Personal loans offer the quickest way to deal with financial emergencies. They are also unsecured, making them convenient. Unfortunately, the fact that personal loans can be availed easily and offer so many benefits has led to many half-baked theories going around, misleading potential borrowers.
Given below is a list of common myths about personal loans that you may come across.
Myth: Low credit score equals to a loan rejection
Fact: Borrowers are often under the assumption that a low credit score will result in their personal loan application being rejected. While it is true that your credit score is an important factor taken into consideration during personal loan eligibility evaluation, it is not the only criterion that is focused on. Lenders also consider your income and loan repayment capacity along with your credit score. However, if you have a low credit score then the rate of interest charged will be higher.
Myth: Only banks offer personal loans
Fact: Another common myth is that banks are the only source offering personal loans. Many Non-Banking Financial Companies (NBFCs) and lenders also offer personal loans. Banks generally have stricter eligibility and loan approval criteria whereas NBFCs are quite flexible. Hence, they are more willing to accept personal loan applications.
Myth: Only salaried individuals can apply for personal loans
Fact: It is a common misconception that only salaried individuals with a steady flow of income can apply for personal loans. Self-employed professionals, business persons, chartered accountants, doctors, etc. can also apply for personal loans. Lenders will evaluate their credit score and ITR before approving their loan application.
Myth: Personal loans can’t be availed if you have an existing loan
Fact: Many borrowers believe that they cannot avail a personal loan if they are already tied up with an existing loan. Even if you are already repaying an existing loan, you can still apply for another personal loan. Lenders approve your loan request based on your repayment capacity and current income. They calculate your current income after taking into consideration your existing loan EMI payments and credit card payments. If the lender is satisfied with your repayment capacity for the new loan then your loan application is accepted.
Additional Read:- Mistakes to Avoid When Availing a Personal Loan
Myth: No prepayment option
Fact: Compared to other types of loans, personal loans have a shorter tenure which is why many borrowers believe that there is no prepayment option offered. Like other loans, personal loans also have the option of prepaying the loan before the end of the loan tenure. Most lenders have a minimum tenure for which you have to make monthly EMI payments. After paying the EMIs, you can foreclose your loan after paying a foreclosure fee.
Myth: Interest rates are high on personal loans
Fact: Many potential borrowers believe that interest rates on a personal loan are high. However, this is not always the case. Your interest rate depends on your repayment capacity and credit score. If you have a good track record of repayments and a good credit score then you can easily get a personal loan at a low-interest rate.
Additional Read:- Top 4 Things You Should Know About CIBIL Score to Get a Personal Loan
Myth: Personal loans can only be used for personal reasons
Fact: This is one myth that makes a lot of potential borrowers apprehensive about opting for a personal loan. Personal loans can be used for any purpose. From travel plans to revamping your house, personal loans can help you out in any kind of financial emergency. You can even get a personal loan to invest in your business. Looking for the perfect place to get a personal loan? Look no further than Tata Capital. With personal loan interest rates starting at 10.99 % and tenure from 12 to 72 months, you can now say goodbye to all your financial worries. Use our online calculator to calculate your personal loan eligibility and apply for a personal loan today.