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7 Myths about Personal Loans that You Should Not Believe

By: candicelarson
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There are times that you could use extra cash to fulfill some financial needs and problems. It could be for starting a relatively small business, paying for some home improvement finances, or even for emergencies such medicines and hospitalization. The question is, where should you get the extra money of your own savings or funds are not enough to provide financial help?

Personal loans come in the picture. It is the most sensible solution to the money problem. However, there is a part of you that is hesitant to take a risk on taking out a loan? Why? It is because you hear myths or misconceptions about personal loan. For whatever reasons, you believe them.

To help you understand more about personal loan, the article listed all the myths you have possibly heard about it and why they are not true at all. Check them out below:

Myth #1: You cannot get a loan if you have a bad credit history

This is not true at all. Every lending company and bank have their own criteria for eligibility and requiring clients to have a credit score of certain number to be accepted for a personal loan. Just because you have a bad credit history does not mean that you are automatically not eligible. Obviously, if you have better credit history and credit score, you are likely to be accepted for a personal loan. However, bad credit history is not a huge barrier in getting the loan you want.

Myth #2: Only big banks provide personal loans

Another misconception about personal loans is that only the big banks can offer this kind of loan. At this age and era, there are other financial institutions that offer this service. It has lower interest rate and achievable repayment schedule. What more convenient is, you can now apply online with so much ease.

Myth #3: Personal loans are only for employed individuals

A person with regular income has the advantage when it comes to paying the loans. Banks and other financial institutions also allow businessmen and self-employed professionals to apply personal loans provided that they have the proof that they can repay the loan.

Myth #4: There is a tedious application and approval process

This is perhaps the most common misconception about personal loan. Rumors say that it takes a lot of time to get approval for the loan and the process is tedious. This is not true at any sense. Personal loan process and approval time is lesser compared to other form of loans. Online loan companies have their application through their website, so it is quick to apply and these lenders approved the loan in just few hours. Borrowers can get their money in less than three days. Believing the rumor? It could be your lost now.

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Myth #5: You can only apply one personal loan at a time

Another myth busted! In fact, you are allowed to apply over one loan provided that you have enough cash flow, a decent credit score, and the right debt-to-income ratio. While nothing stops you to have more than one loan application, the drawback would be increased interest rates and a high debt-to-income ratio. It is also up to the loan company if they want to issue a loan since you already have one with them. Keep in mind this: never bite off more than you can chew. It is always recommended to get a loan that you can pay without any hassle.

Myth #6: Personal loan is the most expensive loan you will ever have

This one is completely untrue. The interest rate for personal loan is considerably cheaper when compared to other loan types. When comparing to payday loan or cash advance, you have a better interest rate on a personal loan. It has lower rates too than the credit cards you have but a little bit expensive when compared to cash loans.

Myth #7: You can only use the loan for personal purposes

You may be confused about this because the name suggests “personal” and a lot of people think that the loan can only be used on personal things. Unlike banks, other lending companies are not that interested to know how or where you are going to allot the loan. As long as you make regular payments on time and shows the sincere intention for the repayment, they will not hinder your plan on how to use the money. It is really up to you how you are going to use it. You can even use it for your business, an additional capital. Or maybe you need it for emergencies such as fixing your broken car or home improvement. There are so many ways where you can use the personal loan.

Do not let these misconceptions detract you or dishearten you to take out a personal loan especially if you really need it. Make sure you do your research and have a good judgment about it.

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