Personal Loans: Debunking Common Myths
Personal loans are designed to help borrowers meet day-to-day needs and aspirations, such as medical expenses, education costs, home reconstruction, and other family or lifestyle-related requirements. Understanding the myths surrounding personal loans can help you make the most of your loan and manage your expenses more efficiently.
Myth 1: Only Salaried Individuals Are Eligible
A common misconception is that personal loans are exclusively for salaried individuals. However, self-employed professionals, business owners, start-ups, and even pensioners can qualify for a personal loan. There are no salary-related restrictions on individuals who wish to apply for a personal loan.
Myth 2: A Low Credit Score Means Automatic Rejection
A high credit score, preferably above 750, boosts loan approval chances. However, a lower score does not necessarily mean a simple rejection. Lenders also consider factors such as income, debt levels, employment stability, and past payment history before disbursing personal loans.
Myth 3: Personal Loans Have High Interest Rates
It is generally believed that personal loans carry exorbitant interest rates. However, rates usually range between 10 and 15 percent per annum. These rates can be higher for individuals with weak credit scores, recent defaults, missed personal loan EMIs, or credit card bill payments.
Myth 4: Existing Loans Disqualify You From New Ones
Having an existing loan doesn’t automatically disqualify you from applying for and obtaining a new one. A long and consistent repayment history aids both your credit score and your overall credit profile.
Myth 5: Personal Loans Are Only For Personal Use
Despite the name, personal loans aren’t restricted to personal expenses. Funds can be utilized for various purposes, including business investments, education, or consolidating other debts. Lenders typically don’t impose strict usage restrictions.
Also Read:
- ICICI Bank Personal Loan: 7 Easy Steps for Quick Approval and Seamless Disbursal
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Conclusion
Before applying for a personal loan, clearly discuss your expectations, goals, and objectives with the customer service executive at your financial institution. Financial institutions and lenders check factors such as income consistency, credit scores, creditworthiness, and employment type before disbursing personal loans.
Reference : https://www.livemint.com/money/personal-finance/busting-the-five-common-myths-about-personal-loans-in-india-know-the-facts-before-you-borrow-11746091594045.html
