We all fall into situations in our lives where we require to take a loan for our personal needs like buying a car, a house, for re-modelling a house or planning a grand wedding. We need finances for credit card bills or for buying expensive smartphones. But there are many mistakes one can make while arriving at the decision of taking a loan.<\/p>\n

Most often, the lack of knowledge or taking advice from family and friends instead of consulting a professional can lead to a mistake. So, let\u2019s go through some mistakes that you can avoid while taking a loan.<\/p>\n

Save before you borrow<\/strong><\/p>\n

While planning to take a loan, ask yourself whether or not taking a loan is necessary. You need to understand that taking a loan can be a big commitment with \u00a0payment of monthly installments, which involve penalties if you fail to do so.<\/p>\n

So, before you jump, take a step and analyse your budget. If it\u2019s possible to delay a purchase by saving money instead of taking a loan, it will help you avoid the hassle of paying back.<\/p>\n

Lying on application<\/strong><\/p>\n

Sometimes in desperation, people tend to lie on their loan application to get approval. Lying on your loan application is one thing you should avoid. Refrain from claiming \u00a0to earn more than what you are earning, or doing a part-time job and claiming to do it full-time.<\/p>\n

This is a fraud, which can even lead to a jail term. So, be clear about your information provided. Stick to the truth because no jail term is worth taking a risk.<\/p>\n

Credit score<\/strong><\/p>\n

A credit score is a very important parameter that is checked by a lender before approving for a loan. A good credit score ensures that you will be approved easily by the lender. Whenever you apply for loan, your credit history is checked. The rate of interest also depends upon your history, which means that a good credit score is equal to low interest rates.<\/p>\n

If you have a poor credit score, choose independent lenders like\u00a0 peer-to-peer lending.<\/p>\n

Unlike a bank, many lenders are willing to look beyond your credit score and will be interested in giving out loans.<\/p>\n

Not reading the contract<\/strong><\/p>\n

When you take a loan, a contract is bided between the borrower and the lender, which also mentions repayment plans. Many times a borrower does not read this contract properly, which can mislead them.<\/p>