Do you need quick access to extra funds? Have you been considering a flexi loan? With so much information out there, it can be hard to know what’s true and what’s not. That’s why we’re here to bust the most popular myths about online personal loans! In this article, we’ll tell you everything you need to know about these financial products and how they can help your finances. So if you want to learn more, keep reading!
Myths about Personal Loans
Myth 1: Low Credit Score leads to Loan Rejection
Although many borrowers believe that a low credit score would automatically lead to loan application rejection, financial institutions consider several factors beyond the credit score to determine loan eligibility. Factors such as income and repayment capacity hold greater weightage in the decision-making process. It is worth mentioning, however, that individuals with a low credit score may be charged a higher interest rate than those with a higher credit score.
Myth 2: Personal Loans Cannot be applied for if you have an Existing Loan
There is a prevalent misconception surrounding Personal Loans that one cannot apply for them while still having an outstanding loan. However, this is not true as the same eligibility criteria are applied regardless of whether you have an existing loan or not. As long as you are paying your current EMIs on time, the number of outstanding loans you have should not be a hindrance to getting approved for a new loan. The decision to approve or reject your loan application is based on your ability to repay, not on the number of outstanding loans you possess.
Myth 3: Only Banks Offer Personal Loans
It is a commonly believed myth that banks are the sole providers of personal loans. In reality, various Non-Banking Financial Companies (NBFCs) and other lenders also offer personal loans. While banks often have rigid eligibility and approval criteria, NBFCs tend to be more lenient and open to accepting personal loan applications. As a result, borrowers who may not meet the strict criteria set by banks may still be able to secure a personal loan from an NBFC or other lender.
Myth 4: The Approval Process is Tedious and Time-Consuming
In the current era of information, it is incredibly easy to apply for an online personal loan with just a few taps on your smartphone or computer. Given the abundance of data and records that are available online, banks and NBFCs can quickly scrutinize and evaluate various factors such as credit records, income, cash flow, existing loans, and credit score.
Additionally, the convenience of applying for an online personal loan from the comfort of your own home has made the process safer and hassle-free. By simply uploading scanned copies of the necessary documents, you can enjoy a seamless and convenient experience.
Myth 5: Personal Loans have a High Rate of Interest
It is commonly believed that personal loans carry high-interest rates. However, this is not necessarily true. The interest rates on personal loans are often determined based on an individual’s repayment capacity and credit score. Individuals with a lower repayment capacity may be offered loans at higher interest rates, while borrowers with a good credit score and a history of timely repayments can secure personal loans with lower interest rates, sometimes as low as 10.99% p.a. Thus, the interest rate on a personal loan is not fixed and may vary depending on the individual’s creditworthiness and repayment ability.
Myth 6: There are no Prepayment Options
It is a widely believed myth that prepaying a personal loan before the scheduled tenure is not allowed. However, in reality borrowers are allowed to repay the loan before the end of the term and foreclose it if they wish to do so. There may be a prepayment fee that needs to be paid by the borrower, which can be a flat fee or a percentage of the outstanding loan amount. It is worth noting that this fee may be waived off after a specific tenure, for instance, a year of timely repayment of EMIs. While borrowers may have to pay a prepayment fee if they choose to foreclose their loan within the initial period, they can save money by prepaying the loan and reducing the interest cost over the long term.
Final Thoughts
Personal loans can be a great way to fund your life, whether you’re looking to buy a car, pay off debt, or take the vacation of your dreams. Don’t let myths and misconceptions deter you from getting the cash you need to realize your goals. Do your research and find the right lender for your needs. Remember that personal loan lenders are there to help – not hurt – you.
Author Bio: Tanvi Kaushik specializes in Content Marketing and works with the Digital Team at KreditBee – India’s fastest personal loan platform where self-employed and salaried professionals can easily avail of personal loans in just a few minutes when in need of quick funds. Tanvi writes to-the-point articles on personal finance and budgeting which are truly appreciated by her readers. She is committed to making money matters easy to understand even for the layman. Her commitment to her work doesn’t stop her from pursuing her hobbies of hiking, trekking and going on adventurous trips.