Instant loans have become a convenient option for many individuals in need of quick funds. Whether it’s an emergency or a planned purchase, this type of loan offers fast approval and disbursal. However, there are certain things you should keep in mind before applying for an instant loan. Understanding these do’s and don’ts could help you make informed decisions and avoid unnecessary financial strain.
Do’s While Availing an Instant Loan
Here are some key practices to follow when availing an instant loan to ensure a smooth and hassle-free borrowing experience:
Check Your Eligibility
Before applying for an instant loan, ensure you meet the eligibility requirements set by the lender. Each lender has specific criteria, including age, income, and credit score. Financial marketplaces like Bajaj Markets allow you to easily check these requirements online. Knowing your eligibility could also help avoid rejection.
Compare Interest Rates
Interest rates for instant loans can vary depending on the lender and your credit history. Always compare rates from different lenders to ensure you are getting the best deal. Small differences in interest rates could significantly impact your overall loan cost. Compare different loan products to find the most favourable rates.
Understand the Loan Tenure
The tenure of your loan affects both your EMI (Equated Monthly Instalments) and the total interest you pay. A longer tenure may result in smaller EMIs but higher total interest. Conversely, a shorter tenure could lead to larger EMIs but less interest overall. Choose a loan tenure that suits your financial situation and repayment capacity.
Read the Terms and Conditions
Before accepting any loan offer, carefully read the terms and conditions. Look out for hidden fees such as processing charges, prepayment penalties, or late payment fines. Understanding all terms helps avoid unpleasant surprises later. If anything is unclear, ask the lender for clarification before proceeding.
Maintain a Good Credit Score
A good credit score gives you access to better interest rates and larger loan amounts. Most lenders, including those on Bajaj Markets, assess your credit score before approving a loan. If your score is low, take steps to improve it before applying. Paying bills on time and reducing credit card debt could gradually improve your score.
Ensure Timely Repayment
Always ensure timely repayment of your loan to avoid penalties and damage to your credit score. Missing even one EMI can impact your financial standing and increase the cost of the loan due to fines. Set up reminders or automatic payments to help you stay on track.
Borrow Only What You Need
It can be tempting to borrow more than necessary, but this increases your financial burden due to interest payments. Borrow only the amount you need and use the loan for its intended purpose. This approach helps in avoiding unnecessary debt.
Don’ts While Availing an Instant Loan
Here are key mistakes to avoid when applying for an instant loan to ensure smooth repayment and financial stability:
Don’t Ignore Hidden Fees
Many borrowers make the mistake of ignoring hidden fees like processing charges or penalties for early repayment. These fees could significantly increase the cost of your loan. Always ask for a detailed breakdown of all fees before agreeing to the loan.
Don’t Apply Without a Repayment Plan
Applying for an instant loan without a clear repayment plan can lead to financial stress. Before applying, calculate your monthly EMIs and ensure they fit within your budget. Use online EMI calculators to assess whether the loan is manageable alongside your existing financial commitments.
Don’t Rely on Instant Loans for Non-Essential Expenses
Instant loans should be reserved for urgent financial needs such as medical emergencies or essential purchases. Using a loan for non-essential expenses like luxury items could lead to unnecessary debt. Remember that loans come with interest costs, making non-essential borrowing more expensive in the long run.
Don’t Apply for Several Loans at Once
Submitting applications for several loans at the same time can negatively impact your credit score. Every loan application triggers an enquiry on your credit report, and frequent enquiries may signal to lenders that you are a high-risk borrower. This could lead to loan denials or higher interest rates. It’s better to finish repaying one loan before considering another.
Don’t Overestimate Your Repayment Ability
Some borrowers overestimate their ability to repay loans, leading to financial difficulties later. Carefully assess your monthly income and expenses before deciding how much you can comfortably repay. Choose a loan tenure and EMI amount that won’t strain your finances.
Don’t Default on Payments
Defaulting on your loan repayments could lead to severe consequences, including a negative impact on your credit score and potential legal action. Always ensure you have sufficient funds to cover your EMIs. If you anticipate difficulty in repaying, reach out to your lender to explore alternative repayment options.
Don’t Choose a Longer Tenure Just for Lower EMIs
While a longer tenure could reduce your monthly EMI, it also increases the total interest you pay overtime. Before opting for a longer tenure, calculate the total cost of the loan. A balanced tenure with manageable EMIs and reasonable interest costs is often the better choice.
Conclusion
Availing an instant loan can be a quick and easy solution to meet urgent financial needs. However, it is important to approach the process with caution. By following the do’s and avoiding the don’ts, you could ensure that your loan experience is smooth and beneficial.
Marketplaces like Bajaj Markets offer a variety of loan options with transparent terms and competitive interest rates. By checking your eligibility, comparing interest rates, and maintaining a good credit score, you could maximise the benefits of your loan. Always borrow responsibly, keeping in mind your ability to repay within the specified tenure.
