Whether you want to start your own business, purchase a new house, or invest in financial stocks, personal loans can be helpful to someone who is looking for immediate financial shortfalls. For example, some types of personal loans, such an instant guarantor loan may enable you to borrow some money while having a person as a supporter. On the other hand, there are also some myths and popular sayings that people must be aware of when applying for a personal. In this article, I will try to spot and refute those myths.
1: Is it a myth to assume personal loans always come with high-interest rates?
Yes, it is a myth. Getting loans now, especially personal loans do not always come with high-interest rates. They may offer lower high-interest rates than those with credit cards. Some lenders offer personal loans for as low as 10.5% per annum to those with a healthy credit score. The personal loan interest rate cannot be categorized as too high, given that they are not backed by any collateral, as in the case of home loan, car loans, gold loans, etc.
2: Which lenders tend to offer the best rates for personal loans?
Lightstream bank offers personal loans with the lowest rates that made them the best choice for lenders. The annual percentage rate that they impose starts from 4.99% with 0.5% autopay enrolment deduction.
3: People with existing loans are not eligible for personal loans
Banks and financial institutions will take into account the repayment capacity of an applicant when evaluating their loan application. Therefore, lenders will prefer to lend money to those that have an income ratio of up to 60%. It will be the proportion of one persons’ monthly income that it is used for servicing EMIs. On the other hand, other lenders might use net monthly income while others use the gross monthly income to calculate the ratio.
4: Is it hard and entails a long process to get approved for personal loans?
It is not hard to get approved for personal loans as long as you meet the lender’s criteria, such as a good credit rating, and have no other pending loan applications. It is a different story if you have a bad credit history.
On the other hand, in terms of the time you need to fill up a loan application form, it won’t take you more than 15 minutes. Nowadays, all banks have online application forms, which make our lives so much easier.
5: Does applying for a personal loan hurt your credit score? Can it help it in any way?
Of course, it does. The same applies to other loans that you wish to apply for. But it will only be minimal and short-term. On the other hand, it will boost your credit score in the future as a result of more payment history. However, if you already have various loans or are paying high-interest rates, maybe is not a good idea to keep accumulating debt.
6: Is a bank always the best place to get a personal loan?
Considering the terms, APR, service charges, and other factors, banks can be the best place to get a personal loan myths. Especially if you already have an account with them. They might give you some takeaways or promotional offers on your packages.
7: Is it better to apply for a loan that will have a specific use?
Comparing personal loans with other kinds of personal loan myths, they offer the versatility of usage. For example, comparing it to a renovation loan, which is disbursed to your contractor based on the renovation quotation needed for approval, you won’t need to prove the purpose of your loan with the bank. It is up to you how to use the amount of money, from paying debts to investing in home renovations.
8: The more loans you apply for, the more chances of being accepted you would get
Another myth regarding personal loan myths. Some lenders will perform a hard search on your credit report, which will negatively affect your capacity to borrow personal loans. Moreover, it reduces your credit score and will also make you look like a less stable borrower when applying to multiple lenders. The best option here would be to compare APRs and use loan calculators to find out your affordability before applying.