What to Avoid While Applying For a Personal Loan

Given how unforeseen and unexpected expenses have a tendency to spring upon us when we least expect it, it’s always better to have a backup option or a contingency plan just in case anything were to happen. No matter how much you plan your expenses, budget them, and try and stick to it, emergencies (financial or otherwise) always have a way of showing up when you least expect it. It could be anything, like a utility, loan EMI, or bill payment and could leave you in a shortage of cash. That’s why it’s always best to tackle these kinds of events using Personal Loans.

A Personal Loan is an unsecured loan that is provided to working salaried professionals for their personal use, without asking for any security or collateral. This is its best feature, and what makes it an extremely convenient option for availing short-term funds for urgent expenses. However, just because Personal Loans are easier to get than other loans and their disbursal time is short, that does not mean that you don’t do your due diligence before applying for one. The following are some of the most common and/or overlooked mistakes one can make while applying for a Personal Loan, which can affect your chances of getting one.

  1. Agreeing to the first offer: This is a major no-no. The first mistake that most people make is that they almost always only visit their local bank or a branch that they’ve been going to for years (and therefore they blindly trust its service), and think that’s enough. It’s not! You need to go to a few different banks, or at least two branches of the same bank, and see what terms they offer you. Blindly settling for the first loan offer that you receive is the second, and quite frankly, a very foolish mistake to make. You need to compare the interest rates, charges, and terms of a few different Personal Loans before you select your final offer.
  2. Overestimating your credit history: Look, we all know that your credit history is a reflection of your financial standing, your creditworthiness, and how much of a risk you pose to the bank offering you a Personal Loan. If you have a poor credit history, then the chances of getting any type of loan (let alone a Personal Loan which doesn’t even require any collateral) are pretty slim. Make sure that you’re updated about the status of your credit history before you walk into your bank.
  3. Not reading the fine print: I mean, this is so obvious that it shouldn’t be on this list, but sadly, it is. This is one of the most commonly made mistakes while applying for a loan. People mostly think that there’s no point in even bothering to read the terms and conditions because they suspect that it would be filled with language and words they wouldn’t understand. Be that as it may, it’s always safer to read all the terms anyway, so that you can clear any doubts you may have about the Personal Loan as a result. Reading the fine print will also make you aware of many clauses/terms that may not have even been told to you before!
  4. Not sharing all your details: If you’re applying for Personal Loan, it’s always important to let the bank know if you have any existing loans that you’re still paying off. It’s a terrible idea if you decide or try to hide such information, thinking it might damage your chances of getting the loan. In this case, the opposite is more likely to be true. Banks might view the fact that you’re withholding critical information as a red flag, and it might hit your chances of getting a loan as well.
  5. Borrowing more than necessary: The whole point of borrowing a Personal Loan is to take care of a financial emergency. If you borrow beyond your capacity to repay, then it won’t be long before the same Personal Loan becomes a financial burden in itself. Do whatever it takes to make sure that the loan you’re availing is well within your repayment capacity. Use an EMI calculator, talk to a bank representative, and make sure you quote a reasonable loan amount.

So now that you know the most common mistakes you can make, make sure you stay sensible and steer clear of all these potential potholes on the road to getting your Personal Loan approved.

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