Opting for a personal loan can bring great relief to when there is a requirement for extra money. Moreover, this convenient finance is a smart option for debt consolidation or covering expenses that are urgent. Hence, it is important that you take out time for selecting the best kind of finance as per the situation. One simple mistake done while taking this finance may lead to rejection. These mistakes could also harm your finances for the coming years.
You may not afford to make mistakes while opting for a personal finance. So, you can be able to avoid them in case you are aware of what you should be watching out for. Following are some general personal loan mistakes that you should be aware of, while also making sure you avoid them.
1. Borrowing rather than Saving
A valid initial point to avoid making mistakes is to figure out if you really need personal finance or not. Lending Money is a huge commitment. Hence, you need to ensure that whatever you will be getting out of it is worthy of the chunk of your invested budget.
It might happen that the purpose for which you are getting this credit is not your need but more of a want. In such a situation you should consider saving some funds instead of borrowing. Saving funds is not just less risky but is also a responsible and better financial decision. You can also avoid spending money on paying loads of interest. While you might end up delaying your purchase, it is always better than relying on a credit that could affect your pocket.
2. Not Considering Other Options Over Borrowing
In case you decide that taking up a funds could be advantageous for your finances, then you should identify your borrowings. The borrowing product should be the one that would help you save the most. You can get personal finance easily in the UAE. They can be a common way of financing purchasing or refinancing debts, but they are not the best option always. For instance, in the case of student loans, refinancing with private lenders may usually deliver lower rates of interest and larger savings.
It is suggested that you do not assume any kind of credit to be the best or your only choice. Make sure that you consider all possible solutions so as to ensure that there is no better option out there.
3. Opting the First Loan you can Find
A lot of borrowers who are interested in taking a funds will initially look for a fund with the bank they are currently dealing with. And why not? An established relationship already exists with them.
However, in case you fail to check beyond your initial choice of the lender, it will prove to be a personal finance mistake which could cost big. Some other lender may be able to offer you a better rate of interest or other various favorable terms. It is all about getting a suitable amount, even if you have not borrowed from the other bank ever before.
While opting for this finance, the best way of ensuring you get an ideal deal is to look around and compare all offers to find the lowest interest rate for personal loan in UAE. However, you would never find out if you do not invest your time in looking for the most suitable offer.
4. Overlooking Fees and Costs
While comparing different lenders, most of the borrowers compare the particular personal finance rates offered by them so as to find an ideal deal. As soon as you find an ideal deal, you can get amount easily.
However, you must compare & account for different costs too. A lot of providers charge a processing fee as well as other charges that might add to the fund cost. In case you are not aware of these fees, you may end up having a funds that makes you bear more costs than you expected.
5. Comparing Costs Only
It is true that considering costs and fees is essential, however, it is not everything. Experience, as well as customer service, can be of great importance too when deciding whether to go for a personal loan or not.
Make sure that all the banks or other lenders you are taking into consideration are reputable. You must be careful of predatory lenders or scammers.
6. Ignoring your own Credit History
While getting a personal finance in the UAE or any other place for that matter, your credit history is an important aspect. A bad credit score can lead to fund rejection. It is amongst the main factors the lenders consider while deciding whether or not to give you approval for the funds.
The lenders may also set the rates on your lending money on the basis of your credit history. Hence, the better your credit, lower would be your rate of interest. If you apply for the loans without looking at your credit score, you may end up choosing to apply for a loan that isn’t an ideal financial fit.
7. Providing False Information on the Application
Honesty is the best policy, and honesty will get you the best deals and policies. Lying is a thing that should have no space when opting for a finance. It might look like a small fib to claim a part-time job as full-time, or simply rounding of your income. It is possible that you do this because you are worried your amount would not get approved if you do not modify the truth a bit.
However, lying on the application of the loan could be considered a fraud and consequences could be its rejection, fine or even jail. Getting such funds would never be worthy of such amount of risk. Hence, you should always stick to the truth and just the truth.
8. Not going through the Fine Print
The borrowers must always thoroughly go through the fine print of the agreements of their funds. Even though it looks like it may take a lot of time to read all of it, it should be done anyhow.
By going through your contract, you may catch things such as loan terms or hidden fees that might be different from the initial offer. All of these could also help you in identifying predatory lending.
9. Consolidation of Debt Without Change in Expenses
Personal loans can be a common solution when it comes to consolidating debt, especially credit card debts. The general mistake made by borrowers is the consolidation of debt without making any changes in their spending. Hence, as soon as the balance on credit cards reach AED 0, a few people continue to charge useless purchases to their cards.
The Final Thought!
Opting for a personal finance is considered to be a significant financial decision which requires a good amount of research, thought, and caution. With a responsible behavior of borrowing and the above-mentioned tips to get your loan application approved, you may be able to avoid these mistakes. You can easily avail the funds you require that too without any regrets.