Borrowing money from legit online lenders is not as easy as it seems. The lending journey is not just about going through the relaxed application process, lending is made complex by interest rates, finance charges, due dates, loan terms, and other factors. Most online loans are made affordable to help most borrowers manage their finances. However, there are times when borrowers don’t mind how crucial borrowing is that they commit certain mistakes that turn online loans into a debt nightmare. 

Here are the most common blunders on lending which borrowers should avoid, at all costs. 

1. Grabbing the first offer

Competition among lenders usually places the borrowers on the winning side. When lenders are made aware that you applied with their competitors, too, they tend to offer a much more affordable loan with laidback payment terms. 

READ: Choosing The Right Online Loan For Beginners

How to avoid this?

Research and compare. Not all loans are equal especially in terms of loan features like maximum borrowable amount, interest rates, and loan tenor. Researching on what online lenders offer will allow you to see the difference and opt for the ones which suit your repayment capacity. 

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2. Not checking the rates

There are times when borrowers are faced with an emergency that they focus on getting the money at once instead of doing the math and picking the best offer. Emergencies are critical situations that tend to trigger us from getting into agreements we don’t fully understand. 

How to avoid this?

Don’t borrow money without checking the interest rates. Sometimes, online lenders advertise for as low as 2% interest rates without you realizing that this is imposed daily and not on a monthly rate. Without thinking, you signed up and apply only to find out that you were raking as much 60% interest on top of your loan. Don’t wait until it is too late to back out. Read, understand, and ask questions. 

3. Applying for the wrong type of loan

A personal loan usually has the lowest interest rates compared with other financing products. Sometimes, a borrower can get as low as 0.88% interest rate each month. There are also times when car loans come much cheaper than any offers. Pera247, an online lending company, offers different types of loans like instaLoan and eShopaLoan.

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InstaLoan is intended for those who need a lump sum while eShopaLoan is made for those who want their gadgets and appliances paid directly on Lazada. Applying for the wrong type of loan can be detrimental to your finances. For instance, you are about to grab an air conditioning unit at a 20% discount and you applied for an instaLoan. You still need to wait until the money gets transferred to your account before purchasing the unit. By the time the funds reach you, the sale is already over. 

How to avoid this?

Plan out your spending. Know what the loan is for and check out different offers from online lenders. If you require cash, then seek for a cash loan. If you need an appliance loan, then opt for offers like eShopaLoan. Again, it takes a few minutes of your time to do your research, compare and choose the best for your money needs. 

Pay for your next gadget with eShopLoan

4. Not knowing what the loan is for

Most borrowers just want to borrow money for no specific reason, or so many reasons. This can be a huge blunder because sometimes, the borrowed amount can be too much or too little you end up not achieving your purpose. 

How to avoid this?

Before downloading the app, define your purpose. Is the loan for tuition? For utility bills? For the household budget? Or for an online learning gadget? Only when you defined the purpose that you’d be able to also set the loan amount. Borrowing too much will make you pay for something more without using the money as intended. Borrowing too little will push you to take whatever loan offer is available even when the terms don’t match your needs. 

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5. Accepting unrealistic loan terms

Desperate times call for desperate moves. Often, when borrowers are caught in desperate situations, they just tend to accept available terms and conditions. Some terms are too difficult to follow and you end up applying for more loans to keep up with the current loan. 

How to avoid this?

Ask questions. Never be too shy to ask or too busy to read. The terms and conditions of an online loan should be visible to all borrowers. If these were not read or clarified in the first, place, they are left with no choice but to suffer the struggle of repayment according to the loan contract. 

READ: How To Apply For A pera247 Loan

6. Paying off the loan too early

Early loan repayment can be very beneficial to those who have extra money to cover for debts. However, some people rush to closing their loans to enjoy freedom from debts. This could be damaging as some even drain their savings accounts to pay off the loan. 

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How to avoid this? 

Although early loan repayments are profitable at first glance, it is not advisable if they come with a large sum of processing fees. Consider comparing the benefits you can get if you off a loan compared with using the lump sum to start a business or invest.

READ: What You Need To Know About Personal Loan Early Repayment

Ailene Amaro

Ailene Amaro

Ailene is a history major turned language teacher turned finance writer. Stern and strict as she may seem, she spends her time away from her lesson plan with music and lyrics.

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