When your cash flow is low and the bills are piling up, you could end up needing a personal loan. However, even though personal loans are so popular in India, people often have the wrong idea about them. Many view them as debt traps, and others think that they’re impossible to procure with a low credit rating.
It’s essential that you understand what personal loans are, and, more importantly, what they aren’t, especially if you’re looking for some credit. Here are a few myths Indians have about personal loans. By knowing these common personal loan myths, you can make the most of your financing options.
Myth 1 – Personal Loans are Extremely Expensive
Since personal loans are often obtained without a collateral, they have high interest rates. But this doesn’t mean that they’re the most expensive kind of credit out there. In fact, credit card interest rates are somewhere between 22 to 36%. Interest rates for personal loans are significantly lower at 12 to 15%.
So the next time you’re using your credit card to make a big purchase, think about how much money you’d actually save if you were to obtain a personal loan. For instance, if you want credit to buy a TV and a fridge that are together worth ₹ 90,000, it makes more sense to get a personal loan than to put it on your card.
Myth 2 – It’s Impossible to Get a Personal Loan with a Bad Credit Score
Although your chances of obtaining a loan at a top-notch bank are significantly reduced if you have a bad credit score, there are still a lot of other lenders out there who can help you out. You may be charged a slightly higher interest rate for such loans, though. You can even raise your credit score by paying off older debts with the new personal loan that you’re taking.
Myth 3 – Only Major Banks Give You the Best Options
Indians often think that big banks are their best bet when it comes to personal loans. But this assumption is just another one of the personal loan myths that are widely prevalent in our country. Financial companies, or non-banks, offer personal loans at highly competitive interest rates as well.
Bajaj Finserv, for instance, has a 5 minute approval system when you apply for a personal loan online. What’s more, if you decide to close your loan before the tenure is complete, you won’t even be charged a foreclosure fee.
Personal loans can be incredibly useful when you’re low on cash. You get to spend money on what you absolutely need to, without having to account for what you’re spending it on. So the next time you need some money, do your research and find a personal loan that suits your needs perfectly.