5 costly mistakes to avoid when applying for an instant personal loan | Mint

The need for funds can arise at any time for several purposes, such as medical expenses, educational costs, or any other unexpected needs. Not everybody will have enough funds to meet unforeseen expenses. In such a scenario, an instant personal loan can be a viable option.

What is an instant personal loan?

As the name suggests, an instant personal loan is a type of unsecured loan that is approved quickly with minimal documentation. It can be used for multiple purposes. As this loan is disbursed quickly, borrowers can mostly use it to fund emergency expenses.

However, in emergency situations, due to the urgent need for funds, borrowers can overlook a few details and make mistakes while applying for an instant personal loan.

Check out some mistakes to avoid when applying for an instant personal loan.

Check loan amount

Before applying for an instant personal loan, estimate the amount of loan that you actually require. Just like any other loan, an instant personal loan has to be repaid in future therefore, always borrow an amount that you can repay later without straining your finances. Overborrowing can lead to issues such as high debt, low credit score, poor finances, cash flow problems for monthly payments, loss of assets etc.

Do not hurry

Instant personal loans are mostly applied for emergency situations. However, do not hurry when applying for an instant personal loan. You might miss key details if you apply for a loan in a hurry, which might result in additional costs in future. Take some time to check all the documents and details of the loan you are applying for to avoid unexpected costs.

Look for credit score

Never ignore your credit score before applying for an instant personal. The lender determines your creditworthiness. Having a high credit score helps you to get better terms on your loan whereas a low credit score may charge high interest on the loan or even lead to rejection of your loan application. If you apply for an instant personal loan with a low credit score, the lender may charge you a high interest rate, which is an added burden on your finances.

Read fine print

The fine print of the personal loan documents comprises essential details on the terms and conditions of an instant personal loan. Make sure to read the fine thoroughly, as missing key information may lead to unexpected charges on your instant personal loan.

Avoid missing payments

Before applying for an instant personal loan, calculate your EMI to estimate your monthly cost of the loan. If the EMI is more than what you can afford in a month, you might miss payments, which might have severe consequences. Get an instant personal only if you have the financial capacity to make monthly payments.

In conclusion, like every other loan, applying for an instant personal requires key considerations. Missing out on essential details can make the loan expensive for you.

Hence, plan well before applying for an instant loan so that it does not become a financial burden in future.

(Note: Raising a personal loan has its own risks)