Personal loans can be used for any purpose, such as marriage or higher education. A personal loan is a great option because of its flexible repayment plans and low interest rates. It becomes advantageous to take out personal loans, such as those offered by Zap Money, which have minimal paperwork requirements and quick processing. But it is important to manage mistakes in personal loans on EMI

To the point that you may now apply for a loan without leaving the comforts of your home by going to a bank. However, before applying for a personal loan, you should be aware of your Equated Monthly Instalments (EMI), which determines the monthly payment amount.

Even while the Principal Component and Interest Component will make up the majority of your EMI, there may be additional costs that you are unaware of. These include processing fees, delinquency penalty charges, etc. As a result, make sure you understand everything about your EMI before taking in a personal loan.

Here are a few things you ought to be aware of. This post highlights the 9 mistakes while acquiring a personal loan on

Being Unaware of Your Credit Score:

Always verify your CIBIL score before applying for a personal loan because the lender will also do so. It is an account of the loans you have repaid.

A credit score of 750 is regarded as ideal.  Your application may be denied or end up with a higher interest rate if your credit score is below 600. Ensure that you raise your credit score before submitting an application for an EMI personal loan.

Opting for a High Credit Amount:

It is easy to overestimate your financial requirements and borrow more than necessary. Borrowing is not the end of the loan process. The financial difficulties begin immediately after borrowing when you are expected to repay the funds with monthly EMIs.

Neglecting to repay the monthly amount, including interest, results in delayed payments, which have a significant influence on your credit score. This is one of the critical mistakes to avoid when applying for a loan. Overall, it leads to increased interest rates for future loans.

As a result, before applying for a loan, examine your financial needs and then only apply for the loan amount you require. It will ensure that your EMIs are paid off on time and will ultimately save you money.

Not Enquiring About the Eligibility Criteria:

When applying for a Personal Loan, contact your lender ahead of time to check your eligibility. The lender will then conduct a simple credit check on your credit score, whether you are above 18, if you have a PAN card and an Aadhaar card, and if you are an Indian resident with a bank account to determine whether you meet the conditions.

This will not influence your credit score, but it will help you better understand your eligibility. By doing so, you can reinforce crucial requirements and improve your chances of loan approval.

 Don’t Ignore the Fine Print:

Ignoring the fine print is the worst possible mistake. Please keep in mind that this is a financial transaction that comes with certain terms and conditions. To satisfy all of the terms and conditions, you must first understand the specifics of the loan you are taking out. It is always advisable to look over all the terms and conditions of the transaction.

Choosing a Longer Tenure:

Thinking that a longer repayment period will reduce your budget is one of the misconceptions to avoid when applying for a loan. Loan tenure is the overall amount of time required to repay the loan. You should constantly evaluate your financial situation before selecting a loan tenure because it may affect your monthly payments.

It is worth noting that a longer tenure usually results in reduced EMIs. However, it usually means a higher interest rate. By the end of the long term, you will have paid more cumulative interest. So make a thoughtful decision based on what is important to you.

 Opting for Multiple Personal Loans at the Same Time:

If you are in desperate need of money, you might think that the best way to apply for a personal loan is to apply in multiple banks at once.

But these numerous applications can cost you your credit score. It may result in rejections and high interest rates. Thus you should apply to a single bank only at a time. If your credit score is good, your loan will get approved.

Co-signing responsibility:

Not all personal loan borrowers require a co-signer. However, if your credit score is low and you need the loan right once, you can get a co-signer with a higher CIBIL score or more income.

If you’re Co-signing a loan for someone else and the principal borrower fails to make payments, you may be held accountable for the loan. It can be avoided by thoroughly looking over the principal borrower’s responsibility and considering the potential liabilities before co-signing.

Not checking all the charges:

Aside from comparing interest rates, it is also critical to consider the costs associated with the personal loan. This could include foreclosure charges, processing fees, penalties for late payment, and so on. These fees and charges may indirectly increase your responsibility to the lender. It is suggested that you investigate all possible expenses linked with personal loans.  

Making Late Payments:

It’s common knowledge that a late loan payment lowers your credit score. First, you can receive a notification from the lender outlining the situation. Naturally, defaulting on a loan will appear on your credit report and negatively impact your creditworthiness in the future, making it very difficult for you to get approved for another loan anytime soon. Because of this, while selecting a term, take into account the real length of the loan as well as the EMI you can afford.

Personal loans can be useful in any financial emergency, as previously said. You must thus borrow money wisely. Do not forget that timely EMI payments will raise your credit score significantly and establish your creditworthiness as a borrower.

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