A personal loan can be an effective financial tool, whether you need funds for medical emergencies, debt consolidation, home repairs, education, or even travel. But even though it is convenient and easily accessible today, many borrowers still end up paying more than necessary or facing approval delays due to avoidable mistakes. Understanding what not to do can help you make smarter, more informed borrowing decisions.
Prior to looking at the frequent mistakes made, keep in mind that the process of comparing lenders, checking your ability to pay back the loan, and reading the fine print is a significant part of the loan process. You can also explore using a personal loan or checking eligibility through an instant personal loan app, which makes the entire process simpler and more transparent.
Here are the five major mistakes you should avoid before applying.
1. Not Checking Your Credit Score in Advance
Your credit score is a decisive factor in determining your approval chances, interest rate, and loan amount. First-time borrowers often apply without checking their score, and end up either rejected or with a higher interest rate.
What does it matter:
- A higher score (normally 750+) gives a better chance of getting a lower interest rate
- A low score may lead to rejection or a loan that is much more costly.
- Multiple rejections can hurt your credit score even more.
Tip: Have a look at your credit report at least once a year and make sure that there are no mistakes before applying. If your score is low due to high credit usage or late payments, you can improve it by paying off existing debts or lowering credit card balances before applying.
2. Borrowing More Than You Actually Need
When lenders pre-approve you, or when eligibility calculators generate a large loan limit, it’s tempting to take a higher amount. But borrowing more than your actual need results in higher EMIs (monthly repayment), which increases your cost over time, and often ties up further risks for you.
Common reasons people borrow more:
- Assuming they will earn more in the future,
- Wanting to have “extra funds” available, or
- Being lured by a tempting loan offer.
One should borrow only what one actually needs and what one’s repayment ability can comfortably accommodate.
3. Not Comparing Lenders, Tenures, and Charges
Many borrowers choose the first lender that approves their loan quickly, but in the end, they frequently end up paying an unnecessarily high interest rate or simply not being aware of hidden charges. This mistake more often happens with those who choose a loan through an instant personal loan app without carefully reading all the details.
What to compare:
- Interest Rates: Understand that a 1% or 2% difference in the interest rate means a significant difference in the total cost.
- Processing Fees: Normally, these will be 1% to 3% of the total loan amount.
- Prepayment Charges: Some lenders will allow you to pay off the loan early with very little or no pre-payment charge.
- Tenure: With tenure, the longer the tenure, the lower the EMI will be; however, the higher the interest you will be paying in the long term.
4. Ignoring Your Repayment Capacity
One of the biggest mistakes borrowers make is failing to calculate their affordability. Taking a higher amount without assessing your repayment comfort can quickly create unnecessary financial pressure.
Before applying, consider asking yourself these questions:
- Will I still be able to save money each month after I pay EMIs?
- Are any expenses coming up shortly (i.e., rent increase, children’s school fees, or medical expenses)?
- Do I have any emergency funds for at least 3–6 months’ EMIs?
Having these checks done will help you avoid being trapped in financial debt.
This is also where digital tools like an EMI calculator on an instant personal loan app can be very helpful. Using the calculator, the borrower can adjust tenure, amount and interest rate to find a repayment plan that is affordable and convenient.
5. Overlooking Terms, Conditions, and Hidden Charges
Many borrowers don’t feel like reading the loan agreement because it seems lengthy or overly filled with financial jargon. Unfortunately, this is where most surprises tend to be hidden.
There are some key things you should review before signing:
- Processing fees
- Late payment fees
- Rules for prepayment and foreclosure
- Penalties for EMI bounce
- GST and other taxes
Taking the time to read through some of this information, even for a few minutes, can help prevent any unforeseen costs down the road. Trusted digital platforms like Kissht keep your loan terms clear, upfront, and easy to understand. You’re able to make informed choices without being pulled into under-the-radar requirements.
Conclusion
Avoiding these five mistakes can make your loan journey far smoother, more affordable, and stress-free. Whether you apply through a lender’s website or an instant personal loan app, take time to assess your credit score, key charges, repayment capacity, and actual requirement. Borrowing responsibly not only protects your finances today but also strengthens your credit profile for the future.
When done right, a personal loan can be a practical and reliable financial solution, just ensure you take it with the right awareness and preparation.
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