6 Common Myths About Personal Loans That Could be Stopping You – What to KnowMar 19, 2020
A personal loan is one of the easiest types of loans to get today. Individuals who need quick loans for emergencies resort to a personal loan often. However, many are still unfamiliar with this type of loan, and instead of discussing the facts, here are some of the common myths about personal loans that will help you become better educated about it:
A Low Credit Score Is a Hindrance for a Personal Loan
Your credit score is a factor when you’re applying for any type of loan, but it’s not the only one that lenders take into consideration. There are other factors that lenders consider to determine whether an individual is eligible for a personal loan or not. That said, your low credit score isn’t necessarily a hindrance—as long as you have good income and repayment capacity, it’s likely that you’ll get considered for a personal loan.
It Has High-Interest Rates
A lot of people assume that personal loans, which are unsecured loans, have high-interest rates. It isn’t always the case because, in some cases, financial institutions would set the interest rates of a personal loan based on the borrower’s repayment capacity and credit score. That said, people who have low repayment capacity get personal loans with higher interest rates usually. On the other hand, individuals with good credit scores and repayment capacity can have lower interest rates.
You Can Only Get Personal Loans from Banks
Many people believe that banks are the only ones who can grant personal loans. However, Non-Banking Financial Companies (NBCFs) also offer personal loans. When a borrower gets rejected for a personal loan by a bank, he or she may resort to NBCFs and other online lenders who accept loan applications.
You Can’t Get a Personal Loan With an Existing Loan
If you already have existing loans, you can still get a personal loan. This is because a bank would determine the eligibility of a borrower based on his or her’s repayment capacity and current income. That said, you can still apply for a personal loan even with an existing loan.
You Can Only Apply for a Personal Loan When You Have Steady Income
Individuals who have a steady income get approved easily because they have a regular flow of funds. However, self-employed people can still apply for a personal loan. The difference is that lenders would consider different factors to determine if the person’s eligible for a personal loan. One of the factors that lenders look into for people who don’t have a steady income is their credit history.
Personal Loan’s Processing Time Is Very Long
Back in the days, processing for a personal loan can take a lot of time. However, things have changed significantly now and borrowers can expect faster processing times for their personal loans. In fact, a personal loan can be approved within two days. Some lenders offer instant loan options that disburse the loan amount to the account of the borrower in just minutes.
These are the common myths that surround a personal loan. So, if you need quick loans, whether you’re employed or self-employed, you can apply for a personal loan.
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