If you are thinking of availing a loan for the first time, then the idea of borrowing, the long waiting time and documentation associated with it might be bothering you. The interest rate you have to bear and the collateral required would be additional concerns for you. However, you can put all your worries and tensions at rest by opting for a personal loan.
A personal loan is a financial instrument which offers quick processing along with minimal documentation and no collateral. Although there are many misconceptions which surround the environment of personal loan. In order to make the right choice, you must be aware of them to make sure you keep yourself away from it. Thereby, people can also opt for an option of instant personal loan which will be very helpful.
Some of the popular myths prevalent about a personal loan are:
- No tax benefits: Many think that there is no tax benefit on the personal loan. However, if you avail personal loan and invest it in your business, then you can certainly avail tax benefits and exemptions.
- Collateral: Some people also think that they have to post collateral; however, it is not true. A personal loan is an unsecured loan, and it does not require any collateral.
- No Prepayment: ”Personal loan does not allow prepayment”; is a complete myth. Even though they have comparatively shorter tenure, there is still room for prepayment. You can opt for foreclosure or prepayment as per your need, and you will be charged a small fee for it.
- High-Interest Rate: It is considered that personal loan has a high rate of interest. However, the rate of interest you will get on your loan will be based upon your repayment capacity and credit history. If you have good repayment capacity and strong credit history, then your interest rate of personal loan can be as low as 10.50%.
- Only Banks Offer: Another prevailing myth is that only banks offer personal loan. However, in today’s digital era, a lot of NBFCs and digital lenders have surfaced which are providing easy and customized personal loan at attractive rates of interest.
- Low Credit Score: Another misconception people have about a personal loan is that you need to have a good credit score to avail it, a bad or low credit score won’t cut the deal. Surely, a bad credit score puts your loan application in a difficult spot, but it does not guarantee rejection. The lenders also look at your repayment capability to determine the status of your application.
- Tedious Procedure and Long Processing: This is one of the biggest myths surrounding personal loan that it has a tedious procedure and a long processing time. The approval or rejection of your loan application does not take more than 48 hours, and once approved your loan is disbursed within a week from the date of application.
- Only Increases Debt Burden: It’sIt’s not true that a personal loan will only increase your debt burden. You can also use it to refinance your existing debts and consolidate them into one loan. Debt consolidation helps to reduce the monthly burden along with decreasing the total interest outflow as well.
- Can’t Apply With Existing Loan: Whether you have any existing loan or not is not the criteria of application for a personal loan. Your eligibility will be assessed based on income level, repayment capacity, credit history, etc., irrespective of the fact that you have an existing loan or not.
Keeping these myths in mind will help you filter the right information and make the best decision suitable for you. Lenders provide personal loan upto Rs. 50 lakhs, based on the eligibility criteria.