Personal loans are essentially unsecured credit that an individual can avail for periods of between one to five years, usually, this is from a bank of your choice. There are several factors that are considered when determining the amount of money that one is eligible in a personal loan. The main ones are one’s financial health and their source of income. In this case, financial health is an excellent credit history. It is easy for a person with a credit score of seven hundred and fifty to get a personal loan compared to a person whose credit score is between 300 and 700.
Things not to do
When taking a personal loan, there are things that one should not do. It is good to be aware of these things so as to keep an eye out for them. The main ones are listed below:
Ignore interest rate
It does not matter whether you are taking a personal loan of 2500£ or personal loans up to £25000. It is never wise for you to take a deal with the first bank that makes you a loan offer. Most times it is very tempting because you would like to get your hands on the money as soon as possible. The best approach to take is to take your time and rationally compare the type of rates that various banks are offering. Getting a low-interest rate is best because it will assist you to ease the financial burden that you are trying to manage. Therefore, never ignore the rate of interest.
Never take it easy with the specified tenure
Usually, there is a repayment duration that is specified by the lender. It is always good practice to try and clear the loan way in advance of the deadline. Be proactive about the stated repayment period to avoid accruing interest over time. Go for an optimal tenure if you can.
Never take more than 1 loan
Personal loans are meant to ease immediate financial strain but this should not be abused by taking several. This is mainly because such a move functions to reflect a poor fiscal discipline on behalf of the borrower thus negatively impacting your credit score. Get one persona loan, finish repaying it and take some time off before applying for the next one.
Do not invest
Investing money in order to get good returns is good but you should never invest money obtained from a personal loan for such a purpose. The main reason for this is that personal loans have significant interest rates that might work against you when experience losses or if your investment fails to pick up.
The things not to do while taking loans listed above are far from exhaustive as there are many more. However, these can act as a good guide.
ConclusionPersonal loans can be very helpful when one is in serious need. However, if this money is used in a reckless manner then there are unsolicited financial strains to be suffered. In addition, this can interfere with your good credit score. It is for these reasons that one ought to be extremely mindful when taking a personal loan. Pay keen attention to its purpose and the repayment plan. When all of the things not to do while taking loans are adhered to, taking and repaying a personal loan will be a walk in the park.