Emergencies of any kind never announce their arrival. They don’t gently knock at your door, but rather break it down and create havoc in your life. Financial emergencies are known to have wrecked the lives of many. In fact, even people leading a financially stable life have had the wind knocked out of their sails by financial emergencies. More often than not, the best way to tackle a financial emergency is by availing a Personal Loan. Whether it is debt consolidation or an unexpected house renovation, Personal Loans are useful during various types of financial emergencies.
Considering that most people avail a Personal Loan during an emergency, it’s obvious that one needs the loan money credited to their account as soon as possible, right? However, like any other loan, one has to be extremely careful while applying for a Personal Loan. A tiny mistake in the application will not only lead to rejection, but the rejection could affect your Credit Score, which could affect the chances of getting any other loan approved in the near future.
Additional Reading: Personal Loan Pitfalls To Avoid
To keep you vigilant, we’ll tell you the most common mistakes that you need to avoid in order to get your Personal Loan approved as soon as possible. Let’s begin.
The first offer works!
No, it doesn’t. Don’t EVER go in for the first quote that you are offered. We understand that you need the money urgently, but that does not mean you go after the first offer that comes your way.
The most common mistake committed by people while availing a Personal Loan is that they visit their regular bank, request a quote and then go with it. Well, once you do this, you ought to check quotes from other banks too.
So, to make it simpler, you can compare Personal Loans on BankBazaar. By doing so, you can figure out the pros and cons of each loan offered by various banks.
Wondering what factors you should compare? Make sure you check the processing fees and interest rates. While these are the basic features you ought to check, don’t forget to check the part-payment fee and prepayment penalty. If you don’t plan to prepay the loan, these charges won’t matter to you. However, if you plan to prepay the loan before its tenure, checking these charges is absolutely imperative.
Additional Reading: Tips To Handle An Emergency That Costs More Than Your Emergency Fund
Loan amount? Err… kind of unsure.
When you approach a money lender and are questioned about your requirements, don’t give vague answers. Before you visit a bank, make sure you write down your monetary needs and calculate the sum of all your needs. If you tell the bank that you need approximately Rs. 5 lakhs or something between Rs. 3 lakhs to Rs. 4 lakhs, you are giving the bank a reason to not trust you.
Why, you ask? If you are unsure of your requirements, it signals that you are equally uncertain about how you plan to repay the loan. Thus, any bank or money lender will be sceptical while approving your loan. Make sure you calculate and pre-decide the loan amount that you need. Don’t give vague answers or show uncertainty. It could totally ruin your chances of getting your loan approved.
Additional Reading: 4 ‘I’s Of Personal Loan Rejection
Hesitant to share information
No matter what you try to hide financially, the bank is likely to find out. So, right from the first transaction or enquiry, be honest with the bank. If you have any existing loans and EMIs, make it a point to inform your bank about it. Whatever your financial condition is, don’t hide it from the bank.
If you decide to forge some documents to prove your credit worthiness, don’t forget that the bank will find out about it once it accesses your credit report. And when they do, you can say goodbye to your Personal Loan!
Whether you have doubts about your credit worthiness or not, never lie to a bank. Don’t be hesitant to share any information or it could cast doubts in the lender’s mind about trusting you. Also, no matter what you plan to hide from the lender, he/she will find out about it anyway. Ever heard of don’t be shy with your tailor or your doctor? Well, add bankers to this list too.
Additional Reading: 5 Tips To Avoid Personal Loan Perils
- Why a Personal Loan? Well, it’s personal!
Yes, you can use a Personal Loan for just about anything under the sun, but try not to hide the purpose of the loan from the bank. While it’s possible that you may not know how you will utilise the money, one of the biggest mistakes that loan borrowers commit is trying to hide information from the lender or displaying uncertainty in the lender’s presence.
So, when you reach out to a bank to avail a Personal Loan, give them a clear idea of your plans. Let them know why you need the money and how you plan to utilise it. Yes, of course a Personal Loan can be used for any personal emergency, but what’s the point of hiding the reason from your banker?
This will help you gain the lender’s trust, and it will work in your favour to get your loan approved quickly. Honestly, it’s better to have the banker in the loop just in case you ever face money troubles and are unable to pay an EMI. In such a scenario, the lenders may understand your situation and could give you an extension to pay the amount due. So, always maintain transparency with all your transactions with your bank.
Additional Reading: Factors Affecting Your Personal Loan Application
Credit history? What?
Never underestimate the power of credit history. All lenders check a borrower’s credit history to understand his or her financial situation. If you have never missed your Credit Card payments and have a clean financial record, you have nothing to worry about as your Credit Score is likely to be good.
If you have a good Credit Score, your credit report will be good too, which will give you the power of negotiating on the Personal Loan interest rate. A good credit report will convince lenders that you manage your finances well, making it easier to get your loan application sanctioned.
Additional Reading: 10 Myths About Credit Score And Credit Report
Ignoring the fine print, because who reads it, right?
The most common and the riskiest mistake that a lot of people commit while availing a Personal Loan is ignoring the fine print. NEVER EVER do that! It’s just like ignoring the terms and conditions on an advert or a sale and then being duped.
If you don’t want to be scammed, it is extremely advisable to read the fine print. Some think that the fine print contains a lot of indecipherable jargon, which would be beyond their understanding. But, it is important to put in the effort to understand the paperwork.
If there is any confusion, clarify it with the bank representative. It is always better to clear all doubts right in the beginning rather than finding yourself in a soup later. Sign all the paperwork only when you have cleared all your doubts. After all, better safe than sorry.
Additional Reading: Did You Read The Fine Print In Your Loan Documents
Well, now you know the mistakes that you need to stay away from while applying for a Personal Loan. If you are in the middle of a financial emergency, you can safely look for Personal Loans on BankBazaar.
Additional reading: Personal Loan Handbook: All Questions Answered
Looking to invest in other schemes so you’re better prepared for a rainy day? Go ahead and explore your options, NOW!