5 Costly Mistakes to Avoid When Taking a Personal Loan

Taking a personal loan can be a smart financial decision - or a costly mistake. Here are the top 5 errors that cost borrowers lakhs every year.

Mistake #1: Not Comparing Lenders

Many borrowers go with the first offer they receive, often from their salary bank. This can cost you significantly.

Solution: Always compare rates from at least 3-5 lenders. Or use Unyfy to compare 15+ banks with one application.

Mistake #2: Ignoring the Total Cost

Many borrowers focus only on EMI amount, ignoring:

• Processing fees (can be 1-3% of loan amount)
• Insurance charges (often bundled without consent)
• Foreclosure penalties
• Late payment fees

Solution: Ask for the complete cost breakdown and calculate total outgo, not just EMI.

Mistake #3: Borrowing More Than Needed

Pre-approved higher amounts feel tempting, but remember - you pay interest on every rupee borrowed.

Mistake #4: Choosing Wrong Tenure

Too short = EMI burden. Too long = More interest paid.

Solution: Choose a tenure where EMI is comfortable but not excessively long. Rule of thumb: Total EMIs shouldn't exceed 40% of income.

Mistake #5: Not Reading the Fine Print

Hidden clauses that can hurt you:

• Variable interest rate clauses
• High foreclosure charges after specific period
• Mandatory insurance requirements
• Processing fee refund terms if loan rejected

Solution: Read the loan agreement carefully. Ask questions. Don't sign what you don't understand.