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Common Personal Loan Mistakes and How to Avoid Them

by Adam Jordan about a year ago in personal finance
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How to Avoid Them Personal Loan Mistakes

A personal loan is a money that you can borrow to be used for different purposes. The loan is usually repaid in monthly installments over a specific period of time and is not supported by collateral. There are mistakes that people typically make when getting personal loans; below are some of the mistakes you need to avoid.

Applying for The First Loan You Find

I personally made this rookie mistake because I didn’t understand personal loans, I was happy to get any loan approval at the beginning. But what I didn’t know is I’d be missing out on better deals. You will know that an offer is fair only when you have sampled other offers.

Always remember that a personal loan is a financial commitment. That said, it’s essential to compare monthly fees and interest rates of each bank before you make this commitment.

Some leading banks in the UAE, such as ADCB Simply Life, offer a personal loan calculator that makes comparing loans as easy as a few clicks. Trust me, this tool is really helpful and can help you to better estimate monthly payments and costs for your loan.

Borrowing More Than What Is Actually Needed

After your loan has been approved, you will be overwhelmed by that much money for you to spend however you want. But just because the bank is willing to get you the loan doesn't mean that you should borrow an unnecessary amount. When trying to understand a personal loan, examine the monthly installment to ascertain that you can afford it. Borrowing too much will lead to late or missed payments, so be careful.

Comparing Payments Only

Personal loans are not very complicated, but you have to consider various factors such as:

  • Amount of the loan
  • Term of the loan
  • Fees
  • Interest rates, etc.

Based on my experience, when contrasting personal loans from the competition, I would recommend giving all banks the same request: a similar advance sum and term. You'll likewise need to provide them with generally comparable data about your financial assessment, pay, and obligations. The better the data you give the loan specialists, the more explicit their statements will be.

Lack of Information on Your Credit Score

First, you need to know your situation. From there, you will know if this will hurt your credit score or not. Apply your loan to banks who will work in your space, considering your situation. Knowing your credit score will help lenders to give you realistic offers.

Conclusion

If you've never applied for a loan before, don't be afraid of the process. In fact, a personal loan can bring financial relief, when done properly.

So before applying for a loan, make sure that you understand everything involved in the process to avoid these common mistakes. Contact several banks to compare and contrast their loan terms, then decide on which lender has the best terms that you can work with.

The list above will now help you to avoid common mistakes when getting personal loans. Once you know what to do, you can now make informed decisions on your loan journey.

Next, ask your bank to make you an offer based on your particular circumstances, including loan amount, term, credit score, etc., and choose the best deal from there.

personal finance

About the author

Adam Jordan

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