Running out of funds is quite normal among families, especially during these tough times of the COVID pandemic, and a personal loan is a preferred solution for getting a quick advance. However, with increased demand for personal loans, the interest rate has also gone higher, making it hard to repay and apply for a personal loan.
A personal loan is an unsecured loan that can be used for any financial needs. It is one of the most popular forms of credit as it does not require any collateral, and there are also no restrictions in terms of its usage. While applying for personal loans, applicants often fail to pay attention to some of the crucial factors associated with it, leading to the rejection of loan applications. Learning from the mistakes of others can help you become a smart personal loan applicant. Do you want to know how? Here are some things you should never do while you apply for a personal loan:
Making multiple loan applications at a time
8 out of 10 people tend to this mistake of applying for a personal loan in multiple banks, thinking that at least one of them gets approved. However, this is not a healthy practice, as the approval of a loan depends on several factors. Making too many applications simultaneously may indicate that the applicant is credit-hungry. This may end up in the lender rejecting your loan application.
Not comparing the lending options offered by lenders
Many people tend to apply for a personal loan based on a referral or instant approval, ending up selecting the bad option. Instant loan approval might have a high rate of interest charged, where you would have got it at better rates from another lender who would take a bit of time to process the loan. Therefore, you should always compare all the available loan offers before applying for a personal loan. This will help in framing proper homework before you get into action.
Not checking your credit score
Most people forget the fact that a credit score is a key to process a loan. If you have a good credit score, the chances of approving your loan application are high. This can only be achieved by making correct repayments of existing loans and not making any default in the payment of credits. But what happens, in reality, is that people tend to take more and more personal loans and make default in the repayment, ignoring the fact of credit score. This will result in the rejection of the loan application.
Choosing longer tenure for EMI payment
What every borrower looks for is to pay the EMIs at the shortest amount, which is only possible by opting for a longer tenure. This is a big mistake done by everyone as this could only increase the debt burden. With longer tenure, you end up paying more interest rates. While opting for shorter tenures, you save more on the interest and overall debt burden. For this, you can use the EMI calculator for personal loans.
Not checking the eligibility criteria
Keep in mind that different lenders have different eligibility criteria in terms of age, income, employment, residential location, credit score boundaries, etc. You must apply for a personal loan after checking your eligibility criteria so that it could help you improve your chances of getting better loans.
Like these, there are many other subsidiary factors that you need to consider before applying for a loan. The above mentioned are some of the common mistakes that every borrower makes. Reputed banks like Axis bank help you apply for a personal loan easily and at affordable interest rates.