If you’re a first-time borrower, the idea of taking out a loan may be intimidating for you. You may be worried about lengthy processing times or high interest rates or having to post collateral against your loan. Personal loans can come to your rescue. They are quick, hassle-free instruments that you can avail to finance almost any need in your life – wedding, education, renovating your home, buying a car, or even a medical emergency.
However, there seem to be many misconceptions that surround personal loans that often deter individuals from availing one when they really need access to financing. So here’s a list of 10 personal loan myths, busted and corrected.
1. Personal loans are only offered by banks
This is a common misconception. Banks, however, are not the only lenders. There are several non-banking financial institutions and digital lenders that will give you access to personal loans at very attractive rates of interest. If, for some reason, your bank rejects your loan application, you can approach these financial institutions for a personal loan because their eligibility for personal loans and approval criteria are likely to be lower than those of banks.
2. There’s no point in applying for a personal loan because your credit score is low
A low credit score can definitely impact the outcome of your loan application, but it doesn’t guarantee a rejection. While it an important criterion for approval, lenders also look at your income and ability to repay while reviewing your loan application.
3. Personal loans have tedious application procedures and long processing times
Maybe this was true in the past, but it certainly isn’t now. The whole process of application, approval, and disbursal of loan into your account can now take as little as 24-48 hours, especially if you apply online. Many lenders offer pre-approved, instant loans which means that you can have the loan in your bank account within minutes.
4. You have to post collateral to avail a personal loan
These are unsecured loans and don’t require any collateral, thereby requiring minimum documentation. This is also why processing of a personal loan is quick and hassle-free.
5. There are no tax benefits or exemptions on a personal loan:
This depends on the end use of your loan. You are eligible to avail tax benefits if your loan amount is invested in a business, in the purchase, construction or renovation of a housing property, or in the purchase of any other asset.
6. Personal loans have very high interest rates
Because personal loans do not require collateral, it is assumed that they would come with very high rates of interest. In reality, the interest rate depends on your credit score and capacity to repay the loan. If you have a strong profile, interest rates on personal loans can be as low as 11%. In any case, they are cheaper than other borrowing options such as credit cards.
7. Personal loans do not allow prepayment
Just because they have shorter tenures does not mean that personal loans have no prepayment options. Like any other loan, you can avail prepayment and foreclosure options on your personal loan subject to certain terms and conditions and a fee if your lender levies one.
8. You can’t apply if you already have an existing loan
You are eligible to apply regardless of whether you have existing loans. Your lender will review your application based on the same criteria as your other loans: your credit score and your repayment capacity taking into account your income, cash flow and existing liabilities.
9. Only salaried individuals are eligible for personal loans
This is commonly believed because salaried individuals have a steady flow of income. However, self-employed individuals and business people are also eligible to avail personal loans, and your application will be judged upon your income and capacity to repay the loan.
10. Personal loans will only increase your debt burden
This seems logical because taking out a personal loan when you already have existing debt will only add to your burden. However, you can actually refinance all your debt (multiple loans, credit card debt) through a personal loan, thereby consolidating all your debt and paying only one monthly installment with one interest rate.
So there you have it — all the reasons you thought you couldn’t get a personal loan, busted! With a Bajaj Finserv Personal Loan offered on Finserv MARKETS, you can borrow up to Rs 25 lakh to finance any of your unique requirements, collateral-free. All you have to do is meet the simple eligibility requirements, submit basic documents, and get instant approval and money in your bank within 24 hours. You can also use the personal loan EMI calculator, available for free on the Bajaj Finserv website, to calculate your exact interest amount based on your loan amount and now there’s nothing holding you back from using a personal loan to finance your dreams! You can simply download Finserv MARKETS Personal Loan App and easily apply for a personal loan with minimum documentation.
Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you make it Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!