💸 5 Mistakes To Avoid While Taking a Personal Loan
Introduction
Personal loans offer a quick and unsecured way to get cash for anything from weddings and travel to medical emergencies or debt consolidation. But one wrong decision can turn this convenience into a costly burden.
Before you hit that “Apply Now” button, take a moment to understand common personal loan mistakes and how you can avoid them to stay financially safe.
❌ Mistake 1: Ignoring the Interest Rate Trap
Many borrowers focus only on monthly EMIs and overlook the interest rate. A small difference—say, 12% vs 16%—can add up to tens of thousands over the loan tenure.
✔️ Avoid This By:
Comparing interest rates across multiple banks, NBFCs, and fintech apps
Checking for reducing balance vs flat interest rate
💡 Pro Tip: Use online loan calculators to estimate total interest cost.
❌ Mistake 2: Borrowing More Than You Need
It might be tempting to take a higher amount than necessary, especially if you’re eligible for it. But remember: every extra rupee costs interest.
✔️ Avoid This By:
Borrowing only what’s essential
Avoiding upselling traps like “pre-approved top-ups”
📉 A bigger loan = higher EMI + longer repayment stress.
❌ Mistake 3: Not Checking Your Credit Score
Your CIBIL score directly affects your loan approval, interest rate, and tenure. Ignoring it may lead to rejection or high rates.
✔️ Avoid This By:
Checking your credit score using your PAN card
Correcting any errors in your credit report before applying
🔎 Lenders usually prefer a CIBIL score above 750.
❌ Mistake 4: Overlooking Additional Charges
Many borrowers miss the fine print and get surprised by:
Processing fees
Prepayment/foreclosure charges
Late payment penalties
Insurance add-ons
✔️ Avoid This By:
Reading the loan agreement carefully
Asking the lender to break down all fees
⚠️ Even a 2% processing fee on ₹5 lakhs = ₹10,000 upfront cost!
❌ Mistake 5: Not Planning for EMI Repayment
A personal loan is a commitment—missed EMIs lead to credit score drops, penalties, and even legal action.
✔️ Avoid This By:
Using a loan EMI calculator before applying
Keeping EMIs under 40% of your monthly income
Maintaining a 3-month emergency fund
✅ Opt for auto-debit to avoid missed payments.
📌 Conclusion
A personal loan can be your best financial ally—or your biggest mistake. Make sure you compare offers, check your credit health, plan repayment, and stay aware of hidden charges. By avoiding these 5 common mistakes, you can turn your loan experience into a smart financial move.
FAQs
🔹 What is the biggest mistake to avoid while taking a personal loan?
Not comparing interest rates or reading the loan terms can lead to higher debt and penalties.
🔹 Can I repay my personal loan early?
Yes, but check if there’s a prepayment penalty. Some lenders allow free foreclosure after a certain period.
🔹 Does applying for multiple personal loans hurt my credit score?
Yes. Multiple applications create hard inquiries, which can lower your score temporarily.
🔹 Should I go with the lender offering the fastest disbursal?
Speed matters, but also compare interest rates, fees, and flexibility before choosing.
Published on : August 3RD
Published by : Kaushik
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