Popular personal loan myths you should ignore

Personal loans are very popular. They can be used for anything you want, such as financing a wedding, paying for college, dealing with medical emergencies, or paying off other debts. They are simple to get. The quick disbursement makes the entire process easy and painless.

The popularity and advantages of instant personal loans are well known. But some personal loan myths persist. These common personal loan myths can be misleading. 

Read below for some common personal loan myths to avoid

1. Personal loans are only used for personal reasons
   • This common misconception causes people to avoid applying for personal loans. Most people believe that personal loans are only for personal use because of their name. A personal loan can be used for almost any purpose. It includes medical emergencies, home renovations, child education, vacations, debt consolidation, and weddings.
2. A low credit score equals loan denial
   • Borrowers believe that having a low credit score will result in their personal loan application being cancelled. Your credit score is an important factor considered during personal loan eligibility evaluation. But it is not the only criterion. Lenders consider your income and loan repayment capacity. 
    
3. Only employees on a salary are eligible
   • It’s a  misconception that you can only apply for a personal loan if you have your pay stubs, offer letter, and company ID. Personal loans are available to self-employed people, private business owners, and NRIs. Indeed, some lending institutions make personal loans based on the house rent income.
    
4. You are ineligible due to a low credit score
   • A low credit score reduces your eligibility for a personal loan. But it does not negate your chances of getting one. Some firms are willing to make loans to people with poor credit. If you take out a personal loan, you will also have a good chance of paying off your other debts. You improve your credit score when you repay your personal loan nicely and on time.
    
5. The most expensive loans are personal loans
   • This is one of the most common reasons people avoid taking out personal loans. A personal loan’s average interest rate (12%–16% per year) is lower than that of a credit card (2.5%–3% per month). Most people use their credit cards in an emergency. Now, it is simple to get a personal loan. When you need money, it is best to get a personal loan. You could also use seasonal offers and personal loan schemes.
6. There are no tax breaks
   • This is one of the most common Personal Loan Myths that prevent people from taking out a personal loan. Please keep in mind that a personal loan does not count as income. You can claim certain tax benefits when you use a personal loan for property construction or repair. You can also use the money for a down payment on a home and still claim tax benefits.

7. The lengthy approval process
   • You may have heard that applying for a personal loan entails a time-consuming application process. Also extensive documentation, frequent bank visits, and so on. But this is a common misconception. On the other hand, personal loans can now be secured online, saving you time and effort. Quick personal loans are given by online lenders using cutting-edge technology. A personal loan requires the least amount of documentation. The lender sends a representative to your door to complete the documentation process. The loan is agreed upon in a matter of minutes, and you can have it in your hands in less than three days. You can finish the entire procedure without leaving your house.
8. Personal loans are only available from large banks or non-bank financial institutions.
   • If you believe that personal loans are only available from top banks or NBFCs (non-banking financial companies), you’ve got it all wrong. Smaller banks and other lending firms offer personal loans with lower interest rates.
9. You cannot apply for a personal loan if you already have one.
   • No rule says you can’t apply for a personal loan if you already have one. Lending firms check your repayment capacity when approving your loan. If various loans burden you, you can use the debt consolidation facility to combine many debts into one. Your personal loan application may be approved even if you have an existing loan as long as your repayment capacity is satisfactory to the lender.
    
10. My loan is detrimental to my financial health
    • Increasing your debt burden may not seem like a good idea if you already have many loans or are paying high-interest rates. But the notion that your financial stability fixes a personal loan is not true. A personal loan can reduce your interest payment. 

Conclusion

Personal loan myths already exist in our world. We cannot avoid them. But we can control how they are used. This means verifying before believing and moving forward after validating. If you want to apply for a personal loan but aren’t sure, contact the lending company; they’ll talk to you about it. Not a member of your family, a friend, or a co-worker. Clear your mind of any ambiguous thoughts.

Read on to learn more about finances at https://www.piramalfinance.com/.

FAQs

1. Is it possible to close a personal loan in advance?
   • Some banks have a 6-month to a 1-year lock-in period. While others allow you to pre-close your account even after the first EMI has been deducted. There may also be restrictions, such as using only your funds to pre-close a loan. Banks may provide free pre-closure or charge a fee. Please ask the bank’s loan advisor to clarify all these factors before signing the loan document.

2. What loan terms do I have?
   • The length would be fixed by your earnings and experience and could range from 12 to 60 months.

3. Is it possible to track a loan application?
   • Yes, you can choose this option. The facts will be shared via phone messages or emails. This is also purely free.