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New to Personal Loans? Make sure to avoid the common mistakes of first time borrowers to get a great interest rate and terms.
There are instances when your best recourse or option is to apply for a Personal Loan. Whether it’s to cope with financial shock, cover an unforeseen need, or as another way to finance a start-up business or even a personal trip, banks and finance companies have a myriad of Personal Loan offerings in the market.
In fact, more Filipinos have been availing of Personal Loans. According to a report by the Bangko Sentral ng Pilipinas (BSP), loans for household consumption which includes Salary and Personal Loans grew 19.8% in the first quarter of 2015.
While there is absolutely nothing wrong with applying for a loan for the right reasons , there are ways we can improve how we avail of one. It really is all about making an informed financial decision, especially for something that you have to pay back with interest. Some borrowers, especially first time Personal Loan borrowers, make mistakes that cost them in the long run.
We’ve listed the common mistakes that first-time borrowers commit below, so that you can get the best possible deal for your Personal Loan:
Not Knowing Your Credit History
When applying for a loan, make it a point to consider your credit history. Do you have an unpaid phone bill or a cancelled credit card? Financing institutions take your financial record into account when reviewing your loan application. Being a first time borrower may actually hurt instead of help your chances in some instances, as it may be harder for a lender to assess your credit-worthiness without a history of good payment. However, you can prepare documents that help prove that you can manage large expenses such as a history of paid rent and utility bills. Being aware of your credit history enables you to look for the loan type or program that can best cater to your specific situation and need.
Lying About Your Financial Capacity or Credit History
It’s also not a good idea to exaggerate about your income in your Personal Loan application form. There is a reason why banks and lenders ask this information – they don’t want you to get a loan that’s beyond your capacity to pay back. Meanwhile, omitting information about past financial troubles will only work against you as financing companies have a way of tracing this through credit bureaus or investigation companies.
Not Shopping Around for the Best Personal Loan Option
A lot of us do a lot of looking around and canvassing when we shop for shoes. You should apply all that vigilance and zeal when applying for a loan. After all, it is a product that that will dictate your future budget and financial record. Look at trusted online loan markets and forums, ask your trusted friends and family members, go to banks and lending companies’ offices if you have time.
Not Asking Questions
Part of the loan application process is interfacing at different instances with your potential lender, be it through their website, over the phone, or face-to-face. Make sure to take time and list down all the questions you have in mind and discussing them with your lender. Don’t hesitate to ask every detail about payments, requirements, as well as special programs or offers they have that may apply on your case. This ensures that you don’t get into an agreement that you’re not prepared for, and that you get the best possible loan deal.
Not Using a Personal Loan Calculator and Figuring Out the Payback Amount
Some first time borrowers think that they can easily pay a loan back because they have a high monthly income. However, this is only one side of the equation. When figuring out how much you can afford to pay monthly for a loan, consider your expenses and other financial obligations too. Some people with big paychecks may find it hard to pay back for a loan because of equally high expenses. Using an online personal loan calculator will help you estimate your monthly payments based on your loan amount and lenders’ average interest rates.
Not Looking at the Total Payback Amount
Keep in mind that aside from paying back the loan amount or principal, you will also be paying the monthly interest that you agreed on with your lender. There may also be processing and other types of fees, depending on your agreement. Make sure to read the fine print before signing any contract. You can use a personal loan calculator to get an estimate of how much you may be paying per loan amount.
Ready to Make an Informed Personal Loan Application?
Loansolutions is Philippines’ #1 Online Loans Market Place. Our website enables you to get Personal Loan offers from the largest network of legitimate lenders in the Philippines through a single, online application form. Our Loansolutions Concierges will help you with the whole loan process, from application to approval.
