5 Personal Loan Mistakes You Need To Avoid In 2019

We all have that uncomfortable, nervous gut feeling when it comes to processing personal loans. Well, the uncomfortable gut feeling is short-lived and the happiness soon resumes once the loan amount is processed and we have our hands on what we wanted. What can possibly go wrong? The recurring nature of the EMI can take a toll on the savings. This can be avoided only if one uses the personal loan EMI calculator.

The Concept of Loans

The concept of loan has been like the second nature of mankind and its history goes back into the mists of time. The concept can be traced back to Assyria and Babylonia. Back then, the merchants would give grain loans to traders and farmers. Since then, the loan has stayed true to its nature and evolved only to be exchanged in the form of paper currency.
A loan is defined in terms of debt that a borrower owes to a financial institution. This debt is paid back with a certain rate of interest charged periodically.

When you seek a loan, the bank is interested in the purpose for which you seek the loan amount. It then gauges the possibilities of whether you will be able to pay back or not by checking your background. It also sets up certain bare minimum parameters for the borrower to meet the eligibility criteria. You can do so yourself by using the personal loan eligibility calculator. Hence, you will be required to maintain a docket of paperwork for the smooth processing of your loan. However, many individuals make a few mistakes when seeking personal loans that hinder their financial stability in the future.
Here is a list of the 5 common personal loan mistakes that one must avoid in 2019:-

Taking Too Many Loans Simultaneously

Loan is one of the most preferred ways of getting financial help, given its versatile nature. However, misusing it can be a huge financial blunder. You must use it only when you absolutely have a financial need and the outcome should be beneficial in the long run. Many borrowers make the mistake of borrowing money for small reasons. Having too many loans is accounted as liability and can cause a severe dent to your financial health.

With more loans, you are giving away more interest, which means little or no savings. This little or no savings would lead to complete absence of investment. Therefore, it is advisable to avoid availing loans unless absolutely necessary. Have your budget outlined, calculate your liabilities and weigh your assets. You can calculate your interest rate with the personal loan interest calculator.

Borrowing More than What You Can Pay

Loan money, at first, looks like easy money, but only while paying the recurring EMIs, you would feel the financial dent in your budget. Just as a personal loan is a life saver for most, it takes only a high principal amount and exorbitant interest rates to turn it into a sworn enemy. You must take a loan that meets the exact personal needs and doesn’t exceed a certain budget. You can gauge your needs with the help of a personal loan calculator. With its assistance, you can calculate the monthly EMI that you will need to pay with the different interest rates available or compare the loans from different entities.

Avoiding the Details

We get it! Nobody would want to read the lengthy terms and conditions or the legal documents. But, if it weren’t really that important, would it be this lengthy? If the lender has laid out so many clauses and conditions, it ought to be important. You need to read the fine print before availing the service. This way, you would be sure of what you are signing up for and avert any issues in the future. The legal document serves as a proof in case of any conflict between the lender and the borrower. Hence, it must be signed after thorough reading and understanding.

Taking a Loan for a Long Tenure

Financial entities offer loans for as long as up to 7 years. Long tenure loans seem the easy way out with relatively lower EMI options. But, if you pay close attention, you would end up paying a higher amount than your principal loan amount. It is ideal to choose the shortest tenure for repayment of a loan. You must use a loan calculator to find out the total loan amount payable during the tenure period. It isn’t a bad idea to be a little thrifty when comparing the interest rates or deciding upon the final loan amount. Always use the personal loan EMI calculator before arriving at the final decision. You should have all the help you need while taking such critical financial decisions.

Not Looking for Your Options

A personal loan is the easiest one to get your hands on, but do not mistake it for the best solution for your needs. There are many other easy loan options available in the market. You must compare the various options available to you, compare the various interest rates and the EMI that you will have to pay for each one of them. You can do so by using the personal loan EMI calculator.

Additional Read: Know the Merits of Availing HDFC Bank Personal Loan

Conclusion

The loan is a critical decision to make and you must do so after thoroughly comparing the interest rates, loan tenure, principal amount and the total re-payable amount. This way, you are securing your future finance from any unprecedented challenges.

Author Since: Jan 17, 2019

Anoop Bansal, a professional Chartered Accountant based in the National Capital - Delhi. I have worked for the top-notch Indian and International banking firms for the past 10 years. Currently, I work at emi-calculator.loan blog and a financial consultant for different SMEs in India. Follow me on Facebook, Twitter and Linkedin for more information.

  1. “When you’re seeking a personal loan, think about why. What’s your goal? What do you want to do? If you can accomplish your goal by budgeting for it, that’s better than taking out a loan. All these things are very helpful which are given.

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