The very idea of applying for an online personal loan may seem so intimidating for a newbie. One comes across all kinds of silly myths about personal loans and sometimes these myths are the major hurdles that prevent people from reaping the benefits of an easy to avail, unsecured personal loan.
There are several tools to help consumers make the right decision when it comes to personal loans. However, these tools are of no use to people who make decisions based on hearsay rather than on actual facts. So, in this article, you can finally find the truth behind the top five myths of personal loans.
Myth #1: Personal loans aren’t for those with poor credit
It’s true that borrowers with good credit get better rates when it comes to personal loans. Earlier a poor credit history or low CIBIL score usually dealt a death blow to getting a personal loan with bad credit. However, times have changed and bankruptcies or an occasional missed payment do not mean much these days.
If you have a good credit utilization ratio for the last few years, then you can get your personal loan approved irrespective of your credit history. However, your interest rate will depend on your credit history. You can get favorable rates if you’re willing to submit collateral.
Myth #2: Your bank is the only source for Personal Loans
This is a common myth, and most people who apply for personal loans approach their bank where they maintain an account. However, different banks have different criteria. So, try to look around or use an online personal loan calculator to help you find the best lender.
Recently other alternatives like NBFCs, peer-to-peer lenders and online lenders have emerged. Check them out for better interest rates.
Myth #3: You are eligible for only one loan at a time
You can get more than one loan at a time if you have the necessary income, good credit rating and the right debt to income ration. However, availing more than one loan at a time can end up skewing your debt to income ratio. So, think carefully, before getting more than one loan at a time.
Myth #4: Getting an overdraft on your Credit Card is cheaper than a Personal Loan
If you think that getting an overdraft on your credit card is easier and less expensive than a guaranteed personal loan, then you’re wrong. Check out the interest rates on your credit card and compare it with a personal loan. Then choose the one that works in your favor.
Myth #5: Personal loans reflect poorly on your Credit History
Wrong. Personal loans do not reflect poorly on your credit history. Rather defaulting on your EMI payment is what impacts your credit history in a negative way. On the other hand, repaying your instant personal loan on time or well ahead of time, increases your repayment capacity and improves your chances for future loan approval.
Wrapping it Up
Never rely on false myths and hearsay. Rather, take the time to understand the facts and utilize long term personal loans to meet your emergency cash requirements.