A personal loan is the most convenient and the quickest way to deal with any financial crises as it offers many benefits like quick online approval, flexible tenure, no restriction on end-use, instant disbursal, etc. Unfortunately, with so many benefits comes several half- baked theories too that often mislead people regarding a personal loan and compels them to look out for more expensive ways to deal with the financial emergency.
#Myth1. Only banks offer personal loans
Many people tend to believe that the banks are the only financial institutions offering personal loans. Yes, all the banks offer personal loans but there are many NBFCs like Bajaj Finserv, Tata Capital, HDB Financial Services and digital lenders like EarlySalary that also offer personal loans. When a bank rejects your personal loan application, you can contact these NBFCs and digital lenders for a personal loan as their eligibility criteria is a bit flexible as compared to the banks.
#Myth2. Low credit score leads to loan rejection
A credit score is one of the most important factors considered to determine your personal loan eligibility. However, a credit score do not entirely impact your loan approval chances. A credit score of 750 or above is considered healthy by the lenders but if you have a low credit score (less than 750) other factors like your income, employer, etc. can save your loan application. In such a case, the interest rate will be on the higher side but you have the chance of getting a personal loan.
#Myth3. Only salaried individuals can avail a personal loan
It is a very common misconception that only salaried professionals with a steady flow of income can avail a personal loan. Self-employed individuals/professionals like a businessman, CA, doctors, etc. can also apply for a personal loan and the lenders will evaluate their credit score and income tax return (ITR) before sanctioning the loan. Some of the banks also offer a personal loan to pensioners.
#Myth4. The processing time is long
It is believed by many that the processing of a personal loan consumes a lot of time and there are a lot of formalities involved. This is not true. These days with banks being digitalized, you can easily apply for a personal loan online and can process your loan application just by uploading minimum documents. Also, you can avail instant approval online and the amount would be disbursed to your account within 3-5 working days.
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#Myth5. Interest rates are high on a personal loan
A lot of people think that interest rates on a personal loan are high. But do you know that you can get a personal loan with an interest rate as low as 10.99%? Yes, it is true and depends on your credit score, age, repayment history, employer, etc. Also, the interest rates on a personal loan are very low as compared to the interest rates of credit cards that start from 30%. Hence, it is always feasible to avail a personal loan rather than a credit card.
#Myth6. There is no prepayment option
Due to the shorter tenure of a personal loan that usually varies from 12 to 60 months, many individuals believe that there is no prepayment option offered on a personal loan. However, you can prepay the loan before the tenure ends. Some of the banks have a lock-in period of 6 to 12 EMIs and after paying these EMIs, you can foreclose the loan any time before your tenure ends.
#Myth7. A personal loan can only be used for personal reasons
Personal loans come with a flexible end-use that is they can be used for any purpose. You can even invest money availed from a personal loan in a business idea or you can buy equipment for business or can pay salaries to your employees.
#Myth8. You can apply for a personal loan from various lenders at a time
Yes, you can apply for a personal loan from various lenders at a time but it is not advisable. Every time you apply for a personal loan, it gets registered to the credit bureau as hard inquiry and gets reflected on your credit report. If any lender checks on your credit report, he will be able to see this inquiry and will consider you credit hungry and hence might not approve your loan application. Therefore, you should only apply with a single lender at a time.
If any of the above myths ever stopped you from taking a personal loan, the time is now. You can still avail a personal loan without any hassle at Paisabazaar.com and can repay it within flexible tenure. Just remember, do not borrow more than you can repay as this might lead to a debt- trap and choose an appropriate tenure for a stress- free repayment process.