These loans are provided by banking institutions and NBFCs with minimal to no paperwork and seamless approvals. These loans are approved within 24 to 48 hours. Despite their convenience and comfort, unplanned borrowing can result in imposing a heavy, long-term financial burden and debt obligations.
Here are five costly errors to dodge when applying for an instant personal loan:
Borrowing more than required
Taking a personal loan amount higher than the required amount based on generous approval limits can increase the monthly EMI burden. It also prolongs the repayment process and places a strain on your finances. Borrowers should accurately and carefully understand their needs to maintain repayments and avoid unnecessary mistakes that can push them towards the trap of falling into debt.
Ignoring interest rates and hidden charges
Several borrowers overlook the entire cost of securing a personal loan. It is crucial to keep in mind that these loans are credit products that are provided by lending institutions to earn interest on. Further, the applicable interest rates on these loans primarily range from 10% to 18% per annum. Still, hidden charges, fees such as processing, pre-payment penalties, and late fees can make the costs of these loans much higher. To combat such difficulties, it is important to compare lenders and carefully go through the terms and conditions of the loan offer.
Neglecting credit score and eligibility
A good credit score, i.e., any score above 750, assists in securing favourable interest rates and approvals. That is why ignoring credit health can result in higher interest costs or even rejection of the loan application. Eligibility factors such as income, job stability also impact approvals. That is why it is vital to meet these requirements.
Applying to multiple lenders simultaneously
Submission of document-backed applications to several different lending institutions at once can result in generating multiple hard credit inquiries that can bring down your credit score and showcase credit-hungry behaviour to lenders. These developments, hence, can ultimately harm your chances of loan approval.
Overlooking the fine print
Overlooking or ignoring personal loan agreements and not acknowledging repayment schedules, penalties, and borrower obligations may result in unexpected financial challenges, such as hidden charges, penalties for not meeting agreement terms, along other similar complications.
Maximising approval and saving money
Therefore, to optimise instant personal loan benefits, you should focus on maintaining timely repayments, building a strong credit profile, and using online tools to compare offers. Leveraging digital pre-approvals accelerates processing and simplifies documentation.
Hence, the focus should always be on informed borrowing and transparent communication with the lending institution about the terms and conditions of the loan so that you can maximise savings and boost approval chances.
For all personal finance updates, visit here.
Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards, and credit scores. Mint does not promote or encourage taking credit, as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
