5 Common Personal Loan Myths you Should Ignore

Personal loans are extremely useful. One can avail a personal loan to go on a holiday, manage wedding expenses or even to pay for higher education. The applicant doesn’t need to pledge any collateral, the documentation process is hassle-free and the loan is quickly disbursed.

Unfortunately, there are some personal loan myths floating around that deter people from applying and enjoying the benefits of personal loans. We have busted 5 common personal loan myths that have caused apprehension among personal loan applicants

1) Personal Loans can Only be Availed by Salaried Employees

There is a common pervasive myth that only salaried employees can avail personal loans. It is believed since the salaried employees have a steady stream of income, their credit history can be easily evaluated and income easily predicted, bereft of any anomalies or inconsistency in the flow of income, and thus no deferred payment or default on monthly repayments.

However the truth is that anyone that has a regular, consistent, and guaranteed flow of income, including a self-employed individual can also borrow personal loans based on their eligibility. Their past credit records are carefully assessed and evaluated, the cash flow in their books is properly examined, the ITR is also taken into consideration before sanctioning the loan.

The current nature of the business or the related industry may not be included in the assessment as a business is subjected to recurrent cycles of highs and lows. So, self-employed people like entrepreneurs, CA as well as salaried employees can avail personal loans.

2) Only Banks can Provide Personal Loans

One of the common personal loan myths is that personal loans can only be availed from banks. Many NBFC’’s and digital lenders provide personal loans with more flexibility and less stringent criteria for approval of loans than banks. So If a bank rejects a loan application, NBFCs with their customised and diverse loan offerings, and a relatively higher probability of approval can come to the rescue.

3) A Good credit score is Required to Avail a Personal Loan

A credit score is an important factor in determining the fate of the loan application, and also the interest rates applicable. A credit score below 670 is considered to be highly unfavourable, while 750 is an excellent score. 

However, other factors at times take precedence over a low credit score such as a borrower’s income and repayment capacity that may tilt the scales in their favour. There are dozens of lenders available at the click of a mouse who may provide you personal loans at convenient interest rates. However, the interest rates may be slightly higher considering your less than excellent credit score. There also may be the case where the interest rates are left untouched, and the terms and conditions of the contract are altered or revised to protect the interests of the lender and also fulfil your loan requirements at affordable interest rates. One can also work towards improving one’s credit score over time.

Must Read: How to Get a Personal Loan Using Aadhar Card & PAN Card?

4) The Approval Process is Often Tedious and Time-Consuming

In this information age, an online personal loan can be availed at the mere tap of the fingers. In the data-centric age, vital information like the credit records, income, cash flow, existing loans and credit score is available in the public domain and readily accessible by banks and NBFC’s for scrutiny and evaluation.

Also, at the convenience of your home, you can avail an online personal loan by uploading scanned copies of all the required documents. Hence, you can enjoy a safe and hassle free experience.

5) Personal Loans are Only for Personal Reasons

Once you take the personal loan, you are not restricted to use the funds for any specific reason. A Personal loan is just a loan with no collateral needed. Hence, once you receive a personal, you can use it for personal expenses. You are also free to invest the amount in your business. Several businessmen avail personal loans to manage working capital requirements.

Hence, once we have separated the truth from myths, we can easily comprehend the wide range of benefits of personal loans, and the smooth, straightforward process of the personal loan application, where approval is instant and takes far less time than normally assumed. Rejection of application does not close any doors on your requirement. There are not only banks but NBFC’s and digital lenders who are scouring and searching for loan applicants like you. And the entire process from selecting a lender to loan approval can be carried at the convenience of your computer or mobile phone without stepping out of your home.

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