Myths about Personal Loans
While a lot has been discussed about Personal Loans, its benefits, ways to avail Personal Loans, and related topics, there are still lots to know about Personal Loans. Personal Loans discussion can be a never-ending topic, and we can continue talking about various related aspects and educate each other on Personal Loans, endlessly.
It is being said that “Any Knowledge incomplete is dangerous, as it leads to the creation of several myths”. The same holds true for all fields and Personal Loans are no different. You are mature enough to know that any myth spread in the market with faster speed than the reality and such is the case with the Personal Loans. The Personal Loans are also surrounded with several myths; the cloud of myths needs to be cleared. Continuing the tradition, today, we are going to put an emphasis on what are different myths related to Personal Loans and will have a detailed synopsis on this particular aspect:
Ø Personal Loan Charges are very high with a high rate of interest
Myth: Many people carry an opinion that Personal Loans are a very dear option to avail. They are of the view that the Personal Loans carry a very high rate of interest and are not at all worthy to avail.
The Reality: The reality is far different from what the general people think of. In fact, the rate of interest for Personal Loans varies from 12% to 18% (depending upon various factors), which is a very nominal rate of interest considering various other loan types. As compared to the Secured Loan Types, of course, the Personal Loans are the costly affair, but considering that those secured loans, carry too many restrictions and collateral to be pledged, the personal loans are very viable options to avail.
As compared to credit card loan rates of interest, these Personal Loans are very cheap. Thus, busting this myth that Personal Loans carry a very high rate of interest, we believe that the Personal Loans carry a fair rate of interest, which is cheaper than some other loan types in the market.
Ø All lenders charge the same rate of interest on PL
Myth: There’s a myth that all Lenders carry the same rate of interest on Personal Loans, which is, of course, a complete myth.
The Reality: Most of the loan seekers compare the Personal Loans, just on the basis of the rate of interest. While, the actual comparison must involve several other factors, which most of the times, general people just overlook. In fact, if you talk about the rate of interest being same for all the banks at Personal Loans, the people are missing completely various other factors, while in the processing of comparison. The Loan Processing fees and other such charges are some of the aspects, which are completely missing, while in the comparison of the Personal Loans from Different banks. Also, to mention, the prepayment charges and other schemes and offers are some other aspects, which makes a huge difference in the total loan cost. That’s why, in the initial stages of the article, we mentioned “Incomplete knowledge is always harmful, and leads to the myth”. Now, what you say, do all lenders charge same for the Personal Loans?
Ø Personal Loan is given only to the salaried person
Myth: Several people believe that only a salaried person can avail the Personal Loans, while those, self employed and businessmen will not be issued personal Loan in any case.
The Reality: Clearing the air, the above notion is a complete myth. Just, consider a fact, that with the development at peak, how many of us are being employed in a private firm/government organization and how many of us are doing our own businesses and are self employed. With the country moving towards self employment with a rapid pace, how come this kind of myth creep in the minds of the people. In fact, the reality is that the Personal Loans are available for all; salaried, self employed, businessmen, and even to NRIs.
The matter of thing is that the eligibility criteria differ based on your profession. Today, there are several loan houses, which are eager to offer you a Personal Loan, whatever your profession is. The factors like rate of interest may differ (which in case, of self employed may go higher as compared to salaried person!). But, the chances of the rejection of the Personal Loan Application are very rare, even if you are self employed or a businessman.
Ø You aren’t eligible for a Personal Loan if you have an existing loan
Myth: Carrying on the list of several myths, there’s another one; if you have an existing loan, you are not eligible for a Personal loan.
The Reality: The reality is in fact quite different from what is prevalent in the market. In fact, even if you carry an existing loan with you, you are quite easily eligible for applying for a Personal Loan. The only matter of concern is the repayment capacity of yours. The Loan Manager in fact, just checks your repayment capability, and if found eligible, you will be approved for the Personal loan, that’s it. Your repayment capability is the deciding factor in such a scenario, and your income must satisfy the loan department for the approval.
Ø Poor Credit Score? No Personal Loan!
Myth: There’s another myth that Poor Credit score holders are not eligible to get a Personal Loan. Their loan application gets declined if they are carrying a low CIBIL Score with them.
The Reality: While, the Credit Score is a crucial aspect of a Personal Loan, and all banks go through this step in evaluating the Personal Loan application of a Loan Seeker, before approving any such. Thus, the credit score plays a deciding role, in the Personal Loan Application approval or rejection.
