A personal loan can be helpful in many ways to fulfil goals of varied necessities. Its advisable to be precautious when applying for a personal loan. Here is a list of things to avoid when applying for a personal loan
What are the mistakes you should avoid when applying for a personal loan.
Disclosing your liabilities
Whatever vendor you approach should be aware of all your current liabilities. Your loan eligibility will be calculated on the basis of your liabilities. Your loan application can get rejected if any liabilities are found out later on in the process.
- Repayment capacity
Only borrow that you have the capacity of paying back. Before you apply for any online loan option make sure you have the provisions and ability to repay it in full without having to take out another loan. Calculate your EMI and figure out a repayment plan according to your capacity.
- Prepare a budget
When applying for personal loan you will have to have a repayment schedule on board, along with that it’s also helpful to make a budget which will help you repay the loan without it becoming burdensome on your finances
- Correct documentation
When applying for a loan it is crucial to have all your important documents like your bank statements, your KYC documents, credit report etc. in order. Improper documentation is one of the major causes of loan application being rejected.
- Read the fine print
Don’t sing the documents without first reading the terms and conditions carefully. Don’t just focus on the interest rate and loan amount. Things like foreclosure charges, bouncing charges etc. are all very important to read as well
- Avoid multiple loan queries
Every time you put in a loan application your credit score reduces. If you put in several loan queries in a short duration it will have an impact on your credit score. It will also have a negative effect on your loan application which could lead to your application being rejected.
- Research your choices
Before you decide on a particular vendor make sure you research and compare all your options. You should compare charges, loan repayment clauses, terms and conditions of various banks and lenders. Don’t undermine the importance of doing proper research.
- Choose the right tenure
Choosing the right term tenure and EMI options according to your income capacity is very important. People usually select longer tenure term in order to reduce EMI cost but that can lead to you paying more interest amount. So as per your capacity and income allowance choose the right EMI and tenure for you.
- Check your Credit score
Before applying for a loan you should check your credit score and make sure you have a higher credit score as that will have an impact on your loan application. If your CIBIL score is low chances are your loan application might be rejected. So it is important to improve your credit score before applying for a loan.