It might be overwhelming if you’re looking to borrow a loan for the first time in your life. You may be worried about long processing time, high Personal Loan interest rates, or the need to pledge collateral against your loan. If these are your fears, you can opt for Personal Loans and wash away all your worries.
You can apply for Personal Loans online as they are a quick, hassle-free way to get small instant loans. Also, there are no restrictions on the purpose of a Personal Loan. You can use the loan amount for any need in your life, such as home renovation, wedding, education, buying a car, or even using it to pay for a medical emergency.
However, there seem to be a plethora of misconceptions about Personal Loans deterring individuals from applying for the same.
Here are ten common myths about small instant Personal Loans busted and corrected.
Ten common myths about small instant Personal Loan
- Personal Loans are available only in banks
It is a common myth believed by most people. Banks are not the only financial firms that give loans. Numerous non-banking financial companies (NBFCs) and online lenders offer Personal Loans at competitive interest rates. You can compare and choose the best one to apply for a Personal Loan online. If your bank rejects your loan application, you can approach non-banking financial institutions offering the best interest rates. Some NBFCs are more flexible with eligibility criteria and have faster approval than private and nationalized banks.
- You are not eligible for a Personal Loan since you have a low credit score
A low credit score can undoubtedly impact the approval chances of your Personal Loan application, but it doesn’t necessarily lead to rejection. While it is one of the crucial factors for loan approval, the lenders also check your income and repayment ability while reviewing your loan application and may still approve the loan despite your low credit score.
- The personal loan application process is tedious and time-consuming
Maybe it was true previously, but it certainly isn’t now. The Personal Loan online application process, approval, and credit of the loan amount into your bank account takes as less as 24 to 48 hours. Some lenders provide pre-approved, instant small Personal Loans, which means you can have the loan amount credited to your bank account within minutes with minimal documentation.
- You need collateral for a Personal Loan application online
Personal Loans are unsecured and don’t need any collateral, reducing documentation steps significantly. It is one of the main reasons why processing a Personal Loan is fast and easy.
- No tax exemptions and benefits apply to Personal Loans
It depends on the purpose of taking the loan. You can avail of tax benefits if you use the loan amount to invest in a business, purchase, construct, renovate a house, or buy some fixed assets.
- Personal Loan interest rates are incredibly high
Since Personal Loans don’t need collateral, it is a presumption that they have very high-interest rates. The Personal Loan interest rates depend on your credit score and loan repayment capacity. If you have a decent profile, the Personal Loan interest rates can be as low as 11%. They are more cost-effective options than taking a loan on credit cards and other methods.
- There are no prepayment options in Personal Loans
Personal Loans have a shorter repayment term does not mean they have no prepayment options. Similar to other loan types, you can avail of both prepayment & foreclosure options on your small instant Personal Loan, subject to terms and conditions.
- You cannot apply for a Personal Loan online if you have existing loans
You are eligible to apply for a Personal Loan online regardless of whether you have taken loans previously or not. The lender will review your application based on criteria such as credit score, repayment capacity, income, cash flow, existing liabilities, etc.
- Only salaried employees can take a Personal loan
It was commonly believed that salaried individuals are only eligible for Personal Loans since they have a steady income flow. However, self-employed and business owners are also eligible to take Personal Loans. Lending institutions will review your loan application based on your income and repayment capacity.
- Personal Loans will put undue stress on your existing debt
It seems logical since taking out a Personal Loan when you already have outstanding debt will add more to your financial burden. However, you can pay off your debt (multiple loans, credit card debt, etc.) using a Personal Loan, reducing your debt burden and paying only one EMI with one interest rate.