5 Personal Loan Mistakes to Always Avoid
September 4, 2019
Applying for a personal loan can be a great way to help your finances.
Nevertheless, and especially if you’ve never actually had a personal loan before, mistakes do happen—whether during the loan application process or the duration of a loan itself.
Whenever the time is right for you to apply for a personal loan, avoid making the 5 mistakes below at all costs.
1. Not Checking Your Credit Score Beforehand
Sometimes, the relief a personal loan can bring may inspire you to jump right into the application process. Although we admire your enthusiasm, it’s important that you take the time to check on your credit before submitting a loan application.
For one thing, not knowing your credit score early on may lead you to agree to a less-than-ideal loan offer. Also, if your credit score is on the lower side without you knowing it, you may start blindly applying to lender after lender only to have your application rejected and your credit score brought down by their hard checks.
At Illinois Lending, we don’t need credit checks to approve a personal loan for you. Better yet, your credit score won’t be affected at all when you apply.
2. Applying for A Lot of Credit at Once
As exciting as it is to apply for a personal loan, you may not want to do so if you’ve applied for a lot of credit already.
Taking out too much credit before applying to a loan can decrease your chances of getting an inquiry approved by a lender.
Applying for too much credit also has the potential to lower your credit score, which we just learned gets in the way of applying for a personal loan.
Try to limit the number of loans, along with other forms of credit, you take out at any one time. Although, if you have no choice but to apply for multiple, consider Illinois Lending. We still offer online and in-person loans for individuals with bad to no credit: with our same-day approvals, we get them the funds they need fast.
3. Zoning in on Monthly Payments
There are a lot of other costs factoring into personal loans and you should be aware of these before applying.
Apart from monthly payments, the APR, which stands for annual percentage rate, is one you should know about. In general, an APR is a percentage calculated on a yearly basis that includes a loan’s interest rate and some additional fees. These extra fees may be:
- Origination fees
- Late fees
- Check-processing fees
- Prepayment penalty fees
Knowing what these charges are upfront will help you know what you’re getting yourself into with your loan, as well as what future mistakes you should avoid paying the price on later.
Illinois Lending’s payment calculator is one way we help potential applicants find a personal loan that’s right for them. It calculates several different payment options while automatically factoring in our APR for you. With no other hidden fees or prepayment penalties to compute, it’s a very easy tool to use.
4. Not Reading Your Loan Contract
Signing a contract without reading it first sounds like something people would never do—but you’d be surprised by how often it does happen.
It’s simple, really: after you’ve had your loan approved, never agree to or sign anything without being 100% of what you’re agreeing to and signing.
One way to ensure this is to have a trusted advisor review the terms of your loan contract with you. Although a common recommendation is for this advisor to be a family member or friend (a.k.a. not a lender), we’re always here to answer any questions you might have on your future loans. Feel free to contact us at any time.
5. Not Paying Off Your Loan
You might think making late payments is the worst personal loan mistake you can make. While you definitely want to avoid doing that, the absolute worst mistake you can make is not making payments on your personal loan at all.
The biggest consequence of making late payments on your loan is watching your credit score drop—but refusing to pay off your loan can have it sent to collections, cause it to default with added fees, or even force you to go to court.
If there’s one mistake you should never make, it’s this one. The best way to avoid it is by finding a loan you feel comfortable paying back. Illinois Lending can put your search for one to an end, thanks to our flexible terms, fewer restrictions, and refinancing options.