Loan Blunders that Anyone Should Say No To

It is inevitable that you will take some or the other loan at any given point of time in your life to meet a certain financial need. This may be a asset-based loans such as a home loans or other types of loans such as a personal loan or an educational loan. However, any loan that you take will have an impact on your credit score. So, before making a decision, first sit down and take a look at the common loan mistakes that you should avoid at any cost in your life.

1. Not comparing interest rates: Different banks have different lending rates, and before you go ahead and apply or a loan, it is a must to sit down and compare interest rates. It is very wise to do a through comparison before you choose a lender. This applies to all categories of loans that are offered. Go for an interest rate that is comparatively lower and also go for fixed interest rate rather than floating interest rate. Also choose a tenure carefully because the longer the tenure of the loan, the more the interest you will be paying over the period of the loan.
2. Choosing the first lender that approaches you: You really want a loan and then a lender approaches you, you say yes and feel like it's the best deal for you! Then after signing the application, you see that there are better deals on offer. You feel cheated! Does it look like a similar pattern? This is why, financial experts ask prospective borrowers to make an effort to take a look at multiple lenders before closing in on a loan. It is not enough to just compare interest rates, you will also have to compare lenders and weigh the pros and cons before making a final decision.
3. Unplanned financial decisions: A loan is not money that gets credited to your bank account for free. You are not shopping for money, so do not go on a shopping spree! You have to pay it back, and mind you, you are being charged in the form of interest for the money that you have borrowed. So as a policy, try to avoid debt as much as you can, Loans should ideally be taken only for appreciating assets like buying a house. Personal loans usually come with a very high interest rate, and you should avoiding this category of loan. Instead of taking a personal loan, just plan your finances better.
4. Defaulting payments: This is a complete no no. At no point of time in life should you default a payment towards a loan or even make delayed payments. Even credit card bills should be paid on time in order to maintain a good credit score. Without a good credit score, you will not be able to get loan approvals in the future.
5. Taking multiple loans: Having too many loans is just a bad idea. This will not only cause financial stress but will seriously jeopardise your credit health. So, be careful when it comes to loans and make a wise decision.
6. Choosing a heavy EMI: Another important thing to keep in mind is to choose an EMI that you can actually afford to pay after taking care of all your other expenses.

When it comes to a loan, be wise before it's too late!