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The ultimate guide to getting a personal loan at the most favourable interest rates

Personal loans are a great way to cover expenses and achieve financial goals. But when you apply for a loan, you must be careful not to fall prey to these common mistakes, which can lead to financial trouble.

1: Applying for a loan without checking your credit score

Your credit score will play a big role in determining how much you pay for a loan. If your score falls between 750-900, you’ll be offered the lowest interest rate on the market. But if it’s lower than that, your rates will be higher than what they could have been. So before applying for a personal loan, make sure to check your credit report. If there are any issues or mistakes on your report, you can get them fixed first. You can check your free credit report and report any discrepancy in your report on the OneScore app. After that, it’s a good idea to compare offers and choose the one that best meets your needs.

2: Borrowing more than what you actually need

When you need money, make sure you only borrow what you really need. If you have a good credit score when you take out the loan, you may be able to get a low interest rate. However, don’t overextend yourself by borrowing more money than you need at the moment. Otherwise, you could risk your financial security and future access to loans or lines of credit.

3: Applying at different lenders at the same time

When you apply for a loan, the lender will check your credit report. This is known as a ‘hard enquiry’. Each time this happens, your credit score goes down a little bit. If you apply for a lot of loans in a short period of time, you look like you can’t manage your money well and appear as a risky borrower to the lenders, which makes it harder to get approved for a loan and could lead to higher interest rates.

4: Not comparing your options

While you shouldn’t apply for too many loans at once, you should still compare your options. All personal loans available in the market aren’t the same; some offer better rates and features than others, which means you will be able to save a lot in the coming years. Take your time to compare interest rates, processing fee, tenure options, eligibility requirements, etc. and choose the one that’s more favourable to you to make sure that you’re getting the best deal possible.

5: Not reading the terms and conditions thoroughly

When it comes to personal loans, surprises are rarely good! It’s important to read the terms and conditions (and not just the loan amount and interest rate) thoroughly before signing on the dotted line. Some things to watch out for include: foreclosure charges, part payment charges, and bouncing charges. And most importantly, it’s crucial that you have a thorough understanding of your ongoing credit accounts and debt to better plan what amount you can realistically afford to borrow without putting a strain on your finances. To track all your credit accounts and regularly check your credit score, download the OneScore app now.