Personal LoanMistakes To BeAvoided

Following are the personal loan mistakes to be avoided-

IGNORING CREDIT SCORE

NOT SHOPPING AROUND

BORROWING MORE THAN THE REPAYING CAPACITY

NOT EXPLORING ALTERNATE OPTIONS

MISSING PAYMENTS

IGNORING CREDIT SCORE

Upendra was clueless about what a creditscore is and what role it plays in loan

approvals. He never bothered to ensure thathe had a healthy credit profile. Late payments

on credit card bills and a high creditutilization ratio had resulted in a low CIBIL

rating.

NOT SHOPPING AROUND

The most expensive mistake that Upendra didwas taking the first loan that was approved.

He did not do extensive research andcomparison of various options to ensure thathe gets a deal that is most viable. The interest

rates on personal loans, terms, pre-closurecharges, and fees vary greatly among

different lenders.

BORROWING MORE THAN THE REPAYING CAPACITY

Upendra was happy that the personal loaneligibility criteria of the bank permitted him toborrow a sum of Rs 30 lakh that was needed tofund the education. But such a huge sum was

beyond his affordability. Soon the EMIsoverstretched his finances and led him into a

crisis. He started defaulting on payment and hisCIBIL score came tumbling down.

NOT EXPLORING ALTERNATE OPTIONS

Personal Loan interest rates are very highmaking this type of loan a very costly

proposition. Upendra should have exploredother options like loans against property, loans

against securities, education loans, or goldloans which have a significantly lower rate of

interest.

MISSING PAYMENTS

As with any other loan, timely payment of theEMI of a personal loan is imperative to

maintain financial stability and keep the CIBILscore intact. Upendra did not follow this

ground rule and fell into a debt trap.

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