But, the catch is that the Credit Score is not only the deciding factor in the approval or rejection of personal loan. There are several other factors like Income, Repayment capability, which play a deciding factor, accumulatively, in the whole process. Low CIBIL Score doesn’t mean an outright rejection of the application for a Personal Loan. The Loan department considers all other factors of a person, and if found satisfactory, the Personal Loan application is approved. However, the chances are high that in such cases, the rates of interest will be higher as compared to other normal cases.
Ø Personal Loan can be availed for personal reasons only
Myth: There are many people, who believe that a Personal Loan can be utilized just for the Personal purpose. This particular notion even catches more fire owing to the name ‘Personal Loans’.
The Reality: So, what’s the reality behind this perception of the people? In fact, the reality is that it is a complete myth, which has gathered owing to the name ‘personal loans’. The reality is that, as soon as you are sanctioned the loan amount, in your amount, it is completely your wish, on what to do with this Loan Amount. You can spend it whatever, needs of yours, and there’s nobody to ask you on this. You can even, stand in the middle of the road, and can distribute money among people; no one is stopping you from doing this! Do, whatever, you want to, with the loan amount. But, our advice is; don’t spend the loan amount lavishly, as the borrowed money needs to be paid back to the bank, with the interest!
Ø No Tax Benefits
Myth: There’s another rumor spread around in the market, that the Personal Loans carry no Tax Benefits.
The Reality: In fact, the Personal Loan amount, which you availed from the lender, doesn’t come under the taxable income slab. It’s the money, which is completely free of tax. So, first of all, you don’t need to pay any tax on the money borrowed from the bank as a Personal Loan. The Second thing is that the Personal Loan amount can carry a tax benefit, if you utilize this money for some specific valid task, and mention it properly with utmost care and planning. Do your own research and think, on what aspects, you can utilize the loan amount, to avail the tax benefit.
Ø Tedious Loan Approval Process
Myth: Most People believe that the Personal Loan Application process is a tedious process and involves too much documentation and factors check, before the approval.
The Reality: The reality is in fact, just the opposite of what people think of. In fact, when it comes to the loans, people derive a notion, that too much paperwork, too many calls, and many factors check, before the approval. But, in fact, the Personal Loans are the quickest loan types, which require a max of 24 hours to 48 hours. While in some cases, they are approved within 4 hours. There are some other cases, where they come as pre-approved, and a loan seeker may get the loan amount in their account, within minutes. There can be no loan types, other than the Personal Loan, which can be so quick and easy. On the name of documentation, the required documents are kept at the minimum as compared to other Loan Types.
Ø Only Banks allot Personal Loans
Myth: Another common myth about the Personal Loans is that it’s just the banks, who allot Personal Loans.
The Reality: It’s a complete myth, with several other NBFCs and other lending agencies, who offer Personal Loans at the same competitive and attractive rates of interest. In fact, when banks reject the borrowers’ Personal Loans Application, they consider that it’s the end of the road for them. But, if you are well educated on Personal Loans, you must be happy to know, that beside Banks, there are so many NBFCs, and Digital Lenders, who have their doors always open for you for Personal Loans. In fact, the NBFCs can be a better option, as banks generally have tougher rules for the approval of loans, while when it comes to the NBFCs, they are lenient towards the approval and are consistently looking to expand their customer base.
Ø No Prepayment Option Available with Personal Loan
Myth: Among the list of Myths related to Personal Loans, the last is regarding Prepayment Option. Most people believe that Personal Loans don’t carry a feature of the prepayment with them.
The Reality: Clearing this Myth, we would like to say, that Just like many other Loan Types, the Personal Loans, too carry Prepayment Option with them. However, this feature is subject to various terms and conditions and may carry a prepayment penalty charge (You need to check your chosen bank for Personal loans, for the exact terms and conditions and charges related). All the banks, have different prepayment terms and conditions, and cross checking and doing research on your end, will be a better idea. Since the Personal Loans carry a rate of interest ranging from 12% to 18%, it would be always better to prepay your loan and get out of it, by paying prepayment charges.
The Personal Loans are always a good source of money when it comes to the emergency situation in someone’s life. With the instant approval and less paperwork, these Personal Loans are the easiest and quickest approving loan types in the market. The Personal Loans most often get disbursed within a few hours, thus helping people to meet any emergency financial crunch situations. For some, these Personal Loans come with the pre approved, and thus helping them further.
Loaded with various salient features, the Personal Loans are the best loan types, belonging to the unsecured loan types. Since it requires no pledge of any kind, the Personal Loans serve to meet various issues of the person, even if they don’t have any asset to put in. Personal Loans come with no restriction, where to spend money on, the person can cover all sorts of issues, with the loan amount disbursed!