Which are the Personal Loan Mistakes to be Avoided?

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Personal Loan Mistakes To Be Avoided
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Following are the personal loan mistakes to be
avoided-
IGNORING CREDIT SCORE NOT SHOPPING
AROUND BORROWING MORE THAN THE REPAYING CAPACITY
NOT EXPLORING ALTERNATE OPTIONS MISSING PAYMENTS
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IGNORING CREDIT SCORE
Upendra was clueless about what a credit score
is and what role it plays in loan approvals. He
never bothered to ensure that he had a healthy
credit profile. Late payments on credit card
bills and a high credit utilization ratio had
resulted in a low CIBIL rating.
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NOT SHOPPING AROUND
The most expensive mistake that Upendra did was
taking the first loan that was approved. He did
not do extensive research and comparison of
various options to ensure that he gets a deal
that is most viable. The interest rates on
personal loans, terms, pre-closure charges, and
fees vary greatly among different lenders.
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BORROWING MORE THAN THE REPAYING CAPACITY
Upendra was happy that the personal loan
eligibility criteria of the bank permitted him to
borrow a sum of Rs 30 lakh that was needed to
fund the education. But such a huge sum was
beyond his affordability. Soon the EMIs
overstretched his finances and led him into a
crisis. He started defaulting on payment and his
CIBIL score came tumbling down.
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NOT EXPLORING ALTERNATE OPTIONS
Personal Loan interest rates are very high
making this type of loan a very costly
proposition. Upendra should have explored other
options like loans against property, loans
against securities, education loans, or gold
loans which have a significantly lower rate of
interest.
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MISSING PAYMENTS
As with any other loan, timely payment of the
EMI of a personal loan is imperative to maintain
financial stability and keep the CIBIL score
intact. Upendra did not follow this ground rule
and fell into a debt trap.
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