Ah, mistakes. Who hasn’t committed a few? And then some. But, when it comes to your finances, you cannot afford making mistakes; afford being the operative word here. Well, we are here to help you avoid those grave, let’s say, errors in judgement.
Five mistakes to avoid when taking out a loan
Learn, learn, learn. That’s the golden motto of life. How much ever you know, there will always be something else you can learn. Same goes for your finances and that’s what brings us to the first lesson.
The reason we say that research is important is because finance and economics are ever changing. New products come into being every day and there might be just the right fit for you out there. And, you can only come to know of that product with sufficient research. If you avoid doing this, you might end up paying a lot more than you’ve bargained for. Lesson to be learned, not doing sufficient research is a big mistake.
- Not checking eligibility
Our statistics show that about 20% of loans applications are rejected because the person is not eligible. Often, most people choose to apply for a loan that is meant for a different purpose. For example, a person, in need of urgent cash for the purchase of a vehicle, applying for a personal loan would get rejected.
So, how do you fix this? Read the eligibility terms. And, if all the jargon just goes above your head, then, call up the customer service executive and they shall take care of the rest.
- Lying in the application
Lenders, whether a bank or an NBFC, provide loans to profit from them. However, until the loan amount is repaid, the lender’s money is at risk. So, lenders always look for borrowers who are reliable and lying on an application never helps. This is because lenders go to great lengths to verify the documents you have submitted, and any lie is bound to be found out.
You will then lose credibility and the lender would think twice before considering your application again. In case you believe that there are chances of a loan rejection due to some limitations, you can always talk to a customer service agent and figure out your options.
- Borrowing beyond repayment capacity
Loans are usually lent based on your salary or sometimes against a collateral. However, your expenses determine how much you can save each month and pay back. Don’t make the mistake of borrowing more than you can afford to repay.
- Hiding existing loans
Often, people hide their existing EMIs to help them avail a greater loan amount. Though doing so can get you to receive a higher amount, paying it back would put a toll on your finances. Instead, choose an amount that you can practically pay back.
Applying for a personal loan is quite a big decision. Take sufficient time to decide how much you would need and for what purpose. Then, talk your financial adviser and apply with a trusted lender.