Chennai is a cosmopolitan city where people from all over India come in search of a better livelihood. To cope with the fast-paced lifestyle of the metropolis, people often apply for personal loans in Chennai. However, in a rush to get instant money, many borrowers frequently make some mistakes which makes it a costly proposition.
Read this article to know about the top-5 mistakes borrowers make while applying for personal loans in Chennai and what you can do to stay ahead of the curve.
5 Small Mistakes to Avoid While Applying for a Personal Loan in Chennai
- Overlooking the Interest Rates
Lenders offering personal loans in Chennai provide you with two interest options – fixed and floating. If you choose the fixed-rate, your interest liability will remain the same irrespective of market fluctuations. If, however, you select the floating rate, the interest rate will change as per the market. Whichever option you choose, ensure that the lender is not overcharging.
You may use the personal loan EMI calculator, carefully evaluate the loan amortization chart, and find out the amount you are paying as interest before submitting the personal loan documents.
- Spending More Than One Can Afford
Although a personal loan is a collateral-free or unsecured loan, the lender may still take legal action if a borrower does not pay up the EMIs within the due date. Additionally, being a defaulter can decrease the borrower’s credit score, making it extremely difficult to apply for a collateral-free loan or credit card in the future.
To stay away from such possibilities, you should try to keep your loan EMIs at or below 20% of your net monthly income. Keeping an eye on your existing loan profile and settling off outstanding debt before availing of a new loan can fetch you the best interest rates and help you to avert the possibility of a default.
- Availing a Long-Term Loan
Generally, lenders offer long-term personal loans in Chennai of up to five years duration. Although a long-term loan may indeed lower your loan bills substantially, it will enhance the interest amount you need to pay.
Hence, it is always better to apply for a short-term personal loan in Chennai if you want to save money. Although opting for a short-term loan will increase the EMIs, you can get rid of the debt earlier. A short-term loan would also give a boost to your credit score, which can make further loan approvals easier.
- Submitting Personal Loan Documents Without Checking The Eligibility
Borrowers often have the misconception that anyone may apply for a personal loan in Chennai. Hence, they apply for a loan without realising that every time the lender inquires about the borrower’s credit score, their credit score decreases. The lender-initiated credit score inquiry is termed as a soft inquiry, and the credit bureau would deduct points from the score every time a lender asks for the score.
Before submitting the personal loan documents, you should always find out the eligibility and check the minimum eligibility criteria. Sometimes, lenders relax the eligibility criteria if the borrower’s credit score is too high or the borrower’s existing debt is beyond a particular limit.
- Not Reading the Loan Terms
Generally, personal loans in Chennai are easy to avail of, but lenders may fail to disclose some charges or fees that may be mandatory. Quite often, borrowers in a hurry overlook the terms and believe the words of the loan officer while submitting personal loan documents.
Be a prudent borrower and take time to go through the loan document before applying for a personal loan in Chennai. Inquire about the loan application fees, prepayment penalty, and other charges before applying for the loan.
Personal loans in Chennai from reputed lenders like Fullerton can provide you with unparalleled flexibility. As an informed borrower, it is always better to trust lenders who are credible and offer ‘no-terms-hidden’ loans.