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Personal loans are unsecured loans that help you take care of any emergency financial needs or personal requirements. You can apply for a personal loan and use the funds to pay for any medical emergency, fund an unexpected home repair or even to pay for your international vacation.

That said, there are many misconceptions surrounding personal loans. In this article, we’ll take a closer look at some common personal loan myths and decode the truth behind them. That way, you can make an informed decision about availing this kind of loan in the future. 

7 Personal Loan Myths You Should Ignore

Believing in personal loan myths may lead to poor financial decisions. So, here is a closer look at some common misconceptions about personal loans that you should not ignore. 

1. Low Credit Score Always Leads to Loan Rejection 

Your credit score is a three digit number that is an indicator of your creditworthiness. The higher your credit score, the better your chances are of getting a personal loan at favourable terms and conditions. 

That said, a common personal loan myth is that a low credit score always leads to loan rejection. This is not always true. Some banks may approve of your application, but you will be charged a higher rate of interest.  

2. Personal Loans Always Have a Very High Interest Rate

Personal loans are unsecured borrowings. This means you don’t have to offer any asset as collateral to the lender. To make up for this increase in risk, the interest rates on personal loans is higher than the rates on secured borrowing like home loans.

However, one of the many personal loan myths is that they always carry a very high interest rate. You’ll find that this is not always true. If you have a good credit score and a good relationship with your lender, you can negotiate lower interest rates easily.

3. Personal Loans Can Be Availed Only from Banks

Another common personal loan myth is that only banks offer personal loans. While banks may be the primary lenders, there are many other financial institutions and lenders that you can approach to avail a personal loan.

For instance, Non-Banking Financial Companies (NBFCs) offer personal loans with more flexible eligibility criteria. So, borrowers who were rejected by banks can approach NBFCs to take a personal loan.

4. Personal Loans Can Not be Availed if You Already Have an Existing Loan 

This is another popular personal loan myth among prospective borrowers. The truth is, you certainly can avail a second personal loan even if you have an existing loan. The bank or the NBFC will evaluate your application in the same way as it would if this was your first loan.

That said, it may not always be a good idea to avail a second loan if you have not repaid your first one. Increasing your debt in this manner could prove to be a costly mistake in the long run. 

5. Only Salaried Individuals Can Apply for Personal Loans

This is also a common personal loan myth. While salaried individuals certainly can apply for personal loans from banks, NBFCs and other lenders, so can self-employed individuals. The criteria for these two categories of applicants may differ, but no bank expressly bans self-employed individuals from applying for a personal loan. 

It may be easier for salaried individuals to avail a personal loan because they have a regular source of income. But self-employed individuals who provide proof that their income is above a certain threshold can also borrow funds through this route. 

6. Personal Loans Do Not Have a Prepayment Option

You may be aware that home loans come with a prepayment option. But a widely believed personal loan myth is that since these loans have much shorter tenures, prepayment is not really allowed. 

The truth is, most lenders allow you to prepay or foreclose your personal loan after a certain number of EMIs have been paid. Of course, they may levy nominal extra charges for the same. 

7. Processing Time for Personal Loans is Very Long

To bust this personal loan myth, the time is long gone when it took days on end for personal loans to be processed. Nowadays, your loan application does not require any extensive documentation or paperwork. Nor does it take a long time to be processed.

In fact, many lenders approve applications and disburse funds within just a few hours. This is why personal loans make for a good option to take care of emergency fund requirements. 

Now that you know the truth behind the many myths about personal loans, you can make a more informed decision about borrowing funds through this route. If you want to avail a personal loan in a hassle-free manner, you can simply visit Bajaj MARKETS and apply for a loan right away. 

With interest rates starting as low as 10.49% and loan repayment tenures up to 5 years, personal loans from this platform can be customised to meet your needs effortlessly. Check your eligibility and apply for your loan today.