Most people might hesitate getting a loan for themselves due to varied reasons. Popular myths often discourage people from opting for a loan and they might be intimidating at first.
But scrutinising these myths should ease up the suspicious few and get them comfortable with their decision to avail one. Interested people can always check the internet for information from reliable sources regarding where, how, and when they can apply for loans. One can also find personal loan calculators and interest rate lists that compare information from one institute to the other. However, these are of little use when one only believes in hearsay instead of knowing the truth. We’ve gathered here some myths and broken them down for you to kickstart your way to better finance.
‘BANKS ARE THE BEST SOURCES OF LOANS’
While they’re the most popular, banks are not always the best source of loans. Each bank is unique when it comes to loan policies. They have different preferred percentages, risk appetites and loan requirements. There are banks that implement higher interest rates to low-scorers while there are those who only accept high-scorers and offer them low interest rates. Peer-to-peer lending and online lenders have become popular recently. This resulted in different institutions offering more competitive deals. Don’t narrow the options to just one source. Explore the market and know other options.
‘ONLY ONE LOAN IS ALLOWED AT A TIME’
This is usually the advise given by most people. However, this is not true. Individuals are eligible to simultaneous loans as long as there is sufficient cash flow, good debt-to-income ratio, and good credit scores. But it is best to be cautious about having multiple loans at once. This can lead to higher interest rates and higher debt-to-income ratio. Unless we are good with managing multiple financial liabilities at the same time, think thoroughly before making a move.
‘APPLYING FOR PERSONAL LOANS WILL TAKE FOREVER’
The process of applying for a personal loan isn’t as time-consuming as we think it is. Institutions usually provide straightforward directions regarding the process and even have people to assist us throughout. To have smoother transactions during application, have the documents and information ready. Be prepared and familiarize yourself with the procedures. When in doubt, don’t hesitate to call the institution to have these questions answered by a professional. They can walk us through the process over a phone call too. Some institutions can even screen and pre-qualify us over the phone. Remember: knowledge is key!
‘BORROWERS WILL DROWN IN DEBT’
This frightens many who are yet to even apply for a loan. Institutions have now provided more flexible paying schemes these days. Other banks even give their clients the freedom to select the length of period by when they are likely to pay back their loan. This helps borrowers manage their finances better and be less burdened at the end of the month when all their bills are due. There is no need to worry when one has stable income and possesses the commitment to pay.
‘PERSONAL LOANS ARE MORE EXPENSIVE KINDS OF LOANS’
It’s not all the time that personal loans are the priciest. While personal loans have higher rates than unsecured loans, it’s still actually cheaper than other kinds of loans. This type of loan is cheaper than cash advance or payday loans, which we may have to pay during our next paycheck, not to forget repaying the agonizing interest rates. Although personal loans don’t really have the lowest rates, savings can add up over time. It’s just a matter of calculations and we’ll see through it.
‘APPLYING FOR LOAN SHOWS YOU’RE UNRELIABLE WITH MONEY’
Borrowers usually get the misconception that they’re irresponsible with their finances and that is why they need loans. This shaming of ourselves needs to stop. There are multiple reasons behind applying for loans. While it’s true that most people apply for credit to save them from financial obligations, lenders usually grant loans to individuals who are fully capable of returning the money borrowed. Lenders have ways to assess the reason behind the application and they make sure that the borrowers have the financial capacity to return it. Otherwise, loans are not granted. Sure, we may not have the money to fund ourselves at the moment. But having a loan granted and repaying it in time just demonstrates how responsible and mature we can be when it comes to handling finances.
Let’s face it. When don’t have money to blow, all the time. Good thing there are institutions who can help us in the time of need. Now that we know some of the myths circulating around personal loans, we should be well prepared to take that first step to better finances. Ignorance may be a bliss, but it surely is not when it comes to this matter.