Have you ever been doubtful about applying for a personal loan in a time of sudden monthly pocket crunch? What is your ultimate financial fixation when your monthly expenses tend to exceed the budget in the middle of a month? Often enough, we find using credit cards as a simple answer to all our financial worries. We tend to believe that personal loans are beyond expensive and qualifying the personal loan eligibility is an unachievable goal.
Debashish Mullick, an IT professional in Kolkata, had resorted to using a credit card with a considerably high-interest rate during the festive months to fix his monthly budget mismanagement and ended up with a huge credit card debt.
In this hard time of the pandemic, personal loans deal with 28% of the entire bank credit, says the Reserve Bank of India (RBI). However, there are plenty of myths and misconceptions about personal loans that drive the borrowers away. Here we’ll get to the bottom of 5 such myths related to personal loans. Read on.
Personal Loan Application Is A Long Process
Well, it is certainly one of the prime reasons why people don’t find personal loans as a solution to their sudden financial needs. Apparently, it appears to be a lengthy process to apply for a personal loan. However, with the ever-growing digital space, applying for a personal loan is just a click away. The whole process is now available online. You can apply for a personal loan through a simple personal loan app or through the bank’s personal loan website while relaxing at home. All you need to do is to fill in the loan application form online and upload all the essential documents. The bank will check the authenticity of your documents and if you fulfill the personal loan eligibility you’ll get the loan amount transferred within a day.
Personal Loan Approval Demands More Than A Good Credit Score
It’s an absolute misconception that personal loan approval depends only on your credit score. Definitely, a good credit score will ease out the approval further. But, this is not the only factor that runs behind the whole process. Your personal loan eligibility depends on many other factors and parameters. The lender or the bank will decide on the basis of your credit utilization ratio, your monthly income, and your fixed obligation to income ratio (FOIR). If you earn a decent salary every month and hold a good professional position, the chances of your personal loan approval get higher.
Banks Are Not The Only Ones Who Offer Personal Loans
Apparently, you go up to a bank when it comes to taking personal loans because they are the only ones who offer personal loans. But, with the immense growth in technology, now there are a plethora of Non-Banking Financial Companies (NBFCs) and other financial houses who offer good deals in personal loans. However, you might come across different terms and conditions when other financial institutions are considered. Moreover, you might get different interest rates and comparatively flexible repayment plans. A lot of lenders offer personal loans through their personal loan websites as well.
Myths Regarding Personal Loan Interest Rates
It’s true that personal loans come with a different interest rate structure. This is because personal loans are unsecured and they don’t claim your assets as security deposits. Hence, the risk is higher as compared to the secured loans. Therefore, you can expect a bit higher interest rates in the case of personal loans. But this is not as high as the rates you get in the case of credit cards. You get the interest rate in between somewhere 16% to 24% when it comes to personal loans. This figure increases remarkably if you avail credit cards instead.
Avail More Than One Personal Loan At A Time
Yet another notion about personal loans is that you can only have one loan at a time. This is not true. You can avail more than one personal loan at a time. In that case, you have to maintain a good credit score thoroughly. Moreover, you have to keep maintaining a Good Debt to Income Ratio and have your credit accounts cleared and up to date. However, the bank will check on your particulars and see if you fulfill the personal loan eligibility in order to get the loan approval.