Handling financially devastating scenarios in life isn’t easy, especially for individuals who have recently settled down and started a family life. You can make a budget or lower expenses and resolve your financial issues. But there’s no alternative to an instant personal loan. It’s a convenient and quick process of managing emergency financial circumstances.
However, many misconceptions float around with the rising number of personal loan lenders. Some people think personal loans are only for emergencies, while others believe the process includes a ton of paperwork. If you still hold back from applying for this loan because of these myths, it’s time to debunk them individually.
Myth 1 – You Can Opt for a Personal Loan During Emergencies
Most people believe they can apply for personal loans only during emergencies like medical urgency or debt consolidation. However, the truth is different. You can get the loan even for travel or wedding purposes.
Unlike a home or car loan, a personal loan gives you immense flexibility in using your funds accordingly. So, whether it’s a medical treatment or travel, you can use the amount per your personal needs. So, going by its name, you can use the loan for personal purposes based on your eligibility and repayment capabilities.
Myth 2 – The Loan Application Process is Quite Time-Consuming
Thanks to sought-after financial technologies, everyone’s way of accessing personal loans has changed drastically. The popularity of online banks has given rise to a go-to choice where borrowers don’t have to visit the bank to opt for the loan. Online lending has altered the way people took out loans back then. A significant advantage of the bank is the speed. It’s much faster than the conventional loan procedure, which took several weeks.
Myth 3 – Only Banks Can Offer Personal Loans
Back then, people relied on traditional banking, which required visiting the branch and applying for a loan. However, financial institutions began to exist as online banking became an in-thing. The non-banking financial companies (NBFCs) offer this type of loan.
Notably, these institutes offer more flexibility depending on your eligibility. You can get a more digital and faster application process.
Myth 3 – Individuals Need a High Credit Score to Opt for the Loan
A low credit score doesn’t directly disqualify your loan application. Lenders assess your credit score while checking your eligibility. However, it doesn’t mean they will reject the application of someone with low credit. They may approve it with a higher interest rate. Besides your credit score, other factors that determine your eligibility include the following:
- Your age
- Income
- Type of field you work in and more
Myth 4 – You Need So Many Documents to for the Personal Loan Approval
The need for multiple documents used to be complex for the prior generations. Fortunately, for millennials, a personal loan application does not need many documents. Suppose you want to borrow two lakhs. Since the amount is small, you can apply with minimal documentation requirements via the best loan apps. You only need proof of identity, like a copy of your voter card or passport. Besides, you need proof of your address and bank statements for the last three months.
Myth 4 – Only Salaried Individuals Can Opt for the Loan
Understandably, salaried individuals have a more straightforward process when applying for this loan. After all, they can provide regular paychecks and proof of employment. However, the prime thing that a lender checks is your creditworthiness.
So, even if you are not working with a company, you can provide proof of your business. Taking personal loans for your business may cover emergency expenses and reduce your financial burden. Thus, lenders will consider the application (as long as you can give your proof of income for self-employment or business operations).
Myth 5 – You Need to Pay Massive Interests
Personal emergency loan interest rates vary from one lender to another. It may range from ten to twenty percent depending on the loan amount and credit profile (and other risk parameters). Lenders consider a few criteria before approving the loan. Your interest rate will only be higher if you have a low credit score. Otherwise, you can get excellent rates if your score exceeds six hundred and fifty or seven hundred. Please discuss this with your lender before taking out the personal NBFC loan.
Myth 6 – Taking a Personal Loan Might Reduce Your Credit Score
Most first-timers assume that taking a personal loan hurts their credit score. However, personal loans can actually help improve your credit score in various ways. A responsible borrower who makes the payments on time can get an opportunity to open another credit account. Such an individual can manage multiple credit cards and improve their score by paying debts on time.
Myth 7 – All Personal Loans Have Hidden Charges
Undoubtedly, transparency is key when it comes to taking a personal loan. A reliable lender discloses the applicable fees upfront, such as:
- The processing fees
- Late payment charges
- Prepayment charges or other penalties
So, the secret to getting a decent loan is to read the loan agreement and clarify your question before signing it.
Myth 8 – There’s No Concept Called ‘Early Repayment’ or ‘Foreclosure’
Early repayment is clearing your loan balance in a single payment. One can select a foreclosure anytime. Some lenders may have prepayment penalties. If your lender includes a prepayment penalty, it would usually be a small percentage of the outstanding balance. So, reading the agreement before signing helps you understand the lender’s policy.
Myth 9 –Personal Loans and Credit Cards Have No Differences
Understandably, credit cards and personal loans aren’t the same. However, personal loans come with a fixed interest and repayment policy. On the other hand, interest rates on the credit card are typically higher and may fluctuate. Another difference is that personal loan funds can be disbursed as a lump sum. However, a credit card lets you make ongoing purchases within your approved limit.
Wrapping up
Remember those days when your parents used to teach you the importance of shouldering responsibilities? It seems the time has come. So, opting for an instant personal loan online is straightforward – whether you want to consolidate debt or meet emergency financial crises. Now you understand the myths and misconceptions. So, it’s time to make an effective financial decision.
