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No! NO! to these Mistakes on Taking Personal Loans

Avoid 5 Mistakes While Taking A Personal Loan

A personal loan is always wanted by the people due to its easy availability and flexible in nature. Many people are easily eligible for these quick loans when they have good credit score and repayment capability. The lender will never ask them for collateral or purpose of availing the loan.  You can keep your reasons secret if needed. Surprisingly personal loan has turned into an expensive form of debt because many people fail to ignore some key aspects that make you commit mistake. Keep reading to know the mistakes that you should avoid while taking a personal loan.

Don’t have a clarity of purpose of the loan

Few people get a cash loan from the bank just because they stand eligible to get it.  You should try to understand the thin line of difference between essentials and non-essentials in life. Cash loan has high-interest rate and other charges so, it is advisable to avail the loan only when there is a financial emergency.

Don’t research on the other loan options

Quick loans can be used for versatile reasons. As in the interest rate on these loans are high, you should conduct enough research to explore all the loan options available before taking a final call on the loan application. If you are looking to take a loan for home improvement, they are special loans available for the process. Choose the loan with the lower interest rate over personal cash loan.

Don’t borrow beyond your repayment capacity

You should not borrow unsecured loan amount beyond your repayment capacity. The thumb rule is the total consolidated EMIs of your loan should not exceed 10%-15% of the total income so that there is no need for you to stretch your budget.

Don’t choose long loan tenure  

People tend to choose long loan tenure on the cash advance loan to lower monthly EMIs. It is advisable to go with short tenure to reduce the cost of the loan. However, your monthly budget and repayment capacity should be considered.

Don’t hide your existing loan EMIs

People tend to hide their existing loan EMIs to avail higher loan amount. This act will tighten your monthly budget and you will end up in defaulting the loan when you cannot afford it.

Don’t ignore credit score

It is important for you to check your credit score before you approach the lender to avail an unsecured loan. Good credit score will not only improve the chances of loan approval but also fetch you the loan at a low-interest rate.

Don’t approach new lender for the first loan 

Approaching the lender with whom you have an existing relationship will improve the chances of loan approval rather than the new one. Talk to the bank which you have a good relationship about the chances of loan approval before you reach the new lender.

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