Personal Loan Mistakes: A debt trap can leave you bankrupt! If you make these 5 mistakes when taking out a loan..

Many people think, "If you take a little more, it will be useful," but this thinking becomes the biggest mistake. Taking on more than you need increases your EMI and the interest burden. This can disrupt your monthly cash flow. Therefore, take only as much loan as you truly need. Avoid the "I'll pay it back" mindset.

Second - Ignoring hidden charges
Every personal loan includes processing fees, prepayment penalties, and other charges in addition to the interest rate. Many people overlook these details and regret them later. Therefore, read the loan agreement carefully and understand every condition. Ask the bank for any charges you don't understand.

Third - Taking a loan without comparing interest rates
A small interest rate difference can add up to thousands of rupees in the long run. Often, people take a loan based solely on the advice of an agent, even though better rates can be found at other banks. Compare interest rates from different banks and compare the figures with an EMI calculator.

Fourth - Taking Loans from Multiple Sources
Many people take out loans from multiple sources simultaneously to "pay them all off in a little bit." But this mistake can trap you in a debt trap. So, first settle your old loans, then consider a new loan. Proceed based on your repayment capacity.

Fifth - Delaying or Missing EMIs
Failing to pay EMIs on time results in late fees and a negative credit score. This impacts future loans. Set up auto-debit or reminders so you never miss an EMI. If necessary, talk to your bank and get an extension.

Financial Experts' Opinion
Financial experts believe that personal loans are beneficial only if taken for a genuine need or emergency. Taking loans for luxury expenses or shopping can harm your budget.

Does a personal loan offer tax benefits?
No, generally, personal loans do not offer any tax benefits unless they are used for a specific purpose (such as buying a home or education).

What happens if you fail to pay your EMI?
Delaying your EMI results in increased late fees and interest. Repeated defaults can lower your credit score and even lead to legal action by the bank.

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