Mistakes to avoid before applying for a loan - PowerPoint PPT Presentation

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Mistakes to avoid before applying for a loan


It is dependably a smart thought to be prepared. Remember these pointers when you apply for a credit to spare yourself from unnecessary pressure. – PowerPoint PPT presentation

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Title: Mistakes to avoid before applying for a loan

Mistakes to avoid while applying for loan
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It is dependably a smart thought to be prepared.
Remember these pointers when you apply for a
credit to spare yourself from unnecessary
  • Check your credit rating
  • All banks verify the FICO Score of the loan
    applicants. A bad FICO Score could lead to
    rejection or higher cost of the loan while a
    good score helps you secure a loan easily, and
    could even result in the lower interest rate. So
    before applying for a loan, check your FICO Score
    and take steps to keep it healthy. If your
    credit score is 750 or above then your chances of
    fetching a good loan deal, bargaining for a
    lower rate of interest are high. On the off
    chance that your score is lower than 750, you
    are helpless before loan lenders on interest

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  • Compare Various Loans
  • Devoting a little time to compare loans can help
    you save a lot of money in the long run. Visit
    various banks to know about the offerings.
    Discuss with your friends and colleagues to get
    an idea of various options and facilities they
    are availing for their loan. Do an online
    comparison of various products to fetch the best
    loan deal according to your needs. Compare all
    your alternatives to make an informed decision.
  • Borrowing Beyond Your Capacity
  • You should always consider your income levels
    while taking a loan and borrow the amount which
    you can easily repay. Before granting the loan,
    banks determine the amount eligible to you by
    looking at your income and existing liabilities.
    They, however, do not take into account your
    existing expenses. You are the best judge of your
    existing expenses and so do not take a loan
    which results in higher EMI and put you in
    financial distress. If it is higher or too close
    to your monthly income, then consider a cheaper
    option for the thing you want to buy.
  • Negotiate for the best rate
  • Banks are always competing among themselves for
    lending to credit-worthy borrowers. So negotiate
    hard to get a better interest rate on your loan.
    Even a fraction of a percentage of APR could
    mean a substantial reduction of repayment burden.
  • Compare interest payable, charges when
    installments fall due and all other charges. Your
    bank may state it offers particular rates to its
    current account clients yet you may at still find
    less expensive loans available somewhere else.
  • Within their loan offerings, banks have products
    that could work out cheaper for you. These could
    be loans against assets such as gold, shares or
    even deposits. Since these are asset-backed and
    secured the interest rates could be much lower
    than personal loans.
  • Know the risks of secured loans
  • Secured loans are less expensive than unsecured
    loans however you risk losing your home in the
    event that you dont keep up reimbursements.
    Secured loans are just offered to mortgage
    holders with value in their property and mean the
    moneylender takes a charge on your property if
    you fail to pay. So dont sign-up unless youre
    sure that you will be able to meet your
    repayments. This sort of credit is fundamentally
    less risky for loan companies but risky for

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  • Opt For Shorter Tenure
  • Its true that when you spread the loan over many
    years, youll pay lower EMIs. But this may
    result in paying more money as interest. When
    applying for any loan, always choose the shortest
    term available to maximize the benefits of your
  • Read the Agreement Properly
  • While going for a loan, borrowers only focus on
    the interest rates and tend to ignore other
    important aspects. They also choose to ignore
    going through the agreement clauses, which could
    result in missing out on critical terms and
    conditions. Do read the agreement thoroughly
    before signing. If you do not understand anything
    written in the document make sure you get all
    the answers before you sign. You must consider
    the Term of the loan, It is a secured or
    unsecured loan, interest rate fixed or variable,
    charges, fees and penalties for non-repayment.
  • End-use purpose
  • Limit the loan amount to what your end-use
    purpose is. While there will be a temptation to
    seek a loan for things like leisure travel and
    to buy the expensive item you so like. Accessing
    loans to fulfill such desires can mess up your
    finances since you will add another repayment
    component that would go out of your monthly
  • The personal loan should be your last option
  • Borrowing personal loan may seem like a
    convenient loan alternative since there might be
    negligible paperwork. It should be your last
    option because, after credit cards, personal
    loans are the most costly advances that are
    accessible in the market. Borrow it if you feel
    that it will protect you from increasingly
    costly obligation like, in the event that you
    are struggling with heavy credit card bills or
    you expect it to build up an asset. In any case,
    dont significantly think about taking a
    personal loan to spend it on a depreciating thing.
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