People often think of personal loans as a fast and easy way to take care of a sudden financial need. No collateral requirement, quick approval and flexible usage make them an easy option for many borrowers. Despite these benefits, there are still many who are wary due to misconceptions they have heard over time about personal loans.
In this article, we will try to debunk common personal loan myths to help you make wise borrowing choices and avoid costly blunders. Continue reading.
Common Myths About Personal Loans
1. Loans Take a Long Time to Process
The days of long, tedious application processes and equally time-consuming approval processes are over. Today, the entire procedure is smooth and stress-free, involving minimum documentation and lightning-fast approvals.
2. Increased Interest Rates
Yes, the interest rates on personal loans can be on the higher side compared to home loans, vehicle loans, etc as they are unsecured loans. But interest rates also depend on several other factors. Depending on your credit score, credit history, income profile and your relationship with the bank, you can obtain a decent offer on the loan.
3. You have a low credit score and can’t do this
Your credit score is what banks use to determine your creditworthiness. A high score can help you get a loan from the bank. But a low credit score is not a reason to turn down an application for a loan. Even if your credit score is low, you can get a personal loan if you score well on other characteristics like income, employment stability, lower loan amount, etc.
4. Participation Open Only to Salaried People
Of course, a stable job with a decent and regular salary can be helpful in getting the desired loan amount. But that is not all you have to qualify for. If you are a self-employed business owner, consultant and more, you can be eligible for a personal loan provided you have the required loan payback capability.
5. No prepayment or foreclosure allowed
Like other loans, personal loans, permit prepayments and/or foreclosures. This will help you reduce your total interest outflow. However, the same may be subject to some stipulations by the lenders. For example, you may have to serve a lock-in period of 3 months or 6 months before you can prepay or foreclose your loan account. You may also be required to pay a small percentage of your outstanding loan debt as “prepayment fees”. It is important to read the loan agreement to understand these points.
6. Don’t Use a Personal Loan to Take Out Other Loans
Banks and other lenders do check the status of your existing loans before they approve a new loan to you. But it doesn’t mean that you will be rejected from your loan application because you have some existing loans.
Even if you have an existing loan, the bank would sanction your loan amount provided they are happy with your income levels and payback capabilities of the loan.
Summary: When used wisely, personal loans might be the answer to your financial demands. All you need to do is ignore the myths about them and base your decision on the facts. Speak to the customer representative to know the right facts and take the decision accordingly—Vintage Finance is here.