There are many preconceived ideas surrounding personal loans but most of them are only just myths. Let us debunk the idea of the major misconceptions about personal loans and understand it in simple terms. Despite their bad reputation, personal loans are actually versatile financial tools as well. It does not depend on whether you need to consolidate your existing debts. A personal loan covers any kind of unexpected expenses or finances for a major purchase. Regardless, of personal preferences, there are popular myths about personal loans and see why they are true.
Myths Related to Personal Loans
There are several myths related to personal loan app some of the common myths available are as follows:
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It Is Difficult to Qualify for a Personal Loan
There are many people who are opting for personal loans but it is not as hard as you think. While there are multiple applications available that seek a good credit score. However, many lenders are available that provide credit for less-than-perfect CIBIL scores.
Factors like employment history, income, and debt-to-income ratio, etc., play a significant role in loan approval. Some lenders are also present that offer loans for people with significantly lower credit scores. It helps make sure that it is accessible to a wide range of borrowers.
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Personal Loans Have a Higher Rate of Interest
This is not new information that rates for personal loans can be comparatively higher than rates for secured interest rates. Mortgages and auto loans are often known to provide lower credit card interest rates.
A personal loan usually contains a fixed interest rate and this means that your monthly payments are the same throughout. If you have good credit and financial stability you may qualify for even lower rates.
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Personal Loans are Only Applicable for Higher Credit Scores
One of the common myths about personal loans is that they need higher credit scores, it is not true at all! A high credit score can make it easier to qualify for a personal loan and secure better terms of interest.
Personal loan for self-employed are lucrative as they provide an opportunity for individuals. Another factor to note is that some lenders do consider other factors like income stability and employment history.
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Personal Loans Are Available Only for Emergencies
There are several personal loan options that are available and can be used only for emergencies.
Personal loans can be used for a variety of purposes which include consolidating debt, financing a home, or covering medical expenses, etc. If you are borrowing responsibly and have a clear repayment plan then it is a valuable resource for achieving your financial goals.
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Personal Loans Still Needs Some Collateral
Just like secured loans, personal loans need collateral, however, this is not at all true! Thus, it means that you do not need to invest in any collateral but you just need to have the repayment capacity.
Lenders base their decisions on factors like your current salary package through income slips. In case you own a business, they are also known to provide loans as per the profits generated over a particular time period.
Therefore, instant cash loans can be achieved when you have the required credit score and suitable employment or business history as well.
How to Use Personal Loans Smartly?
To use personal loans smartly there are some measures that you need to note:
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Borrow the exact amount of money that you need for a project.
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Planning your repayments can also be an appropriate strategy to ensure proper monthly payments.
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Spend the loan amount on relevant items and do not use it for useless financial commitments (that bear no value).
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Check the different offers from lenders and then come to a favourable conclusion regarding the best personal loan apps.
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Pay more money if needed as it helps reduce your total interest rates as well.
Conclusion
For borrowers, a personal loan serves as an accessible and practical solution. They are helpful to gather short-term requirements financially or provide competitive interest rates as well. There are many myths surrounding such loans, but most of them are not true. Such transparent terms of agreement in the case of personal loans help you get stable cash.
No matter the needs, you can simply opt for a personal loan and help relieve yourself of financial strain. Make ensure you have the repayment ability, this is the single most important factor here.