While instant loans are a great tool to fill your budget gaps, it is important to be cautious before signing that dotted line! Remember, if you aren’t careful with every step, even the best personal loan offers can spell disaster in your lives. If you’re a first-time borrower, check out these top mistakes that you should avoid at all costs!
#1 Do Not Overlook Your Repayment Abilities
One of the biggest personal loan mistakes is overlooking your repayment abilities. Just because you qualified for a huge amount, doesn’t mean you should take it. Instead, apply for an amount that you can afford to repay. And as tempting as it sounds, do not go overboard with the hard cash. Although you won’t have to state a purpose for getting the loan, you will have to repay it at some point. And the higher your amount is, the longer it will take to repay. What’s more, it’ll also result in more interest payments. So, if you’re looking to make a financially prudent choice, only borrow the amount that you need at the given moment.
#2 Do Not Invest The Loan Amount
This is yet another habit some borrowers are guilty of! But guess what? This doesn’t just result in a greater financial burden, but also leads to a debt trap. Investment tools like stocks or mutual funds involve plenty of speculation. So, if things don’t work out in your favor, you can easily end up losing the amount you had borrowed. If you’re really insistent on using your funds for speculative activities, save money from your monthly salary to fund your cause.
#3 Do Not Be A Guarantor To Someone With Low Credit Score
We get it, your friend really needs that Personal Loan. But does he have a good credit score? Will being a guarantor for his cause sabotage your financial situation? As heartless as this sounds, it is important to ask yourself these questions before being a guarantor to a friend’s/relative’s personal loan. In case of doubts, clarify with the bank or the lender. In any case, avoid being emotional while making important financial decisions like these.
#4 Do Not Forget To Compare
At times, we are so ecstatic with our first personal loan offer that we don’t even compare the other options. But unless you shop for the available deals you won’t even know which one ‘actually’ makes the cut! So, before zeroing in on any offer, compare the terms, tenure and interest rates offered by multiple lenders. While banks are the usual choice for most individuals, you can also consider alternative lending platforms. Qbera is one such platform that offers personal loans starting from 11.99% p.a.
#5 Do Not Miss Out On The Terms
While it may not seem important while taking the loan, it is extremely important to read and understand the terms before signing the offer. Check the foreclosure costs, APR, processing fees, late charges, and every other relevant fee before settling with an offer.
Now that you know what to avoid, we are quite sure you’ll manage to make the most from your personal loan.