Taking a personal loan has become very easy these days. If you are a salaried employee, you may receive pre-approved personal loan offers from the bank. In such cases, you can take a personal loan with just one click on your mobile, and the money will be transferred to your account immediately. Banks now offer personal loans even if you have a low credit score. This has made it easy for people to take loans, and they are doing so in large numbers. But is it the right decision? Personal loans are considered to have the highest interest rates, so they should be taken only when you have no other option. Today, we will tell you about some common mistakes that personal loan borrowers often make and later regret.
1. Taking a Loan Without Comparing Bank Offers
Many people accept the first loan offer without thinking it through. Before taking a personal loan, it’s important to compare the offers from various banks and NBFCs. Banks often have attractive offers like waivers on processing fees, lower interest rates, or gift vouchers. Always choose the loan offer that benefits you the most.
2. Misusing the Personal Loan Amount
Since personal loans are easy to obtain, people sometimes misuse the money. Personal loan funds should never be used for activities like share trading, fantasy sports, betting, or gambling, as the chances of losing money are high. Avoid unnecessary purchases like expensive gadgets or vacations. It’s better to save for such things rather than take a loan.
3. Taking a Loan Larger Than What You Need
Banks and NBFCs offer loans based on your financial capacity, but this doesn’t mean you should take more than what you need. Only borrow the amount necessary for your purpose, even if the bank offers you a larger loan.
4. Missing EMI Payments
Once you take a loan, ensure there is enough money in your account for EMI payments on the due date. Plan your budget so you can make timely payments. Missing an EMI results in penalties and lowers your credit score. If you delay payments for more than 90 days, you will be marked a defaulter, which affects your credit for years.
5. Extending the Loan Term Unnecessarily
Some people restructure their loan repayments to extend the loan term, lowering the EMI amount. While this reduces your immediate burden, it increases the total interest paid over time. This option should only be used if you’re facing a financial crisis.
6. Taking Multiple Loans at the Same Time
Some people take personal loans for small expenses and end up with multiple loans, resulting in higher monthly EMIs. This can mess up your budget. If possible, try to finish paying off existing loans before taking on new ones.