8 Things You Must Avoid Doing with Personal Loan

8 Things You Must Avoid Doing with Personal Loan

A personal loan is a credit option availed from financial institutions, generally banks for any type of miscellaneous reason. In essence, the personal loan falls under the unsecured debt category. It means that in the occasion of any bankruptcy on part of the debtor, the creditor cannot place any claim to any asset in the debtor’s estate as no asset had been mortgaged. Thus, this entails that no matter whether you avail personal loan from any lender may it be L&T finance personal loan, Bank of Baroda, Bank of India, State Bank of India, etc., all the lenders do not require you to present any collateral or security to avail the personal loan. But note that as it is an unsecured loan option, you may be charged higher personal loan interest rates, i.e., not offered the best personal loan interest rates if your credit score and your income is not as per the preference of the lender.

However, when availing a personal loan, you must be aware of what you must not do that may endanger your credit score and prevent you from getting any other credit option in the future. Here are some of the important things you must not do with the availed personal loan –

Lower The Repayment Tenure, Lower Would Be The Number Of Issues – 

While you may not specify the use for which you are availing a personal loan or putting up security or collateral, it is fundamentally a debt and note that you have availed the money to meet your unanticipated emergencies. Often, many commit the major mistake of opting for a higher repayment tenure without knowing the fact that it may become a major burden owing to the accrual of interest constituent. Just by keeping your repayment tenure shorter and ensuring to repay your loan proceeds sooner, you can address a very common issue witnessed by many.

Structure Your Coat As Per Your Cloth – 

This is an extremely wise idiom and is applicable to all life arenas and this cannot be better matched to describe this the next piece of advice. The personal loan features may tempt any soul to avail a loan that is over than what’s necessary. Note that towards the end, you must repay the whole borrowed amount along with the additional fees accrued as interest constituent. Availing a more significant loan proceeds would just invite in debt, which tends to enhance your overall loan cost.

Do Not Hamper The Broth, Ensure It Is Simple –

You must be aware of how multiples of the same thing may result in potential harm as well as trust when you say that too many of the cooks spoil the broth. The broth here is your credit score while the cook may be a plethora of personal loans you may consider availing. Ensure to keep it very simple and always be content with what you have and try and solve your financial worries simply. You always can borrow from your family and friends and that is better than being buried under the heaps of massive debt trap.

Multiple Banks Do Not Convert Into Benefits – 

It might happen that you may be in immediate requirement of money, and you require a personal loan very badly but there’s always a chance of witnessing an application rejection by the bank of your preference. So, perhaps, the most obvious thing you must do is apply with multiple financial institutions, right? No. This is the worst thing you can ever do as every bank’s assessment of your score propels your score to drop a little. Imagine a scenario if you applied for a personal loan from various financial institutions! That is a nightmare you would certainly look to avoid. Thus, checking your personal loan deals with distinct banks would come across as the prudent thing you must do. Once you have selected the preferred lender, you must submit a personal loan application with that lender. Avoid submitting multiple applications as doing so would lower your credit score considerably, which indirectly may lower your overall eligibility for a personal loan.

Always Be Punctual With Your Loan EMIs – 

Note that personal loan always is a 2-way street. When any bank process a loan, it would expect the same to be in good faith for you to return loan proceeds periodically and such kind of payments are addressed as loan EMIs. Skipping your loan EMI payment at periodic times would aggressively impact your score and it would be tough to obtain the loan in the upcoming times. Punctuality always is helpful, particularly when it is about financial discipline.

How To Get A Personal Loan In 8 Steps | Bankrate

Compare & then Commit – 

Internet in today’s time is one of the blessings owing to its current potential to evaluate and compare almost all deals under the same roof. When personal loans are involved, many sites are available that permit you to simply compare distinct aspects of personal loan deals. Once you do the comparison online, you get a clearer picture and the power to select in place of depending on hearsay and gossip. You can consider prioritizing the goal of comparison and dig up additional benefits or utilities available with personal loan deals.

Look Before Leaping – 

Often, financial institutions make it simpler for you when it is about documentation regarding personal loan applications. You are told to just sign at specific places by the financial institution while other details are generally filled in by the bank employees. This makes you sigh at the dotted line but at the same time, you tend to trust such reputed banks as you think they would never play any kind of tricks on you. However, it is better to stay in a safer place than be sorry and thus you must ensure to read all the terms and conditions as well as the fine print carefully committing your signature on the form.

Use The Personal Loan To Iron Out Your Issues – 

The fact that there’s zero condition when availing a personal loan, might tempt you to demand a higher proceed. As this is a loan, which you must repay along with interest, so you must only avail the loan proceeds you require and not demand higher loan proceeds.