When you start earning, the first thought that strikes you is shopping, buying a dream home, and going on a luxurious vacation. Savings is probably the last thing that crosses your mind. By the time you undergo financial planning, there are chances of draining out funds. Ever thought of taking personal loans? Financial and personal loans are the new leaf. Numerous banks, financial institutions, and private lenders facilitate medical loans, home loans, business loans, student education loans, etc.
A personal loan is a credit instrument that allows borrowing a lump sum amount in one go. Unlike credit cards, a personal loan borrower pays back the principal amount and interest charged monthly over the term period.
A personal loan is still considered taboo in society for numerous myths that deter individuals from availing benefits of personal loans. Today, due to advancements in technology, it takes less than ten minutes to apply for personal loans. However, borrowers come across multiple questions like which lender to choose, type of personal loan, and eligibility criteria for loans.
This article will bust myths about personal loans if you are a first-time borrower.
Myths Related to Personal Loan
- Only Banks Offer Personal Loans
There is no denying that banks are one of the financial institutions that provide personal loans. However, there are digital lenders and non-banking financial companies (NBFC) like Bajaj finance personal loan that offer personal loans easily.
In some instances, banks reject applications due to legal issues or rigid norms, but NBFC and digital lenders readily provide loans at similar interest rates.
Non-financial institutions offer customization and short-term loans, which is not the case with banks.
- Long Processing Time
Borrowers refrain from applying for personal loans assuming longer processing time and uncertain approval process. However, this is the 21st century, and everything is digitalized. Today, the whole process is accomplished within 48hours.
With the advancement of technology and digitalization in the banking sector, the application and disbursal of the loan process a=has become easier. You have to fill up the application online, upload documents, and wait for a few hours.
- Loan Rejection Due to Low Credit Score
Applying for a loan and paying it off within a stipulated time helps build a credit score. But this is a myth that a low credit score impacts your loan application.
Although credit score is an important criterion for applying for a loan, lenders also look at factors like yearly income, age, the authenticity of documents, fixed obligation, etc.
The credit policies may differ for each lender, but the ability to pay a loan and the intention to pay are the main factors.
One of the biggest myths about a personal loan is the need for collateral. Personal loans are unsecured loans that don’t require any collateral or mortgages. It requires minimum documentation; hence it is quick and hassle-free.
Lenders check factors like income and your paying ability before accepting an application. Thus, feel free to apply if you do not have the security to mortgage.