Personal LoanWhen it comes to taking out a personal loan, Tara Alderete believes that the question should be less about how much, and more about why.

Alderete, director of education for ClearPoint Credit Counseling Solutions, believes that people should stop treating loans as ‘free money’ and put more effort into investigating their available options as well as the need for the loan itself.

The following are some of the most common loan mistakes you should avoid, lest you find yourself in a financial hole much deeper than you are capable of climbing out of.

  1. Needless Borrowing

"When you're seeking a personal loan, think about why. What's your goal? What do you want to do?" she says. Alderete stresses the danger of taking out loans in haste, as it usually leads to wasted money at best and falling into a debt trap at worst.

  1. Missing Non-Loan Opportunities

‘Generally speaking, the people who can qualify for these 0% offers and really competitively priced personal loans, they've got good credit,’ says John Ulzheimer, a credit expert who formerly worked at credit companies FICO and Equifax, referring to the possibility of skipping loans through debt consolidation by means of opening a new credit card and transferring the balance of other cards to it, particularly at a 0% introductory offer. ‘These things aren't just being given out to people who have mediocre credit scores.’ Ulzheimer adds.

  1. Ignoring One’s Credit Score

Professionals from Rapid Loans stress that people should really start paying attention to their credit scores, as it heavily determines whether they would receive loans at reasonable rates, if at all. Looking good in the eyes of lenders (as a low-risk debtor) can go a long way in securing lower interest rates and an easier time making repayments.

READ  Termite Control Options You Probably Don’t Know About

Loans are serious business, as any person in an unescapable debt cycle can attest to. Learning the severity of unpayable loans the hard way is something no one would want to do, which makes learning the specifics of every financial option beforehand all the more appealing.