An unexpected incident can cause havoc with your financial situation at times. You can avoid depleting your funds by taking out a Personal Loan in certain circumstances. Although there are various myths around Personal Loans, many individuals are worried about seeking out one of these loans. In this article, we’ll debunk several common myths that may be preventing you from applying for a Personal Loan.
A personal loan is a set amount of funding that individuals obtain from a borrowing organisation, which is normally repaid in monthly instalments over a certain period. You should avoid falling victim to fallacies when taking for a personal loan, as they can be very dangerous. We may even hesitate from taking out personal loans as a result of the anxiety that these beliefs have instilled in us.
Personal loans can be a useful instrument for bridging some financial gaps that may arise as a result of an emergency. Because of this, we wish to dispel some of the most frequent myths revolving about private loans to help you gain a better grasp of the subject matter.
- One of the most important limitations of personal loans is that they are only available to salaried individuals.
In contrast to salaried individuals, who find it easier to obtain a personal loan due to the simplicity with which they can provide documentation and demonstrate their ability to pay back, self-employed people do not find it hard to obtain a personal loan. The only distinction between the two is just the form of the documentation that must be submitted as evidence. The loan amount may change based on the merits of the case. Personal loans are accessible to any and all Indian residents and citizens that are beyond the age of 21 years and also have a monthly salary of more than Rs.30, 000.
- Approval of a personal loan takes an eternity
This myth, on the other hand, is most likely derived from the manner in which banks operate whenever it refers to the screening and approval times for individual loans. However, with the advent of non-banking financial companies (NBFCs), the computation time for a bank loan might be reduced to as little as half an hour.
To make the credit process of application as convenient as possible for its customers, many lenders use a digital format and only request a few papers, which most people have on hand at all times. Only a few procedures are required, and after the request has been approved, the money is sent to the applicant’s bank account immediately. This is just as fast as purchasing groceries online, and it is also more convenient.
- A person who has an ongoing initial personal loan is not eligible to apply for a second personal loan
The majority of customers assume that they will not be authorised for a secondary bank loan if they already have an existing loan account with another lender. As previously stated, when a lender reviews the loan request, it examines the ability to repay the amount in full. If you have an open loan account and are completing all of your bills on schedule and complete, it will not affect your odds of being approved for a second loan.
- If the credit score isn’t up to par, you should avoid taking out any personal loans
The credit bureau CIBIL calculates your credit score depending on the financial record. Just after 6 months of earning an income from a work or an enterprise does a credit history begin to accumulate?
The CIBIL score is computed as a numeric number ranging from 300 to 900 points. Typically, a credit score of 750 or higher indicates well, and the bank permitting process is straightforward. A personal loan is not deemed invalid to those with a credit rating of fewer than 750 simply because they have a bad credit history. When determining whether or not to grant a loan, a credit rating is among the variables taken into account, although this is not the sole aspect that influences whether or not a proposal gets approved.
If you have a high income and good repayment ability, you may be eligible for a personal loan even if you have a poor credit score. You should keep in mind, though, that borrowers with a poor credit score could be given a greater interest rate to account for the greater risk that they provide to creditors.
- A personal loan should only be used for certain purposes.
A common misconception is that a personal loan’s financing is only intended for one particular function, i.e., for personal reasons. However, this is not true. The value of a personal loan may be utilized for various reasons, and there are no restrictions on how the loan balance can be spent once it has been received.
If you want to finance a trip, plan your vacations, or even just invest for the growth of your business, you can feel free to do so with it. The only activities that are prohibited from using a personal loan are betting, speculating, stock market investing, and any criminal activity that is not in compliance with the law. Aside from that, you are free to use the personal loan money for whatever you like.
- The interest rate on a personal loan is prohibitively expensive.
Numerous individuals assume that perhaps the rate of interest on a private loan is prohibitively high, and as a result, they are discouraged from seeking one. Although, it is a partially wrong claim since the interest rate on a personal loan is determined by several different criteria.
Before such an interest rate is issued, a variety of parameters such as the consumer’s age, earnings, credit rating, financial status, payment history, loan term, and a variety of other variables are considered. Furthermore, if you examine the interest rate billed on a credit card with the interest rate billed on a personal loan, you’ll notice a significant discrepancy, as the rate of interest on private loans is far lower than the amount levied on a bank card.
- You will be required to offer collateral in order to obtain a personal loan.
You could be under the impression that all loans demand some type of security if your only familiarity with loans has been for home purchases or renovations. Personal loans, on the other hand, are not subject to this restriction because the vast majority of them are unsecured, which means that no security is needed.
Unsecured loans include, but aren’t really limited to, the following types:
- Loans on credit cards
- Loans for higher education
- Credit Lines
- Loans for home renovation and furnishing
Conclusion:
If any of the above-mentioned personal loan misconceptions have ever stood in the path of you seeking credit, it’s past time for you to abandon these false beliefs. You can simply obtain a quick personal loan from financial organisations at competitive interest rates and payback terms that are flexible, all without the need for worrying much about unnecessary additional factors.
