Financial literacy is a skill worth developing. One of the essential aspects of it is empowering oneself with knowledge. Especially that of loan taking. With so many tempting offers out there, how does one settle on something trustworthy that won’t hit their wallet so much that they will need a particular sort of financial resuscitation?
In this article, we take on the challenge of busting the myths about personal loans. Read on to learn about the five most common misconceptions.
1. Only banks give personal loans.
While it could be true in the past, it’s no longer a part of our financial reality. What’s more, banks tend to decline loan requests because of numerous stringent requirements, while non-banking financial companies and digital lenders tend to approve loan applications of those who were refused a loan at a bank.
Such customers can still get a loan at a reasonable interest rate and with advanced customization to boot. Lending platforms such as Get Cash ensure the smoothest of sailings for those tired of spending hours on end in bank queues.
2. You cannot take a loan if you have a low credit score.
It most certainly isn’t the case these days. While a low credit score can impact your application, it doesn’t equate to immediate rejection. Lenders look at many other factors before deciding, including but not limited to income, age, and a fixed obligation to income ratio.
Following that, it is always worth giving it a try before calling it quits since there is a high likelihood that one of the numerous, vetted lenders will be eager to lend you money.
3. Taking out a loan takes too much time.
This statement couldn’t be any further from the truth. These days, all one needs to do to take out a loan is fill out a secure online application and upload the necessary documents. Then the waiting game starts, which won’t take more than 48 hours. Generally, if you apply for a loan early in the day, it’s more than possible to get approved within the same business day.
4. Taking out a personal loan can hurt your credit score.
That is certainly not a rule of thumb. If anything, taking out a personal loan and making on-time payments can actually improve your credit score in the long run. Once you apply for a loan, the lender will run a hard credit check to evaluate your financial wellbeing. That might, of course, lead to losing a few points. That said, by ensuring a solid loan standing with on-time payments, you will get those points back and improve the score overall. Ultimately, it cancels out the initial impact of the hard credit check.
5. Personal loans are much worse than credit cards.
That is not true, especially if you have a stable income and excellent credit score. Plus, interest rates for personal loans have decreased significantly in the last few years. These days, one can find a personal loan with an interest rate of 4.98%, while the national average rate for credit cards is 16.13%.
There are still a lot of misconceptions about personal loans. Despite being highly accessible, many still furrow their brows upon hearing about them. That being said, when taken responsibly, repaying a personal loan can even help improve your credit score. In a nutshell, approach loan-taking with a cold analytical mind to ensure your long-term financial standing.
John is a financial analyst but also a man of different interests. He enjoys writing about money and giving financial tips, but he can also dive into relationships, sports, gaming, and other topics. Lives in New York with his wife and a cat.
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