Myths about personal loan

All the knowledge which is incomplete always leads to the creation of the myths in the market and myths spread very faster than the reality of the thing. Are you too one of those who considered applying for a personal loan but was reluctant to take the next step? Could it be because of the stories you have heard about the perils of taking a personal loan? Outdated facts and stories have created myths over the years. Personal loans are not what they used to be. Some of the myths are:

1) Personal loan charges Unfair Rates of interest

There is an average interest rate is around 12- 14 percentage which is seemed high but when it is compared to the credit cards Interest rate can be double or thrice that is from 36-48 percent. Still, people go for the credit cards as this myth has never been busted but we can say credit card can help a person in emergency cash.

2) All lenders charge the same

Most people compare different personal loan scheme with each other on the basis of the rate of interest they charge from the customers. But a proper way to compare is through his true cost of loan which can be calculated by the additional fees incorporated into the loan structure. Difference comes where some of the lenders include the origination fees in the cost which make difference of around 1 to 5 percentage of total loan with this prepayment penalty are also added to the loan which is applied if you pay off the amount before the decided time period

3) Personal Loan is given only to salaried person

This myth is the most spread information among the people with this people adds that private businessman or self-employed people can also avail a personal loan. Today, personal loans are issued against the house renting income in the market. This is not complete myth as the rate of interest is higher to other compared to that allowed to the salaried man or self-employed or any type of the private businessman but there is no rejection of loan

4) No personal loan for poor credit score holder

A credit score is not the decider of loan allotment but one of the important as it gives a strong reason for the banks to trust you. Credit rate doesn’t affect the issue of the loan but in effect the interest rate on the processing of the loan. This is due to the risk of chances of getting defaulting on your loan. You may get some kind of limitations attached with the loan allotted but there is no chance of loan getting rejected due to the Poor credit score. There are many new schemes coming for loan targeting the customers with bad credit rating. These programs do not consider the credit score before giving a loan to anybody.

5) You can use a personal loan for personal reasons only

There is a big confusion among the people about the personal loan as it names says people think personal loan can only be used for the personal things. Any lender is least interested in the way that how you use the allotted loan as long as you are making the payments regularly and on time and shows your intentions of payment. Personal loan once allotted that is your wish how you use them. In fact, you can use that in your business or in your startup, no one going to ask you until you are doing the payment. If you have a startup or small business it may be possible that it will not be providing the flow required so the personal loan can come handy in paying your credit for the business this will help you in making multiple credit or loan into one debt which is also beneficial for the market.

6) No tax benefits

It is not what you hear may be from anywhere; you are eligible for getting the personal loan. First thing, a personal loan is not considered as the income of the person so it can not be included in the income making it a liability for the person and it is also a loan so when you file your Income Tax return. The amount will not be included as part of your taxable income but all advantages which can be gained by another loan can be provided by the personal loan too.

7) Tedious approval process

There is a very common rumor that a personal loan that it takes time for the approval of the personal loan which is not true and in the case of the personal loan the time was taken is lesser than for other loans. It requires minimum documentation as compared to other loans. Now many lenders have an option in which you can apply online for the personal loan and get it approved which take from few minutes to 1 hour and after the approval, it takes less than 72 hours for the disbursement of the funds into your account. So this shows that you can take a personal loan without even stepping out of the house

So just think little of what you hear but on the facilities provided by the lenders. 

This article has been contributed by Shruti Kakkar, Content Writer, LegalRaasta- an online platform for GST Software, ITR Filing, TDS Return Filing, Business Loan, Home Loan, Personal Loans etc