By Jilly Casey
Personal loans provide incredible financial relief to an existing problem especially when you are in a fix. In recent times, personal loans are seen as the perfect option for getting your finances in order as is the case with debt consolidation loans. Most of these loans do not require collateral. As a result of these and other reasons, you may think that the loans are your first ticket out of trouble every time. This shouldn’t be.
There are many costly mistakes made by borrowers every day and you shouldn’t walk in these same shoes. The most common mistakes to stay clear of include:
1. Poor spending habits
Buying things feels good. It should be an achievement to buy things with your hard earned money. However, once you get into the habit of purchasing everything you look at without looking at your bank account situation, you will find yourself in a never-ending debt hole. Rather than spending recklessly, save that money. Saving is a wiser decision compared to spending.
2. Failure to consider alternative options
There is an alternative, always! Borrowing may seem like your only option at the time but it isn’t. For instance, rather than taking a personal loan to pay off your student loans, consider private refinancing options or ask for a credit card balance transfer with a 0% introductory rate. These options are more affordable than the personal loan.
3. Ignoring your credit score
Your credit score determines if the lender approves the loan and the interest rates they will charge you. A good credit score equals faster approval and a lower interest rate and vice versa. The score will also help you pick a lender that fits your bill.
4. Overlooking fees and costs
As you look at the interest rates charged on loans, compare the rates but do not forget to account for costs and any transaction fees. Origination fees affect the cost of the loan and if these fees are overlooked, then you will end up servicing an expensive loan.
5. Running with the first offer or company in sight
Number one rule for personal loan application is research. Take some time and look through packages offered by different companies. Secured or personal unsecured loans are expensive, but companies charge differently for their services. Pick a company with the best rates or even favorable repayment terms. Take some time and look around, you’ll find something that suits you best.
6. Overlooking non-money issues
A good lender is one who offers more than excellent terms, reasonable rates, and lower repayments. A good lender has exemplary customer service, they are reputable, credible, their details and siteshave been verified and licensed, and they can be trusted as seen on their reviews.
7. Lying on the application
Your lies will catch up with you, landing you in bigger problems. Just don’t lie on your loan application. A personal loan isn’t worth a fraud charge and a jail term.
8. Failure to read the fine print
The contract has terms and conditions that are legally binding and if you sign without knowing all the details in the contract, you may end up paying more due to hidden fees in the contract.
In conclusion, these mistakes are avoidable and you can avoid paying more in the end by being patient, knowing why you need the loan, the alternatives, and changing your spending habits for good to avoid unnecessary borrowing.
Author Bio: Jilly Casey is a credit counsellor and a debt management expert. For more insights on personal unsecured loans, look up his blog on personal loans and debt relief.