Personal loans have piqued the interest of a wide range of customers in the recent past because of the benefits it is providing. A personal loan can prove to be our savior at times, as it provides liquidity in a short period of time and without much hassle. It’s also called a multi-purpose loan because it covers everything from remodeling the house to consolidating debts. Despite its popularity, there are certain myths associated with personal loans which makes them look like a debt-trap. And most people don’t even try to cross-check these misconceptions. Lack of knowledge on the customers part can also play a huge part in the creation of such myths.
If you’re one such person, who wants to apply for a personal loan but is reluctant to take a step forward due to such myths then don’t worry as we’ve got it all covered for you. Read on to our blog to know more about such personal loan myths and facts.
Myth- Only salaried employees are eligible
Fact- Both salaried and self-employed professionals are eligible
The myth is widely popular among masses because people believe that they need a salary slip and company ID to avail a personal loan. Even businessman, self-employed professionals, and NRIs can avail a personal loan. However, make sure that you’re not applying for a personal loan with multiple institutions at the same time, as it might make the process slower and the chances of your application getting rejected become higher.
Myth- Personal loan charges an unfair interest rate
Fact- A Personal loan has the most reasonable interest rate
Many people have this common misconception about a personal loan that it is expensive and offers unfair interest charges to its customers. This is one of the reasons why people shy away from taking a personal loan. Usually, a personal loan starts from the interest rates starting at as low as 10.75%, which is reasonable than most other forms of credit. Plus, a personal loan is an unsecured loan, which means that you don’t have to put anything up as a collateral.
Myth- You can’t take a personal loan with a low credit score
Fact- You can avail a personal loan even if your credit score is not good
A low credit score won’t affect your chances of getting a personal loan from banks or any other financial institution. Most banks and financial institutions will avail you a personal loan even if your credit score is low, however, a bad credit score does impact the interest rate at which the loan is processed or the amount that your lender is willing to give you. This is because, a low credit score, makes an image of a risky investment. You can also look for several online portals available in such regard and apply for a personal loan without much hassle.
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Myth- You can’t apply for a personal loan if you have an existing loan
Fact- It’s yet another misconception
There is not a fixed rule that you can only apply for a personal loan if you don’t have an existing loan. People who are not able to clear-off their previous loans can go for a personal loan balance transfer, to transfer the amount from high to low-interest loan. A personal loan also provides facilities like consolidate debt and helps to combine multiple debts into one. This ensures better control over a loan and you just need to pay off the loan with one installment rather than multiple EMIs.
Myth- The loan application process is lengthy
Fact- It’s not lengthy
It’s yet another misconception that people have about the personal loan. The approval process on a personal loan is fast and takes less time. Also, a personal loan requires minimum documentation as compared to other loans. In this digital era, you can get directly jump-off that long queue just by applying for a personal loan through online portals. The applying procedure is rather simple and it takes only a few days for your loan amount to get disbursed.
Myth- You can use a personal loan only for personal reasons
Fact- It can be used for several purposes
There is huge confusion regarding the use of personal loans in the market, some suggest that it can only be used for personal use. Well! Time to bust this myth. A personal loan can be used for several purposes and is not limited for personal use only. Whether you wish to remodel your home or pay off any outstanding debt. A personal loan is there to help you. Banks or any other financial institutions won’t cross-check on how you’re using the allotted money. You can also invest that amount in your startup or financial markets until you’re making your payments on time.
Related Article: Personal Loan: Application Checklist
Myth- Apply for more than what’s required
Fact- It a myth!
Some people might borrow more amount than what is required because they are eligible for it. But they don’t realize that borrowing more than what’s required is a huge mistake. There is a misconception that you need to apply for more. In order to pay off the first installments and the processing fee. But this would only create an extra burden and might also affect your credit score. All the lenders or financial institutions set up a predetermined amount and tenure based on a person’s eligibility. So, you need to apply for what’s required and nothing more.
Bottom Line: Think beyond myths
Myths are just rumors that don’t hold any real evidence to be coined as true. Before believing such myths, always carry your in-depth research and try to find out the truth behind them. Personal loans are an immensely powerful tool if used wisely. Don’t fall prey to such misconceptions before researching for their true essence. Now, that you know about the importance of personal loans and several personal loan myths and facts associated with them, it’s time to go on and apply for one by checking your credit report and eligibility.
