Personal loans are a very handy way for an applicant to fund their expenses. An individual can arrange their wedding, go on a trip or go for higher studies by availing of a personal loan. Unlike car loans, home loans or any other type of loan one doesn’t have to give any collateral or property as submission. Therefore, personal loans are often termed unsecured. Unfortunately, with so many benefits comes myths that prevail in society about personal loans. These mistaken theories often create fear among people about personal loans. It coaxes them into investing huge amounts of expenses during a financial emergency neglecting an affordable and convenient way of financing them. Here in this article, we will learn about the common personal loan myths. mobil casino siteleri
Types of Personal Loans
Indian weddings are celebrated as a festival with utmost joy and exuberance. However, arranging funds for a wedding can be challenging as it involves various ceremonial expenses like decoration, dresses, music, etc. A wedding loan or a personal loan for wedding helps borrowers by providing funds for all marriage-related expenses. Based on your credit background, you can avail a wedding loan to mitigate the financial burden.
Traveling is the most refreshing activity. Almost everyone likes to travel whenever they get time out of their mundane schedules. But when you plan a trip, the first thing to be considered is the budget. Be it a solo or a group trip, it involves multiple expenses like shopping, transportation, hotel and stay, food, etc. Also, everyone can’t bear these expenses in one go. This is where travel loans are useful. Travel loans are provided to fund all travel-related expenses. You can choose not to liquidate your savings or investments but rather apply for an easy travel loan that will take care of every expense related to your travel.
Home improvement loan:
Home improvement loans are different from home loans. These are secured loans while home improvement loans are part of personal loans which provide necessary funds to renovate your homes. Expenses like furniture, cost of labor, household appliances, etc are taken care of under home improvement loans. Also, you can claim a tax deduction on the overall interest amount paid on such loans under section 30 of the income tax act.
Myths about personal loans
A low credit score leads to loan rejection
People often believe that one of the primary causes of loan rejection is a low credit score. A good credit score is one of the very important factors that make an individual eligible for a personal loan. Apart from these, there are several other factors that are also taken into consideration over a low credit score. The borrower’s income or repayment capacity outweighs the credit score.
Only banks offer personal loans
A common personal loan myth is that banks are the only financial institutions that credit personal loans. Apart from these banks, there are many platforms online and NBFCs that offer personal loans. These digital lenders offer flexible eligibility criteria and borrower-friendly ways to credit personal loans. You can just go to their website, fill in the details and wait for approval of your bid.
Only salaried individuals can get personal loans
A misconception that prevails in society is that only salary-based applicants get personal loans. To unveil the reality let’s tell you that anyone who satisfies the eligibility criteria can avail of personal loans. Because of a stable source of income, salaried employees get loans easily. If the bank statement and income are stable for a self-employed individual then his/her application also gets easy approval.
Personal loans have a high rate of interests
A higher number of individuals believe that the interest rates on personal loans are very high. This leads people to drop their plans to borrow a loan. Let us tell you that the interest rates are set accordingly considering the repayment options and credit score. The rate of interest also depends on the amount credited to the applicant. The rates vary from 9.6% to 25% depending on the above factors. Longer repayment period results in a higher rate of interest and vice versa.
If you already have an existing loan, you cannot take another personal loan
Of many personal loan myths, a popular one is that you cannot apply for a personal loan if you’re already repaying for one. Well, this information is not quite true. Everything depends on the individual’s repayment capacity and their monthly income.
Time taking processing
A common belief prevails among the borrowers that the processing time for crediting personal loans is long and requires a lot of documentation. Well, this was an age-old process. But, now owing to many innovations, the loan approval process has become very easy and convenient for customers. Applying for a personal loan is as simple as a cup of tea. Many digital lenders and NBCs provide paperless application options without the submission of any hard copies of documentation.
Lack of prepayment option
Another personal loan myths about personal loans are it lacks of prepayment options. Likewise, the borrower cannot complete the payment before the end of the tenure. Individuals often believe this myth owing to the short-term repayment option for a personal loan, usually from 12 months to 60 months. Nevertheless, borrowers are free to pay the payment prior to the completion of the tenure. By the end of the repayment, borrowers can foreclose their loan and pay a certain amount of foreclosure fee.
You can apply for a personal loan at various lenders
This option is usually not advisable but in the time of financial emergency, you can take this step. One needs to fill out an application for a personal loan at various digital sites and banks. You must keep in mind that every time you apply for a personal loan it gets the credit bureau registers it and your credit report reflects the information. The lender might see your report and consider your credit gluttonous. This may not leave a good impression on the creditor resulting in the cancellation of your application.
These few myths compel individuals to crush their expenses for financial needs, making it difficult for them. Ignoring these few myths one should apply for a personal loan during the hours of financial emergency.