and get the funds you need faster.
Armed with this information, you can prioritise your current and future financial well-being when availing of a personal loan. Use online tools like the EMI and eligibility calculators to optimise your loan and plan your repayment. Also avoid applying for loans with too many lenders in a short period. Check the various eligibility terms and only apply for a loan with a lender you are likely to get approval from.
From comparing loans and charges to getting access to pre-approved offers, you can do it all on the Bajaj Markets app. This financial marketplace brings top lenders and credit facilities under one roof, and makes it easier for you to apply online, right from your smartphone. Get it today from the App Store or Play Store and get a personal loan in minutes.
