At least once in an adult’s lifetime, we get a loan for to buy things, pay bills, or even set up a business. Personal loans are a great option if you need quick cash with little collateral and only a few questions. Sometimes your personal loan application is approved almost immediately.
While some lenders claim to be able to approve loan applications in as little as 5-30 minutes, others can take up to five business days or even a week to process them.
These personal loans are not for everyone. These people lose money and end up in bigger debt than they gain. This can lead to financial and home problems as well.
However, not all of the errors we make when taking out a personal loan can lead to bankruptcy or bigger financial problems . Some are minor enough to cause problems, such as slow application processing.
These are the costly errors that you should still avoid:
1. Compulsion borrowing
Before you apply for a loan, think twice! A loan is a big commitment. It is like getting into a relationship. It doesn’t matter if a family member tells you you have gained weight. You don’t need to go to the bank to get a loan to Zumba, or get medical treatment to lose that excess fat.
Before you make any decisions, think it through. This could save you time, effort, money, and possibly even your life.
2. No long-term plans
This problem can be caused by impulse borrowing. You don’t plan for the long-term if you borrow a loan out of impulse. You’re not planning for your future expenses. You can end up in a lot of trouble if you don’t have a long-term financial plan. This includes debt, inability to pay bills and nearly always not having enough money to buy food or groceries. These are the essentials you need to live a normal life.
Remember, when taking out a loan, think about the future, how you are going to repay the loan, and where you will get the money to repay it.
3. Complete paperwork
It can be very frustrating and annoying to have to submit all required documents and paperwork. It is usually the borrower’s fault that they didn’t read the entire list. They think that a personal loan is an easy way to get cash and can be done quickly by signing only a few papers. It is not.
The bank or lending agency must be able to verify that you are able to repay the loan amount (plus interest). Failure to submit all required paperwork will delay the loan application and affect any plans you may have with them.
It is possible that you will need to return to the bank or lender multiple times to get your application approved. For a smooth application, ensure you have all the required documents (extra photocopies are a good idea, too).
4. Incomplete disclosure
Complete your loan application with honesty. You should be as precise and exact as possible. Why? It is possible to endanger your bank or lender by not telling the truth.
Incomplete disclosure could lead to criminal or court cases. You are committing fraudulent. You might also be using information from someone else to fill out your loan application. This is identity theft. This is a crime.
If you are asked to provide information by the applicant in order to complete the application, do so. If you are uncomfortable sharing this information, then ask your bank or lending agency for ways to get around it.
5. Borrowing money for someone else
People borrow personal loans and then give the money to someone else. This is a bad idea! This is because the other person isn’t responsible for paying the loan back with interest. The problem is that the other person could just take the money and pay off the loan without you knowing it.
6. It is important to ignore the fine print
You should read all the terms and conditions before you sign a loan agreement. There are some details you might not be aware of about the loan, such as the flexibility of the interest rate that can change each month or the possibility that the bank can make important changes to the loan term without you asking. These details are crucial because they could make or break your application. Before you sign the dotted lines, make sure to read them!
7. Forgetting to compare
To make the most of personal loans, compare all loan products. To ensure you get the right personal loan product for you, compare their interest rates, annual percent rates, and loan terms. This will save you money in the long-term.