Overview: myths and facts about Personal loan
Emergency expenses come without warning, financial crises might emerge anytime unplanned. Personal loans are an apt method to address a variety of expenditures that require immediate funding. There are numerous benefits of availing of personal loans as they are unsecured loans, as the applicant doesn’t have to provide any security or asset for the borrowed loan amount.
Though personal loans being unsecured and easy to avail of has made an air of mystery around personal loans. Often, people are filled with misconception and distrust when it comes to applying for a personal loan.
Before availing of a personal loan involves multiple problems, such as:
- From which lender should I opt for a loan?
- Which kind of personal loan to pick?
- How to be qualified to get a personal loan?
Answering these questions is prime, also it is equally important to bust the myths and unleash the fact first that’s around personal loans as it may fog an individual’s judgment to avail a personal loan.
Here are some most common myths linked to personal loan
Myth –1 Personal loans have a high rate of interest.
Many individuals believe that personal loans generally come with a high rate of interest. But, that’s not always the case. In many occurrences, financial institutions and lenders set interest rates based on a person’s credit score or loan repayment capacity. Individuals with a low repayment capacity are usually given a loan at comparatively higher interest rates. Individuals with a high credit score are benefited generally from low-interest rates.
Myth – 2 Only salaried people can apply for personal loans.
Numerous individuals believe that only salaried people with a regular flow of funds are qualified to get a personal loan. However, salaried individual loan applications are accepted easier as they have a steady inflow flow of income. But, self-employed individuals can also avail of personal loans based on their credit history.
Myth – 3 Low credit score leads to loan applications rejected
Many borrowers think that a low credit score leads to the rejection of a loan application. However, the interest rate is charged higher for individuals with a low credit score and low-interest rates for individuals with a high credit score.
Myth- 4 Only banks lend personal loans
Several loan applicants believe that personal loans can be only availed through banks. But that’s not true, there are a few NBFCs who provide personal loans.
Myth – 5 Personal loans do not have a prepayment option
Some borrowers believe that they cannot repay the loan amount before the end of the loan tenure. Most individuals believe this as personal loans tend to have a much shorter repayment tenure. However, personal loan repayment can be done before the end of the loan tenure.
Myth – 6 Existing loan borrowers cannot avail of a personal loan
Many individuals believe that they cannot get a personal loan if they already have an existing loan. This is just a myth. You are eligible to apply for a new loan regardless of whether you have existing loans or not. The lender will evaluate your application based on your loan repaying capacity, income, cash flow, and current liabilities.
If any of the mentioned myths are stopping you from getting a personal loan, this is the correct time. Just remember, do not borrow more than you cannot repay as this might lead to a debt- trap, and choose a suitable tenure for a stress-free payment process.