Mistakes we do while borrowing
There are times when we all need to access financial help and these are some of the most tricky, troublesome, and highly involving decisions. For most of them, the financial borrowing decisions are full of bad experiences. However, this should not stop you from doing so in future. The trick is to learn from your mistakes, understand the consequences, and improve your expertise. Understanding financial requirement may seem complex, and hence we will discuss some of the most common mistakes people do and answer with a solution to it.
Mistake #1: Not doing a proper research
It is very crucial to explore and research on the deals available in the market. This may be time consuming but it is worth every penny as it will pay you off in the long term. Most of the people make this simple mistake by taking the first loan that comes to their attention. They never perform any comparison or check out other deals available in the market. Things to compare in different financial plans are Rate of interest, repayment options, terms and conditions, and most importantly eligibility criteria. Besides the entire loan regarding aspects, don’t overlook taking a glance at the lender’s history and financial stability.
Mistake #2: Not understanding the interest rate
The competition between the lending Financial institutions in India is very high. One can use this at their advantage because they are always battling with each other by offering lower interest rates. Do not settle immediately for the first interest rate you see. The bitter competition gives you the opportunity to negotiate better conditions for your loan or simply consider other offers. The best way is to grab that advantage is to be prepared. Think of what you need the loan for, what are your budget limits, if you are comfortable to eventually secure the loan with personal assets.
Mistake #3: Not keeping a check on your credit score
It is important for you to wittingly know your value. The credit score tool can differ from lender to lender but the basic criteria are similar and it is good to consider the impact that it could have on achieving a nice interest rate or other extras. If you achieve a good credit score all you have to do is finding the best lender. If your score is not that good try to improve some aspects rather than looking for institutions that offer finance for people with substandard score. It will get you pay way too much for your loan.
Mistake #4: Being careless with payments
After all that effort and trouble is surprisingly easy to end up forgetting your responsibilities of repayment. It is usually a ‘first time ‘mistake but can be decisive for your credit history. The missed payments are always registered and will impact on your future credit score. Applying for a loan that gives the possibility to choose a suitable payment day accordingly to your cashing period is an important aspect for you to keep in mind as well. Mark it down on your calendar for a constant reminder or even better set up a self-activating transfer to it ease off your head.
The other aspect of payment is to smartly handling it by keep additional money aside and try to pay lumpsum amount as and when you feel comfortable. This will reduce your outstanding amount gradually leading to a lower monthly EMI.
Mistake #5 To never Reason your budget or requirement
The closer to reality the better! Borrowing money is not a game considering the repayment process and the interest rate that comes along. For sure the lender will forecast your repayment capacity but take a moment and make your own math. A common mistake is to block a great part of your income to repay money that maybe you do not needed in the first place or you could not afford.
The golden rule is to take your time, prospect and not hurry in taking a decision that could cost a lot on the long run.