5 personal loan myths which are not true at all

Whenever there are any unprecedented expenses that might emerge out of the blue, most often turn towards personal loans. Personal loans are a suitable method for addressing a variety of expenditures that require immediate funding. They are a highly preferred mode of credit for many people as they can be utilized for any purpose, unlike car loans and home loans which have a specified purpose.

Moreover, personal loans are unsecured loans as the applicant does not need to place his or her assets as collateral for the borrowed loan amount.

Rohit Garg, Co-Founder & CEO, Smartcoin says, “Being unsecured and easy to avail of has generated an air of mystique around personal loans. Often, people are filled with apprehension and distrust when it comes to applying for a personal loan as there are a number of misconceptions surrounding them.”

Here are the most common myths associated with personal loans;

Myth – 1 Personal loan has a high rate of interest. Not true.

The rate of interest on personal loans is established by financial institutions and lending companies on the basis of an individual applicant’s repayment ability and CIBIL score.

Myth – 2 Only those people who draw salaries can apply for personal loans. Not true.

Even individuals who are self-employed or are running a business can receive personal loans as the approval of a said loan amount is more or less dependent on the applicant’s credit history.

Myth – 3 Personal loans do not extend a prepayment option. Not true.

Personal loans do carry a prepayment option as borrowers can foreclose after paying a particular amount as foreclosure charges.

Myth- 4 Banks are the only lenders of personal loans. Not true.

Move over traditional legacy banks, as there are numerous NBFCs and digital lenders who are offering personal loans these days.

Myth – 5 Personal loans involve a long processing time. Not true.

As personal loans are unsecured in nature and do not require collateral security, they are readily disbursed in a span of 2-7 working days from the time of the initial application, and that too with negligible documentation.

Garg adds, “One should make sure to commit ample time towards market scrutiny and comparative analysis between different lending companies and their financial products to find the best personal loan with the most attractive interest rate.”