Applying for a personal loan can feel like a big step, and it is. Whether it’s to clear out debt, cover a car purchase or give your home a much-needed upgrade, the right loan can make all the difference. But like most big financial decisions, the process comes with its fair share of risks. In this article, we’ll walk you through some of the most common mistakes people make when applying for a personal loan and how you can steer clear of them.
5 personal loan pitfalls to avoid:
- Not checking your credit score first
Your credit score is one of the first things a lender looks at. It gives them an idea of how reliable you are when it comes to repaying money. Not knowing your score before you apply is a common personal loan pitfall that can leave you blindsided. You might think you’re in a strong position when you’re not, or worse, apply for a loan you’re unlikely to get. So, make it a habit to check your credit score through a trusted source such as Equifax, Experian or Illion (Australia’s three major credit reporting agencies) before starting any application.
- Borrowing more than you need
It might be tempting to apply for a larger amount “just in case”. But borrowing more than what you actually need means you’ll pay more in interest. Even if the repayments seem manageable now, you’re locking yourself into a longer commitment. And if things change — say, your income shifts or expenses go up — that larger loan might become harder to keep up with. This is especially true if you’re using the loan for debt consolidation. Think about what you truly need and stick to that number.
- Ignoring the comparison rate
Many people focus only on the interest rate and forget to look at the comparison rate. But the comparison rate is what gives you the full picture. It takes into account other costs that come with the loan, like fees and charges. Looking at the interest rate alone might make a loan seem cheaper than it really is. By comparing the full rate, you get a better sense of how much you’ll actually be paying.
- Rushing through the application
When you’re eager to get the funds, it’s easy to rush through the form and tick all the boxes without reading the fine print properly. But small mistakes can slow down your application or discredit your eligibility. Double-check everything you fill out. Make sure the numbers add up and all documents are correct and complete. If you have questions, check the lender’s FAQ or speak with an advisor. Taking a few extra minutes to seek professional advice can save you a lot of time later.
- Applying with multiple lenders at once
Shopping around is smart. But applying for loans with several lenders in a short amount of time can work against you. Each formal application leaves a mark on your credit file, and too many in a short period can raise red flags. It may look like you’re desperate for money, even if you’re just weighing your options. Instead, use tools that let you check your rate without affecting your score, and only apply formally once you’re confident it’s the right fit.
How NOW Finance can help
Personal loans can open the door to opportunity, but only when approached with care. That’s why NOW Finance focuses on making the loan process simple: Check your rate, apply online and, if approved, get your funds in one to two business days. On top of that, we don’t charge any fees, so the rate you see is what you get.
A no-fuss loan experience is one of the reasons we’ve been recognised with a Mozo Experts Choice Award. Just as important, we help you move forward with fewer errors and second-guessing.
If you’re looking to borrow smarter, we invite you to explore your loan options with us.
Disclaimer: This article contains general comments and recommendations only. This article has been prepared without taking account of your objectives, financial situation or needs. Before taking any action, you should consider the appropriateness of the comments made in the article, having regard to your objectives, financial situation and needs. If this article relates to the acquisition, or possible acquisition, of a particular credit product, you should obtain and consider the relevant disclosure documents before applying for the product. The information in this article is considered to be true and correct at the date of publication; changes in circumstances after the time of publication may affect the accuracy of the information.
