If you’re in need of extra cash, a personal loan can be a true lifesaver, especially if you’re trying to find your way out of debts or to cover some urgent expenses. However, it’s very important to take the time to find the right loan for you, otherwise, you could end up in a bigger trouble. That’s why you should be aware of the mistakes you could make when getting a loan.
1. Choosing the first personal loan offered
The first step of the majority of borrowers is to go to their current bank to look for a personal loan. Don’t do the same mistake of not checking out other possibilities. Another lender may have a far better interest rate or other beneficial terms even if you don’t have an established relationship with them.
In short, comparing different loans and discovering various options is the best way to make the smartest decision. Take some time and do your research.
2. Overlooking other important detail, not just costs
Don’t just focus on the loan rates when comparing different lenders. Other costs and fees are equally important. Some lenders can charge origination fee or any other fee that could be added to the cost. Make sure to know what the final cost of the loan will be so as not to end up with a loan that costs much more than expected.
Customer service and experience are also important factors in choosing the right lender. Reputability of the lender and the reviews they get can be a telling sign of how reliable they are or whether it’s all just a scam.
3. Lying on the application
Omitting some personal detail or stating that you have a full-time job (while it’s actually a part-time job) isn’t as minor as you may think. It’s understandable that you are worried about not getting the loan thanks to your financial situation but lying won’t make your life easier. Lying on the personal loan application can lead to you getting prosecuted or even ending up in jail. That’s not worth the risk – just stick to the truth.
4. Not considering your credit score
Getting personal loans with favorable interest rates will partially depend on your credit score. In the worst case, your credit score could even get your loan application rejected. The loan rates will also be dependable on your credit histories. In general, the better credit score you have, the lower your interest rate will be. So, make sure the lender you want is a good fit and always take your credit score into consideration. If you determine that your credit score is bad, it’s still no reason to get desperate. There are many ways to improve your credit score before you approach a lender.
5. Not making repayments on time
The loan process isn’t over the moment you get the approval for one. You are still under obligation to repay the money after a certain time. Failing to make a repayment on time may seem like a minor mistake, but it will seriously damage your credit score in the future, ruining your chances of getting another loan when you really need it. You need to treat your loan as any other monthly bill – it needs to be paid on time, every time. The easiest way of not forgetting about the due date is to set up an automatic transfer if you use online banking or just put a reminder on your mobile phone.
6. Not considering your budget
A loan is a good option when you are in need of extra money, it will also mean you will have a debt with interest to repay. So, ask yourself one question before you sign the agreement: will you be able to repay it when the time comes? The safe road is to check your budget, along with all your monthly expenses and bills and determine whether you will be able to set enough money aside to repay the loan. In the best case, a loan repayment shouldn’t go over 25% of your income. If it’s higher than that, maybe you need to find another source of extra cash.
Getting a loan can really be helpful for your financial situation. So, make sure you avoid all the mistakes and create the best possible scenario for yourself.