5 Mistakes to Avoid While Taking a Personal Loan

Apart from big purchases like a car or a house, most of us would ideally like a life devoid of borrowing. However, there are times in life when borrowing money becomes a necessity rather than an untamed luxury. In those cases, personal loans that are processed quickly with minimal documentation, like the ones given by SmartCoin come in quite handy. Today, there are multiple options available to fulfill the need for funds. This makes it even more important to know some potential landmines and how to avoid making those mistakes while taking a personal loan.

Taking a loan more than required

When you finally take the leap to realizing the need for a personal loan, it can be tempting to go overboard and borrow more than completely necessary. For instance, you have just bought a new flat and you realize that there are a few elemental changes required for which you need to take a personal loan. You might feel that there is no harm in then going all out and furnishing it to make it your dream home. However, try to be financially disciplined and borrow only as much as necessary, paring your need to burrow down to the basics.

Taking a loan from an untrustworthy source

As mentioned earlier, today multiple providers lend funds towards personal loans. However, you should be careful and take care that the lenders are not fly-by-night operators or that you are not getting into a trap. If need be, check some of the testimonials and talk to friends for some references. But, ensure you trust the lender before you jump on to availing a personal loan from them.

Paying a very high interest rate

Sometimes, taking a loan from something that you regularly use, say a credit card seems like a good idea. After all, what can go wrong? Credit card debt is probably the worst thing you could have in your financial life. The loan comes with a very high interest rate and is often the start of a debt trap that people find themselves sucked into.

Taking a loan for things for which you should have saved

Today, we live in a world where it is extremely easy to compare our lives to our peers. The urge to match up to our friends and the fun that they might be having at whatever cost feels most important to us. Be it a holiday or the latest gadget, with the availability of easy credit, the one-upmanship at every point seems like an easy catch. However, you should remember that borrowing money should be for necessities and not indulgences, which should ideally come only as a result of saving up for it.

That said, not everything in life should be put off till we actually have the money for it. Taking a personal loan to fulfill a cherished wish is wonderful as long as you can afford to pay for that loan.

Not reading the fine print on the agreement

The process of taking a loan is a legally sanctified process, with a formal agreement backing it up. Most of us blindly click on the “I agree” button or sign at the points where we are told to for any such seemingly boring documents. Not reading the fine print for such an agreement could lead to a path of doom. There might be a provider giving an attractive interest rate and a longer tenure but charging a higher penalty for early repayment. Make sure you are aware of any possibly unfavorable terms that you might be signing up for.

Furthermore, The Reserve Bank of India (RBI) has now made it a mandate that all digital lending platforms must disclose the name of the bank or NBFC upfront to the customers. It is imperative that you look for these details while submitting your KYC documents, during the loan application process.

When there is a need for funds, personal loans can be a good, economical way to fulfill it. Not stepping into any of the above pitfalls ensures a smooth journey with a personal loan. Taking loans from credible players like SmartCoin loans helps your cause even more.