When you have exited working life, you may need an extra financial cushion in the form of loans to meet financial challenges that were not earlier considered when making your retirement plan. So, it’s important to keep yourself ready with a plan to get the loans whenever you have a requirement during your retirement. Here are 3 things that you should try to avoid when planning to get a loan during the retirement period.

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Not Reading The Loan Terms And Conditions

You must not rush to get a loan just because you are getting it easily. Often people end up paying higher charges on their loans because they don’t read the terms and conditions before signing the loan agreement.

The terms and conditions applicable on a loan may vary from bank to bank and also depend on the type of loan product you choose. For example, the terms and conditions of unsecured loans may vary from secured loans. The repayment tenure, charges, interest rate, margin requirement, collateral need and other aspects related to the loan are mentioned in the loan’s terms and conditions. So, before you sign the loan document, you must read the fine print very carefully.

Not Preparing To Meet The Eligibility Criteria

Not checking your eligibility before a loan application may lead to a loan rejection and result in a plunge in your credit score. Before applying for a loan, you must conduct an eligibility check. Seniors usually lack active income and they are usually not allowed long repayment tenure due to the age limit on specific loan products. Seniors can avoid a loan rejection by assessing their eligibility for a particular loan product for which they plan to apply and finding out how much loan they can take, the expected interest rate and the repayment tenure they will get from the lender. If they are falling short of applicable eligibility criteria, they may plan accordingly, for example, they may include a co-borrower, adjust the repayment period or the loan amount, or they may check with other lenders as well.

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Borrowing More Than Your Requirement

Sometimes seniors make mistakes by applying for bigger loans than their actual requirement and end up spending the borrowed money on unnecessary things. Before applying for a loan, you must assess your actual requirements. The loan size should be restricted to actual financial need. Smaller loans are easier to repay and you can get them easily sanctioned by the banks.

Finally

Avoid applying to multiple lenders at the same time because it may impact your credit score negatively. If you are planning to apply for a secured loan, choose the appropriate collateral in sync with the required loan size. Choosing the right collateral can also help you in getting the loan with a higher LTV and at the lowest interest rate.

The author is an independent financial journalist.