If you’re a first-time borrower, the prospect of taking out a loan may be daunting. You may be concerned about long processing delays, hefty interest rates, or having to submit collateral as security for your loan.
However, personal loans canada, or elsewhere, can come in handy; they are quick, painless tools that may be used to fund practically any necessity in your life, such as a wedding, education, house renovation, car purchase, or even a medical emergency.
Despite these benefits, certain myths prevent consumers from taking out a Personal Loan. So let’s debunk a couple of these urban legends.
Busting 7 Popular Personal Loan Myths
Personal loans are only available through banks.
This is a widespread misunderstanding; many people believe that banks are the only financial entities that offer personal loans. Banks, on the other hand, are not the sole lenders. Various non-banking financial institutions, online aggreagtors and digital lenders will provide you with low interest personal loans.
Suppose your bank rejects your loan application for whatever reason. In that case, you might approach these financial institutions for a personal loan because their eligibility and approval standards are likely lower than those of banks. NBFCs and other digital lenders are more willing to accept loan applications from these borrowers because their loan eligibility criteria are more flexible than those set by banks.
Personal loans carry a high-interest rate.
Many people believe that the interest rate on personal loans is generally very high. This, however, is not always the case. Financial institutions and other lenders often establish interest rates depending on an individual’s repayment capabilities and credit score.
As a result, individuals with limited repayment capabilities are typically given loans at higher interest rates. Conversely, borrowers with a strong credit score and a track repayment record might qualify for a personal loan with an interest rate as low as 10.99 percent per annum. In any event, they are less expensive than other forms of borrowing, such as credit cards.
Personal loans entail time-consuming application processes and lengthy processing timeframes.
In the past, this maybe was true, but it is not so currently. The entire process of a loan application, approval, and disbursement into your account can now be completed in as little as 24-48 hours, especially if you apply online.
Furthermore, a handful of institutions offer instant loans, which transfer the loan amount to the borrower’s account within minutes of applying. Moreover, many financial institutions are also going toward a paperless process in which applicants do not need to produce physical copies of any of their paperwork.
Only salaried individuals are eligible for personal loans.
Another prevalent misconception is that only salaried individuals are eligible for Personal Loans; however, this is not the case. Self-employed people, business owners, doctors, and chartered accountants are also qualified. Individuals’ eligibility for a Personal Loan is determined by their ability to repay the loan.
Personal loans are not available if you already have a debt.
Many loan applicants believe that they cannot obtain a personal loan if they are currently repaying another debt. However, this is not the case, and the same criteria are used to approve a second personal loan as they are for the first. Financial organizations accept loan applications based on the borrower’s repayment capacity and current income. The loan application is approved or denied based on the applicant’s ability to repay the loan after considering existing EMI payments.
Prepayment is not an option for personal loans.
Another common misconception regarding personal loans is that the borrower would be unable to repay the loan amount before the loan term expires.
Most people assume this since personal loans have a considerably shorter repayment period than other types of loans. Borrowers can, however, repay the loan amount before the loan term expires. Most banks and financial institutions have a minimum tenure during which people must make monthly EMI payments. Borrowers can foreclose their loan after completing the requisite duration by paying a specific amount as a foreclosure fee.
Personal loans will simply add to your debt load.
This appears logical, as taking out a personal loan when you already have debt will add to your burden. However, you can refinance all of your debt (including multiple loans and credit card debt) with a personal loan, consolidating all of your debt and paying only one monthly installment with one interest rate.
Myths are not facts, and they are not backed up by evidence. Unfortunately, people tend to believe them because they hear it frequently from people they consider to be thought leaders. Don’t fall prey to myths without researching the facts. Now that we’ve debunked these Personal Loan fallacies verify your eligibility for the offers we have in store for you!