Common Myths About a Personal Loan :-

No doubt, personal loans are a great option to avail if you want to fund any expenses. Unlike a car loan or a home loan, which are provided for a specific purpose, the amount of money availed by a personal loan can be used for a wide range of purposes. Also, the personal loans are unsecured, meaning that the borrower does not have to place any of his assets as collateral to the moneylender or the bank.

The following are some of the myths or misconceptions about a personal loan :

Low credit score leads to loan rejection :-

Many borrowers think that they have a low credit score, and thus, they will not be able to apply for a personal loan, or their application will be rejected. However, a credit score is a factor that is considered when your loan application is checked. But some other factors can precede your low credit score and help you avail of a personal loan. If you have a low credit score, then the interest rate on your loan will be higher, and when you have a higher credit score, the rate of interest will be lower. The amount of EMI can be checked with the help of a Personal Loan Calculator.

Personal loans have a high-interest rate :-

Many people think that the interest rates on personal loans are generally high. However, in reality, this is not true. In most cases, the banks or the financial institutions set the interest rates based on an individual’s capacity and credit score. People who have a lower credit score and a bad credit history can also get a personal loan, but the interest rate can be higher. However, people with a good credit score and a good record of all the previous repayments can get a personal loan with lower interest rates. The interest rates on ICICI Personal Loan starts from 10.99% p.a to 16.25% per annum.

Personal loans can only be availed from banks :-

This is also a misconception that most people have about a personal loan. People think that personal loans can only be availed from a bank, which is not true. A number of financial institutions and Non-Banking Financial Companies (NBFCs) offer personal loans. If a bank rejects your loan application for any reason, you can apply for a personal loan in a Non-Banking Financing Company.

Personal loans can not be availed if you have an existing loan :-

Many people also believe that they cannot apply for a personal loan if they are already repaying for an existing loan. However, this is not true as you can avail of a personal loan while having an existing loan. Also, you can repay all the debts and the EMIs of your previous loan by taking a new personal loan.

Only salaried individuals can apply for a personal loan :-

Most people believe that only those who have a steady source of income are eligible to get a personal loan. However, the loan application of a salaried individual is accepted easily as they have their salary every month. The moneylender or the bank has the satisfaction that they have a regular inflow of the funds. But that does not mean that self-employed individuals cannot apply for a personal loan. The approval of the loan application is based on the credit history of the individual.

Personal loans do not have a prepayment option :-

People also think that personal loans cannot be prepaid while, in reality, they can be prepaid. Most of the banks and the money lenders or financial institutions offer a minimum tenure to repay the loan to pay the monthly EMIs. After completing the minimum tenure, a borrower can foreclose a loan after paying some amount of money as the foreclosure fee.