5 common personal loan mistakes first-time borrowers must avoid

If you are in an urgent need of money for any reason whatsoever, you may explore the prospect of raising a personal loan. The reason could vary from personal emergency to hosting a wedding, or sending your child for higher education to getting the house renovated. Meanwhile, when you apply for the loan for the first time, you must plan it well and avoid making a mistake.

There are certain precautions that you need and make sure that you avoid making those mistakes.

5 mistakes first-time borrowers could avoid

I. Quality of lender: First and foremost, the lender should be reputable and not some fly-by-night operator. Typically, small players target those customers who fail to get a loan from a bank.

II. High interest rates: By virtue of being unsecured, personal loans carry very high rates of interest. So, one should refrain from taking a loan at an unaffordable interest.

III. Hidden charges: Some lenders levy hidden charges which borrowers should save themselves from. These could include processing charges, insurance on loan and others. Processing charges are mandatory, but they vary from lender to lender, and insurance on loan is voluntary and should be bought only when you want to.

IV. Not comparing different loan options: To close a loan as soon as one can, some borrowers jump the gun before even comparing multiple options. It is, therefore, recommended to use a personal loan calculator before deciding which one to go for.

V. Taking loan for frivolous reasons: Last but not the least, one should take a loan only when it is essential. One should refrain from taking a loan for avoidable reasons such as travel, buying a luxury item and lending it to a friend.

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