Even small mistakes on a small loan can have big consequences! Do not assume that because a loan is small in size it does not require much time or effort to complete. Here are some common mistakes to avoid when you apply for a small loan.
1. Not researching enough
Often because it is a relatively small loan, customers do not pay attention to every detail of the terms and conditions of the loan. This can lead to unwanted complications and unnecessarily high costs in the long run. Make sure that you calculate the cost of the loan – whether large or small – before you apply, so that you are not faced with any unpleasant surprises later.
2. Being in a hurry to complete the process
Because it is a small loan, customers are eager to finish the process quickly and rush through the research and comparison stage. This has negative consequences in terms of the cost of the loan. Simply finishing the process quickly does not mean that you will get good terms – in fact, low EMIs do not necessarily mean that it is a cheap loan. Similarly, the top websites in an online search do not always mean they have the best products. Even though you may be in a hurry to close out the process, you will be saving money in the long run by spending some time to find the loan most suited for your needs.
3. Presuming a small bank or NBFC would be better for a small loan
This is not always the case and is another mistake to avoid. Big banks too can offer competitive rates on small loans and can have a quicker and more efficient loan approval process. Shop around for good rates and terms and do not hold on to any pre-conceived notions about the size of the lender.
4. Being careless about making payments on time
This is an all-too-common occurrence. It doesn’t matter if your loan amount is Rs. 5000 or Rs 5 lakhs or Rs 5 crores. Every single late or missed payment is reported by your lender to the credit bureau. This will adversely affect your credit health and your ability to secure bigger loans in the future. Make sure that you make every single payment on time and in full, whatever the amount.
5. Not being thorough with documentation
Sometimes, because it is a small amount, customers are far less diligent about the documentation. This is another significant mistake to avoid. Many times loan applications can be rejected because of faulty or incomplete documents. Each rejection will decrease your credit score and your ability to access larger amounts of credit in the future.