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It may have become easier to take a personal loan in the digital era, but a small mistake can be heavy on the pocket. Many people take such hasty decisions due to which the burden of EMI, interest and charges suddenly increases. Know those 6 big mistakes, by avoiding which you can save thousands of rupees and make the loan process safe.
New Delhi. In the rapidly growing digital loan market, availing a personal loan has become easier than ever. Many fintech platforms claim to approve loans in 10 minutes. But ease does not mean that the scope for error also increases. Since taking the loan is just the beginning, the real responsibility lies in paying the installments. Therefore, some precautions are very important before taking a loan.
Stay away from loans with high interest rates
There are countless apps and platforms available in the market with attractive offers. But do not take a loan just because the approval is easy. Many times such loans are given at 24 percent or even more interest. High interest rates make EMIs heavy and have a big impact on the pocket in the long run. Always take a decision by comparing different loan offers.
Do not trust unknown or dubious lenders
The proliferation of fintech apps has certainly increased options, but has also brought with it risks. Experts recommend that you always choose a reliable and big lender for loan – like a bank or an RBI-recognized NBFC. Look for alternative platforms only if you do not get a loan from the bank. Choosing the wrong lender can lead to problems later on in terms of service quality and recovery behaviour.
Avoid unregistered lenders
Before taking a loan, definitely check whether the platform or its partner lender is registered with RBI or not. Many apps work as middlemen and actually provide loans from NBFCs or banks. Therefore, it is important to thoroughly check the terms and license, so that the risk of fraud or illegal recovery can be avoided.
Taking loan for non-essential purposes is a big mistake
Personal loan is for those expenses which cannot be avoided. It is not wise to take a loan for going on holidays or for hobbies. Such expenses become a heavy burden of EMI. Take a loan only when there is a genuine need for it and you have full confidence in your ability to repay it.
Don’t ignore processing fees and other charges
Many people choose a loan only on the basis of low interest, but forget about the processing fee, document charge and other fees. Sometimes the interest is low but the processing fee increases the total loan cost by 4–5 percent. Therefore, choose the offer keeping in mind the total cost of credit.
Not reading the fine print is the most common and costly mistake
Many apps add loan insurance by default, which can increase the EMI by Rs 300–400. Not reading the terms and conditions carefully may lead to unwanted charges later on. There’s nothing wrong with insurance, but choose it only if you want to – not because the app already ticked it.
