A personal loan can go a long way in helping you financially. These loans have fixed interest, don’t require collateral, and have a longer loan term, making it easy for you to repay the borrowed amount. That said there are certain pitfalls you’ll need to avoid to ensure you have a good borrowing experience. Let’s look at a few important dos and don’ts when taking out personal loans.
Personal Loan Dos
– Compare the terms offered by different lenders: To get the best deal on a personal loan, it’s important to compare loans offered by different banks. Make sure to compare factors like the interest rate charged, loan tenure, and the maximum approved loan amount, among other things.
– Consider getting a loan from an online bank: Traditional lenders usually take some time to approve your loan application. If you are applying for a personal loan due to a financial emergency, you may want to consider applying to an online bank. There are a number of reputed online banks that disburse personal loan funds within 24-hours.
– Create a repayment plan: If you default on your personal loan payments, your credit score could take a significant hit, which can make it difficult for you to access credit in the future. So, before you take a personal loan, ensure that you create a repayment plan.
– Check the fine print: It’s best to go through the fine print of the loan document to ensure you are aware of the terms and conditions and fees that will be charged.
Personal Loan Don’ts
– Don’t assume the lowest-rate personal loan is the best choice: While you should opt for a loan with a competitive interest rate, make sure to also consider other factors like the various fees charged, reputation of the lender, etc.
– Avoid borrowing from non reputed lenders: Before you sign for any loan, you should check the lender’s reputation by doing an online search.
– Don’t skip checking your credit score: Your credit score has an impact on the interest rate you will be charged. So, don’t ignore it. Make sure to check your score and work toward improving it, if needed.
Keep these dos and don’ts in mind the next time you apply for a personal loan.