New Delhi. Personal loans can prove to be a big help in times of need – be it home renovation, medical emergency or loan repayment. But due to wrong decisions, these loans can also harm your financial condition. Experts say that most people take loans hastily or without research, due to which the debt burden increases later. Here are five such common mistakes, by avoiding which you can easily manage your loan.
taking more loan than necessary
Often people take personal loans more than their actual needs. This increases their interest burden and they have to pay more EMI for the entire tenure. According to experts, personal loan should never be taken due to emotions. Take only as much loan as you need. Borrowing more money not only increases the interest but also lengthens the repayment period, which can increase financial stress.
Ignoring Terms and Penalties
It is very important to read the loan terms and conditions like interest rate, processing fee, pre-payment charges and fine print carefully. Many times people take loans only after seeing the EMI, but the hidden charges later become heavy on their pockets. Pre-payment penalties or balance transfer charges sometimes prove to be harmful for customers. So before finalizing the loan, understand all the terms and confirm any additional charges.
Not comparing interest rates
Many borrowers take the decision only by looking at the loan amount and EMI, while the most important factor is the interest rate. Even a difference of just 1 percent in interest rate can increase your total payment amount by thousands of rupees. Always compare the interest rates of different banks and NBFCs. Do not completely depend on the advice of loan agents, as they do not always provide unbiased advice. By making the right comparison, your savings can increase significantly and the pressure of debt remains less.
Taking loans from multiple sources
Taking multiple personal loans simultaneously can prove to be dangerous for any financial situation. This increases the EMI burden and reduces the repayment capacity. In such a situation, borrowers can get trapped in the debt trap. Experts advise to take only as much loan as you can manage at a time. Also, decide to take a new loan only after keeping your income and expenses in mind.
Not paying EMI on time
Your credit score is badly affected by not paying the personal loan EMI on time. Due to this, it may become difficult to take any kind of loan in future. There is a penalty for late payment and additional interest may also be charged. In many cases, continuous missed EMIs lead to legal action. Therefore, before taking a loan, ensure that your income is sufficient to repay the EMI on time.
Ultimately, personal loans prove beneficial only when taken responsibly and with proper planning. Experts advise not to take hasty decisions and seek help from a certified financial advisor if needed. Proper planning saves you from the debt trap and strengthens financial security.
