Our lavish lifestyles and our limited income do not go hand in hand. Due to the constantly changing economic status, people often find themselves in dire need of funds every now and then. Availing a personal loan when you find yourself in a financial situation has become very common. But the process of getting a personal loan is not as easy as it sounds.
There are a few rules in place so that the financial institutions or lenders can only approve the loan application of people who are eligible. Your eligibility criteria are judged on many things like your credit score, your employment status, and job stability, your monthly financials, your liabilities, etc.
Here are a few mistakes you should avoid doing while availing a personal loan:
- Taking multiple loans:
This is possibly the worst mistake you can do. Taking multiple loans means you will have to pay different EMIs for different loans. This can turn very disastrous, especially when you have very limited monthly income. The EMI that you pay is dependent on your monthly financials and the EMI can cover almost 40% of your monthly income.
If you have multiple loans, you will have very little money that you can spend and you will have almost no savings which are very bad. You need to have some sort of financial security as you can never predict when you will need some funds urgently.
- Taking a loan amount more than what you can repay:
The amount of loan that you take should be proportional to your monthly income and expense ratio. You should never take more than how much you can repay. Taking a bigger loan means you will have to pay more EMI. The more EMI you’ll have to pay, the lesser you will be able to save or invest your money.
- Taking a longer loan tenure:
The tenure of your loan is the time period within which you promise to repay your loan debt back to the bank. The amount of EMI that you have to pay is decided upon your current financial status, your ability to repay the loan and the monthly income.
Ideally, the tenure of your loan should be small so that you can clear off your debt at the earliest. You might face some difficulty during the process initially but once you get a hang of it, it will become easier for you.
- Not comparing the financial institutions or lenders:
It is very important that you compare the financial institutions or lenders before you finalize on one. Not doing a proper research and not comparing the rate of interest can turn very fatal. You should always choose a bank that offers the lowest rate of interest. A low rate of interest means you will have to pay a lower EMI comparatively. Paying a lower EMI will help you save a lot of money in the long run and you can even use this extra money to invest somewhere else.
Also Read: HOW TO AVOID A PERSONAL LOAN REJECTION?
You need to think very carefully before taking a personal loan. A personal loan is a long term commitment and most of your monthly go in repaying the loan debt. You should think carefully and consider all your options before finalizing on taking a personal loan.