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5 Personal Loan Myths That You Should Ignore

personal loan

Personal loans are often mistrusted, and many people believe that they are beyond the hands of the common man; they are very expensive and so on. These could not be farther than the truth. Anybody with a decent income, both salaried and self-employed, can successfully seek a personal loan. The Internet today has a host of options that you can opt for securely. The new sites often offer a good comparison, a personal loan EMI calculator, and some useful tips on how to secure the best personal loan.

A Personal loan are often called impractical citing high interest, hidden charges, and collateral needs; some clarity is needed. Some of the issues that we read on line or hear through friends and family are not true and simply a bunch of myths. Let us try and demystify the world of Personal loans.

Myth #1

You can use a personal loan for set purposes only. Most people hesitate to take a personal loan as they are not sure how they work and what they can be used for. The truth is that you can use the loan, once sanctioned and disbursed to do what you please as long as you pay the EMI’s on time. The most common uses for a personal loan is a medical emergency, home renovations, travel, weddings in the family, paying off credit card debts or buying something that you want.

Take a loan that you can repay and ensure that the EMI’s are paid on time. That is only what the lender looks for ultimately.

Myth#2

You only get a personal loan if your credit score is very high. You do get personal loans if your credit score is low, but not dismal. While it is true that your credit score impacts your loan eligibility, there are ways to get a loan even if your credit score is low. You will today find many online lenders who are ready to take a gamble with you. If your other parameters are within reasonable limits, some online bankers and NBFC’s will willingly give you a loan, albeit at higher interest rates.

Myth#3

Only salaried people can apply for a personal loan. Although lending institutions indeed prefer salaried people as the defaulters are low in this segment, you can apply for a loan even if you are self-employed. These lenders look at your income to determine your creditworthiness. If you can furnish income proof that is decent enough, the bank or NBFC will be happy to grant you sanction for a personal loan.

Not everybody can secure a personal loan. You need to have a salary of over Rs 30,000 per month or an average income from self-employment of over four lakhs in most cases to get the loan. The new age online banks and NBFCs may be ready to settle for a lower income threshold.

Myth #4

Interest Rates are too high for a personal loan. The general misconception is that since a personal loan is unsecured, the interest rates are high. This is partially true as secured loans where the property is kept as collateral is relatively cheaper. But personal loan interest rates depend on more than guarantee.

Your repayment history, your credit score, and your relationship with the lending institution may play a role too. Personal loans often charge interest of 12-24%, depending on the bank or NBFC and your documents. If you compare it with credit card interest rates, the difference is palpable. Credit cards charge 4% as an average per month, which works out to a whopping 48-52% annually. It is a better idea to apply for a personal loan than to get caught in the credit card loan cycle.

Myth # 5

Personal loans are difficult to apply for, and the TAT is too lengthy. This is a total misconception. Technology helps lenders process applications with the help of AI. The smaller loans are often paperless too. You can sit in the comfort of your home, compare personal loans across banks and check your EMI on online personal loan emi calculator after that you can submit your documents. Voila! Your job is done.

Minimal paperwork and documentation have become a common feature of personal loans in India. As the world of finance continues with its dramatic change, banks and NBFCs are making credit more accessible to the common man. The millennial does not want to wait until they save enough. Their motto is to grab life by the horns. Taking personal loans to satisfy their needs easily makes personal loans popular not only with them but with people of all ages.

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