Personal loans have emerged as India’s most popular loan instruments in the last few years. The ease of access, simple eligibility, less documentation, and easy repayment terms and conditions have fueled the demand for personal loans. , Furthermore, since personal loans are only offered for short periods, many people prefer them over many other credit instruments. But, a personal loan is nevertheless a loan instrument, and many myths surround these instant money loans. These myths often restrict many people from availing of finances or making unaware decisions.
Read on to learn these top ten common myths and misconceptions about personal loans.
Ten common personal loan myths
1. Only banks offer personal loans
For the longest y pe, people believed that only banks could offer personal loans. Toloans banking and non-banking financial institutes can provide you with a personal loan. You can also get an instant cash loan through online loan apps. All you need to do is download the app on your smartphone.
2. The personal loan processing takes forever
Personal loans used to take forever to process, but this is not true today. Today, these loans are called instant money loans because you can get the loan amount credited to your account in a matter of minutes. Since the entire process, from loan application to actual disbursal, is done digitally, the time for processing has come down to just a few minutes.
3. You cannot get a personal loan if you have a low credit score
Your credit score influences your loan application. But today, you can still get a loan, even if your credit score is not high. Earlier, loan applications were rejected directly based on credit score. Today, there are many ways to work around a low credit score. Lenders use data analytics and machine learning to determine the risk associated with your account. And you may still qualify for a loan despite having a low credit score.
4. Personal loan is only available to someone who has no other debt
This is another common misconception that restricts many from availing of a loan in their time of need. You can actually help with multiple loans if your salary comfortably accommodates the EMIs. Even if you have an existing home loan or a car loan, you can still apply for an instant cash loan. Make sure you have regularly made payments and maintained a good credit score.
5. The application process for a personal loan requires a lot of paperwork
This, too, is far from the truth. Today applying for a personal loan requires minimal documentation, and you can submit the documents online. You need to provide a copy of your Aadhaar card, a copy of your PAN card, your bank statement, and your income details. The documentation requirements vary from lender to lender. The documentation requirements vary from lender to lender. The documentation requirements vary from lender to lender. In some cases, lenders may ask for income tax returns as well. Make sure to check it before applying for the loan.
6. You need to put up collateral for a personal loan
A personal loan is a kind of unsecured debt. By its very nature, you do not need any collateral or security for a personal loan. This is why it is categorized as ‘unsecured debt’. However, you can also get a secured personal loan if you want. Before applying for one, check out the pros and cons of fast and unsecured personal loans.
7. Personal loans are not given to self-employed people
People in business or self-employed are also eligible to avail of a personal loan if they match all the lender criteria and prove that they have enough financial capability to repay the debt. Generally, lenders use Income Tax returns to check the financial stability of non-salaried people.
8. The interest rates for personal loans are very high
This, too, is not true today’s date. Today personal loans are one of the most popular loan instruments. This increased demand has resulted in a rise in lending institutes which has tightened the competition. Furthermore, conventional lenders used to charge high-interest rates because of their high operational costs. Modern app-based lenders can offer way more attractive interest-rate loans because their cost of doing business is very low.
9. You cannot pre-pay a personal loan
Many people think you cannot pre-pay personal loans because of the short duration for which personal loans are offered. This was never the case. Even a personal loan taken for a very short time can be pre-paid depending upon the terms and conditions of the loan. In most cases, the pre-payment charges for personal loans are also very low. After all, a lender takes a calculated risk every time they lend money to someone, and why would they want to refuse someone paying the money back earlier than expected?
10. A personal loan worsens your financial burden
Personal loans today are tailored to meet the rising demand of modern India. These loan instruments’ intention has shifted from minting money to helping consumers. Gone are the days when one had to lose their land and property to a debt. Today, personal loans are offered with zero collateral and with maximum flexibility. You can repay your loan at your convenience.
When managing your finances, making conscious financial decisions is very important. So, do your research and dispel the myths to use these tools to your benefit. Reading fiancé books, articles and blogs will also help your financial knowledge, which is a must!