6 Common Personal Loan Myths that You Believed Were True

Have you ever found yourself in a situation where your income is not enough to cover all your expenses?

If yes, then you are like most of us!

We often find ourselves at the crossroads and want to get help from the best source possible. In situations like this getting a Flexi Personal Loan is ideal for taking care of small expenses or unexpected emergencies and can helps us solve a financial problem.

Flexi Personal Loan is a lump sum provided by either a bank or an NBFC for a fixed period of time at a pre-agreed interest rate. The repayment options can vary depending upon various factors such as the amount, tenure, and source of funding.

In case you might find yourself in a fix where you will need to consider availing of such a loan, it is crucial that you are clear on a few points as there are a lot of personal loan myths are spreading these days due to the lack of knowledge.

Let’s bust the most common personal loan myths!

1. Low credit score leads to loan rejection

If you have a low credit score, it is not necessary that you will be rejected for a personal loan. This is because the lender will look at other factors like your income and age before approving or rejecting your application. So, suppose you can present documentation supporting your monthly income along with other documents that prove your identity and residence. In that case, there is no doubt that even if you have a bad credit history, it won’t be difficult for you to get approved for a personal loan. However, there are chances that you’ll have to pay a higher interest rate than the individuals who have a good credit score, so its important that you are aware of the fact.

2. You cannot apply for a personal loan if you have an existing loan 

A popular saying goes like ‘There is more than one way to skin a cat.’ This holds true for applying for personal loans as well. You can still get your hands on one even if you have an existing loan, credit card, or even car and home loans. In fact, many financial institutions allow their customers to apply for multiple loans simultaneously without any hassle. All they need is a good reason why they want another loan despite having so many existing debts with them already, and the financial institution will process their request without any trouble at all.

3. Only banks offer personal loans 

The truth is that other sources of personal loans exist in the market, and they are equally good or even better than the banks. The online lending platforms, credit unions, microfinance institutions, and moneylenders can be your choice if you want to avail a personal loan without visiting the branch office of a bank.

4. The approval process is tedious and time-consuming

Many people believe that the process of getting a loan is tedious and time-consuming. However, according to experts, it is not tedious and does not take much time. It can be done easily in less than a week’s time.

The loan process is not very complicated either. You just need to fill in an online application form with some basic details about yourself, such as name, date of birth, email address, mobile number, etc. You also have to upload scan copy of identity proof like PAN card/Aadhaar card/Passport, etc., occupation proof (in case you are self-employed), and bank statement along with other documents required by the lender.

Once your application gets approved by the lending company’s algorithms​—which generally takes a few hours—you will receive an e-mail from them stating that they’ve accepted your application. Now you just have to wait for the funds to arrive in your bank account.

5. Personal loans have a high rate of interest 

Many people think that personal loans have a high rate of interest. However, this isn’t the case, and usually, the interest rates are based on your credit score and repayment capacity. People with a low credit score or low repayment capacity may get higher interest rates. In situations like this, you need to understand that the interest rates are high because of the risk involved in personal loans. The lender is lending you money without having any assets or collateral against it, which is why they need to charge you more.

6. There are no prepayment options

This myth has been busted by most banks and financial institutions in India. You can avail a prepayment option on a personal loan by paying some fees. This fee may include the foreclosure fee and processing charges, and it may be different for every lender.

Got Clarity?

Now that the myths are busted and you’ve got the facts, we hope that you will be able to make appropriate financial decisions when in need.