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Applicants have often been seen to make common personal loan mistakes. Read this blog in order to avoid these 9 mistakes while applying.
Personal loans are one of the best financing options when it comes to collecting urgent funds to fulfil temporary needs.
Thanks to fintech companies and digitalisation, the overall process of getting personal loans has become more convenient.
However, many borrowers tend to make common mistakes during the application process. Being aware of these mistakes is crucial for maintaining a healthy financial life.
This blog highlights 9 common personal loan mistakes you should avoid to make informed decisions.
Mistakes to Avoid While Applying for a Personal Loan
Here are some common personal loan mistakes you must dodge during your application process.
- Overestimate Your Repayment Capacity
While applying for a loan, people often make the mistake of being overconfident about their repayment capacity.
You should not borrow money that exceeds your repaying capacity. It is essential to ensure that you can repay the loan without any issues within the agreed period.
Utilising any online EMI calculator is useful in this instance. It allows you to calculate your monthly payments and choose a repayment tenure that suits your financial capacity.
- Indulge In Credit Hungry Behaviour
Try not to apply for a personal loan multiple times from your bank. This practice gradually reduces your credit score.
For instance, if you opt for too many loans within a shorter time period, your bank can consider this practice as a credit-hungry behaviour.
Additionally, you must also avoid opting for personal loans from more than one financial institution at the same time. You can proceed with another one only if your first application gets rejected.
- Not Disclosing Obligations
Not disclosing the liabilities to the lender is a common personal loan mistake that individuals must avoid.
You must make it clear about your financial conditions to the financial institution before taking the loan.
If it is not disclosed but found, then your application process can get rejected by the institution.
Being aware of a borrower’s liability while providing a loan helps lenders assess his or her capacity to repay the loan.
- Not Reading the Fine Print Carefully
A common personal loan mistake borrowers often make while applying is not reading the terms and conditions carefully.
They also ignore the particular text that contains disclosures and other essential details.
These are not highlighted in the main document but are provided as additional information in the footnotes.
Since it contains crucial information about terms like repayment schedules and penalties, you must read it thoroughly to resolve any disputes later.
- Not Looking at Alternatives Properly
Before opting for a particular bank or financial institution, you should look for its alternatives.
A common personal loan mistake people make is not comparing different loan offers available to them.
You need to compare all of the possible loan options, based on charges, terms and conditions and clauses of loan repayment.
Choosing a loan option without any peer comparison can help you get a loan quickly, but you will also lose the option to bargain for a better loan option at the same time.
- Choosing a Longer Tenure for a Shorter EMI
When choosing a personal loan, choosing a longer repayment tenure for a shorter EMI amount is another personal loan mistake.
Borrowers ignore the fact that they have to pay more interest on a higher tenure compared to the lower ones.
For instance, you can also use an online EMI calculator to choose the most affordable repayment tenure for yourself that will not affect your finances.
Nevertheless, you must try to choose a shorter repayment tenure if your income allows.
- Don’t Be Emotional While Making Decisions
One of the major personal loan mistakes people make is allowing emotions to drive their decisions.
Taking a loan for emotional purchases can lead to borrowing more than necessary, putting undue strain on your finances.
If a product or service is not essential for you, it is better to avoid purchasing it with a personal loan.
- Not Tracking the Loan Application
Borrowers should actively monitor their loan application process to avoid unnecessary delays in disbursal.
Regularly checking your loan status helps address any potential issues early. Utilize the lender's online platform or contact their customer service for timely updates and support throughout the application process.
- Providing Inaccurate Information
The final and one of the most serious personal loan mistakes to avoid is providing inaccurate information during the application process.
This mistake often leads to loan rejections, as lenders rely on accurate details to assess eligibility.
Missing documents, incorrect information, and discrepancies between documents can result in rejections in loan applications.
Therefore, borrowers should prepare all the necessary documents and double-check them before submitting them to the lenders.
The Bottom Line
Opting for a personal loan can be a simple and straightforward process, as long as you avoid these common personal loan mistakes.
From comparing different lenders to checking every term and condition, you need to take the necessary steps to get relief from any type of financial stress.
Once you have done your due diligence, sign up on Jar and get an instant loan to avail benefits like flexible EMIs and instant money transfers!
Frequently Asked Questions
- What are the common personal loan mistakes in India?
Being overconfident about repayment capacity, applying for a personal loan multiple times from the bank, and not reading the terms and conditions carefully are some of the common personal loan mistakes borrowers should avoid.
- How to apply for a personal loan?
To apply for a personal loan, borrowers must determine their requirements, check the eligibility criteria and approach the lender.
After all of these, they need to submit the necessary documents and wait till the disbursal.
- How to choose an ideal repayment tenure for personal loans?
There is no ideal repayment tenure while opting for personal loans. However, to avoid personal loan mistakes, borrowers must try to make the repayment tenure shorter as much as they can, based on their income.
