Personal loans have become extremely easy to get—just a few clicks on mobile apps, minimal documentation, and quick approval. This convenience is great when you urgently need money for medical expenses, travel, education, or personal needs.
However, this same convenience can sometimes trap people in financial stress if they make certain common mistakes. A wrong decision today can lead to months—or even years—of heavy EMI burden.

Here are the biggest mistakes people make while taking personal loans, and how you can avoid them.

1. Borrowing More Than Needed

Because apps offer high loan limits, many people borrow the maximum amount even when they don’t need it.

Why it's harmful:

· Higher loan amount = higher EMI

· Longer repayment period

· Increased interest cost

Tip:

Borrow only the amount you genuinely need, not what you are eligible for.

2. Ignoring the Interest Rate

Personal loans often come with higher interest compared to other loan types. Many borrowers click “accept” without checking the rate.

Why it's harmful:

· Even a 2–3% difference can increase EMI significantly

· You may end up paying 20–40% extra over the total loan period

Tip:

Compare interest rates across:

· Banks

· NBFCs

· Salary-based lenders

· Your existing bank (they often give better rates)

3. Not Checking Hidden Charges

Many people only look at EMI and ignore extra fees.

Common hidden charges include:

· Processing fee

· Prepayment charges

· Late payment fee

· Insurance fee

· Document/verification charges

Tip:

Ask for a complete cost breakdown before signing the loan agreement.

4. Choosing a Longer Tenure Just for Lower EMI

Lower EMI sounds attractive, but a longer loan tenure means you end up paying more interest overall.

Example:

A ₹2 lakh loan for:

· 2 years: higher EMI but lower total interest

· 5 years: lower EMI but almost double the interest

Tip:

Choose the shortest tenure you can comfortably manage.

5. Applying for Multiple Loans at the Same Time

Every loan application creates a “hard inquiry” on your credit report.

Why it's harmful:

· Multiple inquiries lower your credit score

· Lower score = higher interest or loan rejection

Tip:

Check your eligibility first, then apply to one or two lenders only.

6. Ignoring Your Credit Score

Many borrowers don’t check their credit score before applying.

Why it's harmful:

· Low score = high interest or loan rejection

· You may miss out on special low-rate offers if you don’t know your score

Tip:

Check credit score through:

· CIBIL

· Experian

· CRIF

· Bank's own apps

7. Missing EMI Payments

Some borrowers forget EMI dates or underestimate their monthly expenses.

Why it's harmful:

· Late fee + penalty interest

· Lower credit score

· Difficulty in getting future loans

Tip:

Use auto-debit for EMI and maintain a small buffer in your account.

8. Taking Loans from Unregulated Apps

Instant loan apps might not be RBI-approved and may use harassment tactics.

Why it's harmful:

· High interest (sometimes 35–60%)

· Hidden charges

· Misuse of personal data

· Dangerous recovery methods

Tip:

Borrow only from:

· RBI-registered banks

· Approved NBFCs

· Official financial apps

Smart Borrowing Tips to Keep EMI Under Control

✔ Compare at least 3–5 lenders
✔ Borrow only what you can repay comfortably
✔ Choose shorter tenure if possible
✔ Keep EMI below 30% of your monthly income
✔ Avoid unnecessary top-up loans
✔ Maintain a good credit score

Final Thought

A personal loan is a helpful financial tool—but only when used responsibly. One careless decision can turn easy EMI into a long-term burden.
By staying informed, comparing options, and borrowing smartly, you can enjoy the benefits of personal loans without risking your financial stability.

 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.