A personal loan is a great financial tool to finance any of your expenses. Whether it is renovating your home, buying an expensive gadget, or funding for health emergencies, personal loans are always available to help you with your finances. Besides, unlike home loans and car loans, the amount obtained on personal loans can be used without restrictions on end-use.
Therefore, in this article, we will be analyzing all the myths related to personal loans that one should not believe.
Personal loans have a high-interest rate
Most people believe that the interest rate charged on a personal loan is too high. However, this is not entirely true. Personal loans are not secure and interest rates are relatively high compared to secured loans but this does not mean that they are too high and will not be available to the average person. The interest rate on personal loans ranges from 10 to 16% and generally depends on the profile, repayment capacity, and creditworthiness of the applicant.
Example- Mr. Rohan and Mr. Shetty apply for a personal loan at the same time. Mr. Shetty has a good credit history with a CIBIL rate. However, Mr. Rohan has a credit score of 550 and has two ongoing loans. Both are allowed to borrow money but with different interest rates. For Mr. Shetty, loans are approved at 10.05% and for Mr. Rohan, it is approved at 13% per annum.
One should only use personal loans from banks
Some people believe that you should always borrow your money from a bank. Yes, the truth is personal loans provided by all banks, NBFCs. And it is not mandatory to get personal loans only from banks. The fact is that NBFCs and digital lenders have an easier way to qualify and process than manufactured banks. And when the bank rejects your private loan application, you can apply to any NBFC and digital lenders as their personal loan eligibility options are flexible and comfortable with them.
Only earning people can get a personal loan
One of the most common myths about personal loans is that only paid professionals with a fixed income can get a personal loan. However, this is not true and self-employed people/professionals can choose the Indian Overseas Bank personal loan apply option and be allowed to get a personal loan depending on their credit and ITR before approving the loan.
Lower points in debt lead to a higher credit
Your credit score is one of the most important factors affecting your loan approval. It represents the history of pre-loan repayment and affects your credit scores.
The common denominator of personal loans is that – low credit points lead to the rejection of your loan application. However, this is not entirely true, and a bank with strict terms of eligibility and non-compliance can refuse your personal loan application through a CIBIL elementary school.
Personal loans do not have the option to repay in advance
One of the myths about personal loans is that unlike home loans and car loans, borrowers are unable to repay the loan amount before settling down. In other words, they believe that personal loans do not allow them to pay in advance because they have a much shorter period than other types of loans. However, the fact is that borrowers can repay the loan amount before the end of the loan period like any other loan. Refunding the full amount before the lock time may cost you a certain amount of the fine.
Long processing time
Some borrowers believe that the time to process a personal loan is too long with a long document process. This has been the case with traditional personal loans for the past several years.
But now with the involvement of advanced technology in the banking sector you are applying for a loan and that the money withdrawn from your account is made within a few hours. Also, many banks offer instant loan outlets that offer credit within minutes of the application process. This process is completely online that saves time and makes the process less problematic for borrowers.