What Are the Common Pitfalls to Avoid When Applying for a Personal Loan Online?

Personal loans have become quite popular, with almost 67% of Indians claiming to have taken one at some point in their lives. More recently, the personal loan territory has become crowded with micro-financing schemes that offer borrowers smaller loans at higher interest rates and longer loan tenures. Depending on your needs, you may or may not wish to opt for such loans. However, regardless of the type of personal loan you apply for, there are some common pitfalls that you should avoid.

1. Not Comparing Loan Offers

If you are planning to take an instant personal loan online, the biggest mistake you can make is not comparing loan offers. There are a plethora of banks and non-banking financial companies (NBFCs) that offer personal loans online. Each of them has its unique selling propositions (USPs). Along with this, there is also a difference in the interest rates and loan tenures offered.

An easy way to compare these different loan offers is to seek help from an aggregator website. Such websites allow you to compare all aspects of personal loans and make an informed decision.

1. Not Using a Personal Loan Calculator

Another mistake to avoid is not using a loan calculator. There are several loan and EMI calculators available online that you can rely on. These calculators require specific inputs like the loan amount, loan tenure, and interest rate. When you feed these values into the calculator, it provides you with an accurate estimate of your monthly EMI burden.

Calculating an approximate EMI amount before applying for an instant personal loan online can help you make planned decisions about borrowing money.

1. Overlooking Eligibility Criteria

When looking for a personal loan online, you may sometimes overlook a few eligibility criteria. However, not fulfilling all mandatory eligibility criteria can lead to your digital loan application being rejected. When this happens, you will need to reapply and start the process again.

To avoid having your instant personal loan online application rejected, you should cross-check all your personal details and provide the necessary documentation to support them. This can ensure a smooth online loan approval process.

1. Disregarding Hidden Charges

Despite having a more straightforward approval process, most online personal loans have hidden charges. These may include foreclosure charges, partial pre-payment charges, or even penalties for defaulting on your EMI payments. The cost of these charges differs from bank to bank.

To avoid paying such hidden charges, you should always read the fine print of the loan approval documentation. These documents will tell you about all the terms and conditions, including hidden charges you may need to pay.

1. Borrowing More Than Necessary

If you have borrowed more money than you are capable of repaying, then you may be at risk of falling into a debt trap. This is a common pitfall of personal loans since most people may want to apply for a second personal loan to help pay the EMIs of the first one. This is a grave mistake that must be avoided at all times.

To avoid borrowing more money than needed, you should first carefully plan your finances and list all your major expenses. You can do this with a personal loan calculator that is readily available online.

Conclusion

Finally, applying for an instant personal loan online may sometimes be an impulsive decision. So, before you do this, you must always compare multiple loan offers to see which bank or NBFC provides you with a lower interest rate and better loan repayment terms. You can also use a personal loan calculator to compare how much EMI you would have to pay for a selected interest rate and loan tenure.