6 Common Personal Loan Mistakes
Personal loans can be costly, however, they are one of the most preferred types of loans that people go for when they find themselves in a financial crunch. You have to exercise caution while taking out any type of loan. Most often, people fail to do that when getting personal loans, mainly because they are quite easy to qualify for. This article outlines some common personal loan mistakes that people tend to make while taking a personal loan. You should try and avoid them to ensure your personal loan or installment loan does not become a significant financial burden for you.
- Taking a personal loan out of a ‘want’, not out of a ‘need’: It is when the going is easy and there’s lots of money coming in, that many people make financial mistakes. People often fail to draw the line between essential needs and non-essential wants. Taking a personal loan just to upgrade your lifestyle is not a wise move. Personal loans are tied to interest and fees so even if you are able to get an installment loan at low-interest rate, you will have to pay back more money than you borrowed. This is referred to as the cost of borrowing and is prevalent all over Canada. Think about a personal loan only when there is a real need, such as a medical crisis.
- Taking a personal loan without reading the fine print: Reading the fine print on the loan application form is a cumbersome task. The alternative is the loan officer explaining it to you. This works if you are taking a loan from Cashco Financial or any of Canada’s reputable banks. However, other places may not take the time to explain each and every aspect of the loan. Hence, it is always better that you read the fine print, and understand it. It may be a boring task, but down the road it could save you a lot of unnecessary complications. Understand the lenders’ policy regarding partial payments, pre-closure, penalty on missed payments, and so on. Cashco Financial offers our flex loans up to $5000 with no penalty for paying off early which is a great benefit for out consumers.
- Applying for a personal loan without checking the credit score: If your credit score is good, then you do not have anything to worry about. On the other hand, if you have a bad credit score, your loan application may get rejected. Furthermore, even if your loan is approved, you may have to pay more. Hence, apply for a personal loan only after improving your credit score. Cashco Financial’s flex loans actually allow you to improve your credit score while you have the loan with every affordable installment. That’s pretty great for you!
- Taking a personal loan without evaluating your ability to repay: Check whether you would be able to make the EMI payments regularly. Missing even one can be very expensive. Miss two or three and it could be very difficult to catch up. Take into consideration your monthly expenses, other EMIs (if any), and then compare it with your net monthly income. Ideally, your personal loan EMI should not be more than 15-25% of your income.
- Applying for multiple personal loans: A bank will be able to find out whether you have applied for a personal loan from another bank while checking your credit report. If a bank finds out that you have applied to another bank as well, they many tag you as a client with too many expenses. This will either get your application rejected or your loan approved with a higher interest rate. At Cashco Financial, we only do a soft credit check which means that it does not show up on your credit report. Another thing we do to ensure we’ve got you covered.
- Taking a personal loan without comparing it with others in the market: Most often, if a loan is readily available, people will go for that, without even checking whether that is the best loan available in terms of interest rates and other features. Nowadays, you can compare the loans online or there are a number of apps available for loan comparisons. Compare loans to get the best deal available. We at Cashco Financial can even walk through a few loan options with you anytime.