Personal loans are one of the most straightforward financing options available to you. You can obtain a loan without needing to pledge security and can use the funds towards any purpose you desire. Today, you can even side-step lengthy queues and apply for your personal loan online.
In fact, with the increasing popularity of a personal loan, India has many lenders offering instant approval on your application with funds reaching your bank account on the same or next day! However, this simple borrowing option carries with it the baggage of several misconceptions. Believing in them will hinder you from making the most of your personal loan. So, to help you learn the facts correctly, here are 7 Personal Loan myths and the truth about them.
Myth #1: Banks are the only place to go to for a loan
You can obtain a personal loan from a bank or from a non-banking financial institute. What you need to is to verify that your lender is registered with the RBI. In fact, borrowing from an NBFC can at times make your loan more affordable and convenient. For example, Bajaj Finserv Personal Loans offer you collateral-free financing up to Rs.25 lakh coupled with 24-hour loan disbursals and added flexibility via the flexi facility. This allows you to borrow from your sanction in parts and pay interest only on the amount actually utilised.
Myth #2: The interest rate is the same for all customers
Lenders generally have a range of interest rates that they offer to borrowers. Lower interest rates go to the more creditworthy and higher rates come into play when there are more risks involved. If you wish to fetch a low interest rate, improve your credit score as it will reassure your lender that you have the ability to make repayments in a timely manner and meet all the lender’s personal loan eligibility criteria.
Myth #3: Personal loans aren’t worth it in an emergency
Emergency situations involve unexpected expenses that require quick action. Since personal loans offered by top lenders are disbursed within 24 hours, you can meet urgent needs with ease, which makes them suitable for emergencies. Additionally, since they don’t require any collateral, you can apply for them fast, and lenders too do not take the time that is usually required to verify the asset before giving you approval.
Myth #4: Personal loans do not offer any tax benefits
While personal loans can be used towards any end-use, tax benefits are reserved to a few. If you can establish that you are investing the personal loan finances in a business, an asset or are making use of the loan to construct/buy a property, then you can save on tax payments. For example, you can get a deduction of up to Rs.2,00,000 from the net annual value of residential property you are constructing.
Myth #5: Repaying a personal loan is always difficult
The surest way of knowing that you won’t have to toil on repayment is to determine your EMIs with an EMI calculator before you get a loan online or at your lender’s branch. Additionally, your lender’s FAQ guide on everything you need to know about personal loans will inform you about additional fees and the best way to make repayments.
For example, with Bajaj Finserv Flexi Personal Loan you can bring down your EMIs by up to 45% by paying interest-only EMIs through the tenor and the principal at the end. With the flexi facility you also avoid pre-payment charges and thereby make repaying your loan all the more affordable.
Myth #6: Multiple applications improve approval chances
Making personal loan applications with multiple lenders is not the best way to get loan approval. This is because each time you make an application, your lender makes an inquiry into your credit report. Too many of these ‘hard inquiries’ in a short time-frame can pull down your credit score, thereby making it tougher to secure a loan. As an alternative, use a personal loan eligibility checker online to know how much you should apply for and sign up with a lender who has simple eligibility terms.
Myth #7: Personal loans involve lengthy processing
Personal loan approvals need not take a long time. All you need to do is meet the eligibility criteria and support your personal loan application with the necessary documents. Once the lender is satisfied with your paperwork, you will get a green signal. That being said, the best way to cut down on this verification time is to first check your pre-approved personal loan offer. Doing so gives you instant approval, access to custom financing and hastens your loan disbursal.
Now that you know the truth behind personal loan financing, achieve your goals with the right personal loan.
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