A personal loan is the most convenient and quickest way to source money when you need it urgently. Whether it is money you require for an emergency, to cover for a temporary shortfall, pay for an immediate expense, buy an asset or go travelling, personal loans can be of immense help. Personal loans do not require you to put up any collateral. Upon approval, the funds are credited to your account within 24 to 48 hours, making personal loans the go-to option for many.
However, just with any other loan, if you are not careful, getting a personal loan without enough thought and due diligence can have long-term repercussions financially. Here are six common mistakes you need to avoid.
1. Not tracking your credit score
The first thing a financing company does is to check your credit score. If you have a poor credit score, your personal loan eligibility takes a hit. Then, even if you do get a loan, you may have to pay a much higher interest rate on account of the credit risk.
2. Not reading the terms and conditions
Even though you may be in a hurry to secure the loan, make it a point to comb through the fine print. There may be clauses in the contract that may put you in a spot later if you aren’t aware of them. For example, some lenders may charge you a foreclosure fee on prepayment of the loan.
3. Not shopping for the best option
Some people tend to take a personal loan based on instant approvals or zero processing charges. Even though this is not a bad thing, you should ensure that you are not making a hasty decision. By shopping around, you might find a lender offering lower personal loan interest rates that can considerably reduce your debt burden.
4. Opting for a longer loan tenure
This is the most common mistake most people make. In a bid to pay lower EMIs, it seems convenient to choose a longer tenure. However, the longer you take to repay a loan, the more interest you have to pay. Shorter the loan tenure, lesser the interest. Use a personal loan calculator to know the EMI amount that suits your budget best.
5. Taking too much or too little
It is important to assess your exact needs before you apply for personal loan. Taking more than you need again means paying excess interest. On the other hand, if you take too little and fall short of funds, it may become difficult for you to source another loan based on your credit standing.
6. Making too many applications
If you are in a desperate need for a loan, do not make multiple applications at the same time. A hard enquiry during loan assessment will reflect on your credit score, and too many enquiries can adversely affect your score.
For an easy to secure, absolutely transparent and affordable personal loan, you need not look beyond Tata Capital. Whatever your financing needs, Tata Capital has you covered.