The Top 5 Mistakes you should avoid when selecting for a personal loan

Managing personal finances is an uphill task in this topsy-turvy world and especially in the dynamic times that we live in. When situations turn bleak, you may turn to a personal loan to rescue your finances. A personal loan is the best solution to your financial strength. 

Apart from the benefit of receiving personal loans with ease & little to no formalities to comply with, a personal loan offers more than that. A personal loan is unsecured in nature, which allows you to not pledge any of your assets as a collateral. It also makes sure that there is no restriction on your utilisation of funds for any purpose that you may see fit. 

A personal loan can be borrowed for a sum up to Rs. 10 lakhs and for a duration of about 5 years at a time. The rate of interest ranges from 16% to 26%. It comes with a lot of flexibility that will allow you to choose a loan amount & tenure based on your exact needs. 

The top 5 mistakes that you should avoid when opting for a personal loan are as follows: 

1. Treating personal loan as an extension to a savings account: A personal loan is definitely a knight in shining armour when your financial health is on the verge of a collapse. However, it is not to be taken lightly, as, at the end of the day, it is a debt. Therefore, while undertaking a personal loan, you must take a careful consideration. 
2. Availing without planning: A personal loan is your best bet when you have an emergency to tend to, and that emergency requires an additional source of funds to suffice your needs. Therefore, when you are applying for a personal loan, you need to plan the purpose of the expenses that the loan will be used for. 
3. Considering the pocket strength & the timeline: It is essential to consider the strength of your pocket along with the current & certain potential future expenses. While considering this, you need to add the premium payments of the repayment schedule into this. It will allow you to consider the future life and save money as we work towards a sound future of your finances. 
4. Not checking credit scores: If you are a repeat borrower of personal loans or any kind of loan, then you have a credit history. In India, most lending companies use CIBIL scores to check. A CIBIL score above 750 is considered ideal for most lenders; however, the mileage may vary from company to company. 
5. Having too many pending loans: Most lenders take a note of how many debts you are under. Suppose you have too many personal loans or any kind of loans that are currently active. In that case, you can either diligently pay all the loans adhering to the payment periods or consolidate your debt with one personal loan. Consolidating your debts would make it easier for you to keep track of personal loans & easily manage your payment schedules too.