Understanding the Mistakes to Avoid While Taking Out a Personal Loan for Debt Consolidation

When you roll your multiple debts into one single agreement, it could slash thousands of dollars from your total interest bill. Debt consolidation using a personal loan could be a tempting option and really works pretty effectively for many people. However, you must avoid making some common mistakes while taking out a personal loan from personal loan lenders. You must thoroughly understand what the process entails and stay away from common mistakes so that you could get the personal loan and use it effectively for debt consolidation.

The idea of debt consolidation or combining multiple consumer debts into a single simple loan and a single payment every month is extremely popular and gaining traction by the day. As per the new data provided by the P2P Consumer Lender Society, we find that over 60 % of its loans actually are taken out for consolidating debts, followed not so closely by home improvements (around 11%) and followed next by vehicle finance (at 8%). The greatest advantage of debt consolidation using a personal loan is the potential for making huge savings on your total interest bill. Consolidation of different types of debts into a single lower-interest loan could culminate into a reduction of thousands of dollars from the overall interest bill you need to pay.

As per http://www.forbesindia.com, “Today, getting a personal loan is not very hard. Sure, banks do have certain criteria, but someone who has good control over his/her financial past is likely to get the loan sanctioned without hassle. While there is no doubt that a loan can be a lifesaver, most of us are in a hurry to get the money, often miscalculating things or making silly mistakes.”

You need to realize that all loans are not right for consolidation with a personal loan, particularly, if you do not enjoy any interest savings. For instance, student loans usually, have abysmally low-interest rates. As such, they may not be the ideal one for debt consolidation. Here are some common mistakes while taking out a personal loan for debt consolidation. Keep the mistakes in mind and make it a point to avoid them for making debt consolidation with a personal loan a super-hit idea.

Mistake: You Apply for the Loan from a Bank without Doing Any Comparison

One of the mistakes made frequently by individuals while taking out a personal loan for debt consolidation is to get in touch with just the bank they are familiar with and are used for frequently transacting with. Often you make the mistake of not doing adequate research and comparing the available options. You must consider making an informed decision after doing meticulous research. You must evaluate the merits and demerits of the different banks that you could study and identify the most suitable one as per your unique requirements.

Mistake: Assuming that the First Offer Is Good Enough

Do not take it for granted that the first bank that offers you the loan would be the best offer and would work for you. Remember never say yes to the first quote offered to you. It is a fact that you are in urgent need of the money but you need to demonstrate a little bit of patience. Do not blindly say yes to the first offer. As discussed above, you must necessarily check quotes from some other banks and financial institutions and compare the quotes meticulously. To make things simple and easy for you, you may effectively compare different personal loan offers on the Internet. When you do that, you could easily identify the merits and demerits of each loan provided by different banks.

Are you not sure about the specific factors to use while comparing loans? You may examine the interest rates and processing fees. You may also, determine the prepayment penalties if any. In the case, you are thinking of prepaying the personal loan much before its tenure, examining these charges and penalties is absolutely imperative.

Mistake: Not Telling the Bank Clearly Why You Need the Loan

It is mandatory to inform the bank clearly the precise reason why you are taking out the personal loan. You have to explain to the bank authorities the precise purpose for which the personal loan is being requested. The bank would like to know how you would be using up the funds and also, the way you are planning to repay the loan. If you express your motive clearly and reveal your financial planning, the lenders would feel really confident about you and you could easily get loan approval. You may visit reputed sites such as nationaldebtrelief.com for learning more about debt solutions.

Mistake: You Resort to Lies As You Are Hesitant to Share the Correct Information

Just keep in mind that even if you try your best to hide certain important financial facts, you are likely to be caught by the bank authorities. So you must focus on speaking the truth right from your first interaction, inquiry, or transaction with the concerned bank. You must not unnecessarily hide facts about your financial health. Be candid about your present financial condition.

There is absolutely no point in forging any documents for proving your creditworthiness. Remember that the bank would find out the truth once it evaluates your credit report. Once they find out the truth, you may bid goodbye to your hopes of getting a personal loan for debt consolidation.

You are supposed, to be honest in all your dealings with the bank. Remember the bank will never trust you if you tell lie or try dishonest means to convince them of your creditworthiness. You must share everything with your bankers if you want to get loan approval.

Mistake: Not Sure about the Exact Loan Amount Needed

You have to be absolutely sure and clear about the accurate loan amount you are looking for. You must never consider giving your lender a range such as from $5000 to $6000. You must inform the bank about the exact amount needed by you for debt consolidation. If you are quoting a range, the bank would feel that you have not thought properly about your loan application. As you are not too sure about exactly how much money you require, the bank would assume that you would also, have no idea about how to effectively pay back the loan amount. They would definitely, hesitate to approve your personal loan.

Conclusion

You must be careful about steering clear of all the above-mentioned mistakes while taking out a personal loan for debt consolidation. Moreover, always remember to read the fine print and never ignore it. There are chances of you getting duped if you do not read the terms and conditions carefully. Whenever in doubt, feel free to consult an authorized bank representative. You must necessarily clear all your existing doubts before signing any important document or legal contract. It is always better to be on the safe side than be sorry.

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