Collateral free personal loans are a great option to raise funds during emergencies. Personal loan approval is comparatively easier than other loans. Because the borrower does not need to show any specific reason for taking the loan. People are now using personal loans for covering unexpected expenses. You can use the Standard chartered personal loan calculator to check your personal loan eligibility beforehand. However, there are some unpleasant misconceptions regarding personal loans. These myths can stop you from having a clear understanding of personal loans. Hence, we are going to dispell some common myths regarding personal loans.
3 myths regarding personal loans dispelled
Personal loans are feasible than any other loan. First, the amount you avail through a personal loan that you can use for any purpose. Besides, these are a collateral-free loan, so the borrower does not need to place any asset before taking the loan. You can also use a personal loan calculator for checking your personal loan eligibility. But there are some common myths that can obscure your understanding regarding the personal loan. Here are some common myths dispelled as follows:
Every bank offers the same terms
One of the most common myths regarding personal loans is that every bank provides the same terms and conditions. You can find two different banks offering the same amount and the same tenure, but the interest rate may differ.
On the other hand, don’t just judge the personal loan by low-interest rates. If your lender’s loan processing charges are high, then there is no point in running behind low-interest rates. Thus, you must do your research correctly before availing a personal loan. You can even refer to a personal loan calculator to confirm your loan eligibility.
One needs to borrow the maximum amount offered by the bank
There is no such rule that you need to borrow the full amount that is offered by your lender. If you borrow the maximum amount, then it may feel like you are making your life easier, but in the long run, you can face trouble while repaying the loan. The smartest decision is to borrow the minimum amount to deal with your unexpected occurrences. In this, way you can avoid bringing unnecessary debt on you. Besides, personal loan EMIs start right after the disbursal of the loan. Thus, you should consider your future financial goals before deciding the personal loan amount. Also, you may check your EMI amount using a personal loan calculator.
Another very misleading myth is that one can take a personal loan to pay off pending debts. It is not a wise option to pay off your pending credit card debts by taking another loan. For instance, a person has a personal loan to pay off his debts, but he does not earn the minimum amount to repay the loan. Then it is not a solution. Besides, when you take a personal loan, the bank may impose a 1% to 5% processing fee that will also be added to your loan amount.
Personal loans come with low-interest rates
Another big misconception about a personal loan is that they always carry lower interest rates than credit cards. In reality, personal loans may carry low-interest rates than some credit cards, but the interest rates are not exceptionally low. The personal loan interest rate margin may vary from 5% to 35%. You don’t have to keep any collateral for personal loans, so these are an unsecured loan, which exposes the lender to higher risk. Thus, the lender may impose a marginal interest rate. Personal Loan Calculators will give you a fair idea of the principal amount based on the interest rates and loan tenure.
There is another popular myth that your loan eligibility depends on high credit scores. That’s not true. Your interest rate depends on your credit score. In this case, lenders usually prefer a borrower with a higher credit score than average.
Lenders consider your debt to income ratio for approving a personal loan. But you should do proper research about the terms and conditions offered by different financial institutions to avail the most suitable option for you. These above-mentioned points may help you overcome the misleading information you have come across earlier.
