Managing all expenses on a single income and salary is difficult with rising inflation. There comes a time in our daily lives when we need financial help. That is why we take a loan. People usually take out personal loans when they need money, but it is easy to get one. Some banks offer pre-approved personal loans, considering your credit history and CIBIL score.
A personal loan comes under the category of an unsecured loan. It is considered to be the loan with the highest interest rate. Therefore, you should take it only when you have no other option. You should avoid taking a personal loan for small needs.
We are telling you about some of the mistakes customers often make while taking out a personal loan. Later, they have no choice but to regret:-
Not Comparing The Offers Of Banks
Before taking a personal loan, the customer should compare the offers of different banks and non-banking financial institutions. People often accept the offer they get without thinking, which causes them a lot of loss. Before accepting any offer, you should get information about the offers of different banks, processing fees, low interest rates, foreclosure fee exemption, gift vouchers, etc.
Taking A Loan Of More Amount Than Needed
People often take out loans that are more than their actual requirements. By doing this, they only put a burden on their salary. Take a personal loan of only the amount you need, no matter how high a loan offer you have received.
Misuse Of Money
Because they get loans easily, people do not value money. They start misusing the loan money. Personal loan amounts should never be used for share trading, fantasy sports games, betting, gambling, or travelling. There is a high possibility of losing money in these activities. You should avoid unnecessary expenditure or shopping with the personal loan amount. Some people take a personal loan to go on trips. This is not at all appropriate.
Defaulting On EMI
Whenever you take a personal loan, before that, take a look at your salary, monthly essential expenses, and savings. If you have taken a loan, ensure enough money is in your account on the due date to deduct the EMI. You should make your budget accordingly. Defaulting on personal loan EMI attracts a penalty. This also lowers your credit score. If you delay paying EMI for more than 90 days, you will be declared a defaulter.
Increasing The Loan Period Unnecessarily
Sometimes, customers get their loan repayments restructured. In this, the loan period is increased, which reduces the EMI amount. This makes your loan last for a long time. Its disadvantage is that you will have to pay a lot of money in the form of interest. Customers should choose this option only when they are facing a financial crisis.
Taking Multiple Personal Loans Simultaneously
Some people take personal loans for small needs. In such a situation, they have many personal loans and must pay a large amount in the form of EMI. They get caught in the debt trap. If possible, finish the existing loan before taking a new one.
Taking a Top-Up Loan Repeatedly On a Personal Loan
Sometimes, there comes a time when we need a larger loan along with the existing personal loan. In such a situation, a better option than taking a fresh personal loan is to take an additional loan on the existing loan. This is called a top-up loan. Many people repeatedly take top-up loans on their loans. If you are also making such a mistake, you should be alert because taking a top-up loan after a short period spoils your credit mix. This may cause problems in getting a loan in the future because banks may think that you run your business only through loans, and your financial condition is not very good.
