Popular personal loan myths busted
One of the most popular and quick loan options offered in the lending industry is personal loans. However, despite their popularity, a lot of individuals tend to stay away from personal loans due to their belief in various myths surrounding personal loans. Hence, it becomes crucial to bust these myths to allow people to take a step forward towards taking personal loans whenever the need arises in life. Even the presence of beneficial online tools like personal loan EMI calculators come up as another benefit of personal loans and offers convenience for people to enjoy a hassle-free loan approval process.
Here are 7 commonly believed personal loan myths which can prevent prospective borrowers from applying personal loans and maximizing their benefits:
Long processing time: Contrary to the misconception that personal loans tend to involve long processing time, the presence of features like minimum documentation, zero security or collateral requirement, and absence of restriction on end usage of funds enable personal loans of lenders like HDFC personal loan to involve one of the quickest disbursals. Once the applicant qualifies for various eligibility criteria like income, credit score, etc., the personal loan is usually disbursed within a week, thus making these a suitable loan option for those in need of quick funds. One can also use a personal loan EMI calculator to quickly arrive at the optimum EMI affordable for them. Moreover, remember that some lenders have even begun offering pre-approved loans to select customers, which involve near-instant disbursal.
Low credit score implies no personal loan: Another common myth that many people give into believing before taking a personal loan is that having a low credit score implies an outright rejection of the application. However, that’s not the case. Even though possessing a good credit score does indeed boost personal loan eligibility and approval chances, but those having low credit may still get the loan approved, although relatively at higher interest rates. Also, when it comes to submitting an application to lenders, those with low credit scores and facing difficulty or rejection in approval from banks can turn to fintech and NBFCs. Although these lenders may have higher rates on personal loans, their relatively less stringent eligibility criteria tend to help such borrowers in availing a personal loan when denied by other lenders.
Interest rates are unreasonably high: Many people tend to think that HDFC personal loan interest rates are unfairly high. However, that’s not true. Given that personal loans are unsecured loans, i.e. lenders do not require any security or collateral against the loan amount, the element of credit risk is relatively higher when compared to secured loans like gold loans, car loans, loans against property, etc. To cover the involvement of high risk, lenders tend to charge a bit higher rates vis-a-vis some secured loan options. However, the rates vary lender to lender and consumer to consumer, depending on his/her monthly income, credit score, existing debt obligations, etc. Those with a good credit profile may fetch lower rates due to the presence of lesser credit risk. One can also utilize online tools like a personal loan EMI calculator to know the expected EMI as per chosen tenure, loan amount, and applicable personal loan interest rate.
Existing loan borrowers cannot avail of a new personal loan: More often than not, existing borrowers servicing some other loan (s) end up believing the myth that they are not eligible for a new personal loan until completion of the repayment of the existing loan. However, contrary to this myth, existing borrowers can certainly avail of a new personal loan, depending on their existing debt obligations and lender’s eligibility criterion. Those qualifying as per the lender’s set parameters would be eligible to get the personal loan approved.
You cannot prepay personal loans – Given the fact that personal loans are generally short to medium tenured loans involving repayment options up to 5 years for most lenders like HDFC personal loans, people tend to believe that they cannot repay the personal loan. This is untrue. Just like other loan options, borrowers can certainly prepay personal loans whenever they have surplus funds to do so. All that needs to be kept in mind is that there is a prepayment penalty levied by some lenders, and some may involve the completion of a minimum number of EMI repayments before prepaying the personal loan. Hence, those having surplus funds should weigh in the charges and conditions and then repay the loan if feasible enough to significantly save on the total interest cost.
Only salaried individuals can take a personal loan- Those who have irregular income, whether as a self-employed professional or businessperson, tend to believe the myth that personal loans are only meant for salaried individuals due to the presence of stable income. However, what holds the truth is that many lenders do offer personal loans to self-employed individuals, basis their average income inflow, credit score, etc. Hence, enquire with various lenders and explore other loan options as well when in need of availing loans for financial shortfalls. Also, ensure to make use of the personal loan EMI calculator before finalizing the loan deal. Such tools assist in choosing the right combination of tenure, loan amount, and interest rate, which fetches affordable EMI for the borrower to comfortably repay.
Online personal loans are tedious- Even in the digitized world wherein banking services are increasingly becoming paperless, without any need of the physical presence of lender or borrower, many people still only visit branches lenders when availing a personal loan. They avoid applying for a personal loan online due to the assumption that it must be a tedious and risky process. However, on the contrary, online personal loans like HDFC personal loans involve a process that is very smooth and convenient, aimed to make it a hassle-free journey for borrowers and lenders. Unlike the case of offline loans wherein borrowers may visit different lenders and branches searching for the right deal, online personal loans would enable the individual to conveniently compare amongst different lenders online and choose the best one offering low rates and better terms and conditions.