Information that is incomplete will always lead to the creation of myths in the market, and unfortunately, myths tend to spread faster than the reality. Personal loans are among the many products that are often misunderstood. Many people, especially, the first-time borrowers will always have doubts that can prevent them from enjoying the numerous benefitsof a personal loan.
However, with their quick approvals, no restriction on the use of the funds, and no collateral requirement, personal loans can beextremely helpful in getting you out of a financial crisis. Are you among those people who consider applying for a personal loan but are reluctant to take the next step since you don’t know the truth about this type of loans? Well, we have compiled a list of common myths about personal loans that you need to know to make an informed decision.
Myth #1: It’s Difficult to Apply for a Personal Loan
Most people tend to think that personal loan applications are time-consuming and tedious. On the contrary, personal loans usually require less documentation than any other type of credit out there. The application process is smooth, fast, and it won’t consume much of your time. Just make sure that you have all the documents and information required before you start the loan application process and everything will be simple and straightforward.
Myth #2: Banks Are the Only Lenders
Another widespread myth about personal loans is that they can only be accessed through banks. The truth is that there are lots of other financial institutions apart from banks that offer personal loans. Digital lenders and NBFCs also provide personal loans to individuals.
So, if you are among the many borrowers who usually think that they don’t have any other option when banks fail to approve their personal loan application, you need to understand that there lots of lenders out there that can offer you a personal loan. In fact, banks tend to have more stringent eligibility criteria that can easily lead to the disapproval of your loan application.
Myth #3: You Need a High Credit Score to Qualify
The truth is that you don’t need an excellent credit score to qualify for a personal loan. Poor credit can only prevent you from qualifying for the low-end interest-rate range, but it doesn’t disqualify your loan application altogether.
The only thing that you need to understand about personal loans is that consumers with an attractive credit score get loans at a low-interest rate compared to those with a not so good credit score. If you have a debt, make a plan to pay it off and work on your credit score before you apply for a personal loan.
Myth #4: You are Eligible for Only One Loan at a Time
Who said that you can’t get more than one personal loan at a go? As long as you have the necessary income, the right debt to ratio income, and an excellent credit rating, you can always get more than one loan at a time. However, you need to be cautious before you apply for more than one loan at a time since it can easily skew your debt to income ratio making you a risky borrower. This might limit your chances of getting your next personal loan at attractive interest rates.
Myth #5: Only Salaried People Can Get a Personal Loan
This isn’t true since both employed and self-employed individuals can borrow personal loans. The self-employed individuals can borrow personal loans on the basis of their good credit rating while the employed can borrow personal loans against their income. The only thing that most lenders will look at before approving or rejecting your personal loan application is your cash flow and your credit records.