Personal loans are one of the most popular forms of credit which are opted by people if they are in need of quick cash and want to cover their financial needs temporarily. Personal loans offer instant loan disbursement and flexible repayment period which becomes a great choice if you are in an emergency and want financial assistance. However, there are a lot of myths revolving around personal loan eligibility. Let us debunk the top five myths
Personal loan eligibility myths
1. A high credit score is the sole criteria for approval
Without a doubt, many lenders will approve your application if you have a high credit score of 750 and above, but it is not the only determining factor. Lenders also carefully evaluate your income, employment history, debt to income ratio and credit report along with your credit score. If you do not have a high credit score, you still may be able to get a personal loan. In this scenario, you may be offered a high interest rate along with a shorter loan amount and repayment tenure.
2. Only salaried employees are eligible for a personal loan
Although salaried employees do get a benefit if they already have a salary account in the bank in which they are planning to apply for a personal loan, self employed professionals are equally eligible for personal loans. Having a stable source of income is an important aspect in personal loan eligibility. However, if you are a salaried employee but do not have a stable salary, you still might not be eligible for the loan. In the case of self employed professionals, your business statements, tax returns and other documents will be extremely important for approval.
3. Personal loans require a long approval process
While this was a case in traditional personal loans, with the advent of technology, the experience of personal loan applications has been completely transformed. Now you no longer have to wait in queues and fill out lengthy forms by visiting the bank’s branch. With the ease of digital KYC and online application, you can complete your process of applying for a personal loan within no time. This not only speeds up the process but also makes it more secure and convenient for you. Lenders also now offer instant loans which are pre approved and offer quick loan disbursement so that you can access funds immediately.
4. You can not apply for a personal loan if you do not provide a collateral
Personal loans are unsecured loans which do not require collateral while applying. Hence, you can easily apply for a personal loan without pledging a collateral. In case you might not be able to provide a healthy credit score but want to get a high amount for the loan, you may provide collateral in this case which increases the security for the lender that you are capable of repaying the loan and will not make any default.
5. You can apply for a personal loan at a bank only if you have an existing bank account
If you have an existing account with the bank where you are planning to apply for a personal loan, you may get a pre approved loan which can help you get access to funds instantly. However, if you do not have an existing account, you can still apply for a personal loan at any bank. The only difference is that you may not get a pre approved offer and will have to go through the entire application process.
In conclusion, you must understand that personal loans attract higher interest rates than other loans available in the market. Before you apply for the loan, it is advisable to explore different options available which may suit your budget better.
(Note: Raising a loan comes with its own risks. So, due caution is advised)
