Personal Loan Mistakes to Look Out For

First time to apply for a salary loan? Yes, it can get pretty daunting and confusing. There are so many banks and financial institutions that seem to offer the best deals. It’s so hard to choose which one is right for your needs. Not to mention the things you need to do and the certain requirements that you have to meet in order to get your loan approved. Aside from meeting the age and income requirements, your credit rating, the amount you want to borrow, and your capability to pay off the loan will figure greatly, as well. Still, a majority of personal loan applications get declined because the borrowers were guilty of the following:

 Not Doing Enough Research

Much like shopping for a new pair of shoes or even a new gadget, you shop around and compare looks, functionality, ease of use, and value for money. The same can be said when it comes to applying for a personal loan. You don’t just take the first offer that you see. You will find a lot of offers that will make you want to sign up and send your application in right then and there.

However, there are other banks and financial institutions that can offer a much better deal if only you spend more time doing your research. If you don’t have time to physically visit banks and speak with the loan officer, going online to check and compare what loans are available out there will suffice. If you find that all those figures are not making any sense, you can always pick up the phone and speak with any customer representative who will gladly answer any question you may have about their loan products.

Not Reviewing Your Credit Score

Once you submit your loan application, the loan officer will immediately do a credit check. The banks will check your credit history, which basically shows how good or bad you are when it comes to paying off debts. Unlike in the U.S. where they have a centralized credit report system, the Philippines only relies on certain databases and other external sources. However, they hold sufficient information for banks to identify whether you should get approved or disapproved.

If you’ve always paid your credit cards and your loans on time, you don’t need to worry at all. But if you’ve had some cancelled credit cards in the past that you still have not paid off, you need to settle them as soon as possible. You never know when you’ll need to get a loan in the future. When that happens, you want to make sure that you can easily get one approved.

Checking Only for Price

A lot of people take out a loan just because of the huge loanable amount or the flexible loan terms being offered. Once they see the words ‘low rate’ or ‘loan approval in 24 hours’, people are quickly enticed that they forget to look for the catch. What they fail to check are the extra fees, interest rates, and closing costs that come with the loan. Always read the fine print, because you may be paying for something more than you initially planned.

Being Dishonest

If you provide false information on your loan application and your creditors find out, you may face criminal liabilities or pay hefty penalty charges. Only use your own and real personal information. Do not inflate your income just to get a bigger loan amount. Just declare how much you really earn. Remember that even if you do get approved for a much higher loan amount, your monthly payments will also be considerably higher. You’ll definitely have a harder time paying those off, because in reality, you’re not really earning that much.

Borrowing an Amount You Cannot Pay Back

Once you receive the loan proceeds, it’s time to deal with the real matter of settling the monthly loan payments. Depending on your payment arrangement with the bank, you can issue postdated checks or have them automatically debited from your savings account. You have to make these monthly payments on time to avoid late fees or penalties. This is the reason why you have to declare your monthly income during loan application. This is for banks and financial institutions to approve a loan amount that you will be able to pay off without putting you in an even bigger financial strain.

Saying Yes to Dubious Repayment Terms

Some moneylenders will offer repayment terms that are outright ridiculous. But because some people badly need the money and will not easily get approved by banks and financial institutions, they may still take the loan and then deal with the payment later.

Be diligent enough to shop around for a loan that will meet your requirements, and vice versa. Do not allow your emotions to force you into a situation where you should just accept whatever terms are being offered. Take out a loan that’s well within your monthly income and consider your repayment obligations as well. Better yet, go for trusted financial institutions such as BPI personal loan, rather than unsure moneylenders with dodgy repayment terms.

Not Fully Knowing the Loan’s Terms and Conditions

Those small and really long paragraphs on your personal loan application form were printed there for a reason, but very few people take the time to read or understand them fully. Make sure that you know the terms and conditions of your loan. Some of the things that you need to check are the maximum loan amount that you can get, the interest amounts, the penalties incurred for late payments or skipped payments, and the loan period. This way, you know your legal rights as a borrower and what steps the bank or financial institution will take in case of late payments.

Personal loans can be a lifesaver most of the time. They can help borrowers out of a financial problem in more ways than one. They can be the easier and more affordable option. To get the most out of your personal loan, remember these important things and shave a few thousands of pesos in unnecessary fees and extra charges.

This article is contributed by iMoney Philippines, the premier financial comparison site in the country. Compare and apply for credit cards, personal, housing or car loans and more. With weekly articles on general money saving tips and smart financial investments.

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