If you need cash for a short while, personal loans could be a good option. Some people are discouraged from taking these loans nonetheless, due to some widespread misconceptions about them.
Personal loans are essential for those in difficult financial situations. Getting a personal loan is superior to taking out a bank loan, whether you require the money for emergency necessities or personal loans to launch a business. Many times, when considering a personal loan, consumers hear both positive and negative things.
Do you find it difficult to comprehend why lenders fail to offer personal loan approvals? Then you are not by yourself. Many people suffer from similar issues. But no matter who you ask, there are several explanations for this. Some claim that the idea that personal loans are unreliable is wrong. While others argue that getting one from a financial institution is simply too challenging.
Borrowers that need money now or urgently might apply for personal loans, which are unsecured loans. For instance, you don’t have to worry about putting up any collateral to use these financial products to pay for weddings, vacations, urgent medical care, etc.
Although personal loans are widely used due to their many advantages, throughout the course of the year, a number of myths have come into play about them.
Essential Points to Keep in Mind
- When considering other financing options for large expenditures or payments, a personal loan might be a more cost-effective choice.
- A personal loan may also help raise your credit score if you use it wisely.
- The personal loan market is still expanding quickly, indicating that funding and processing times are short.
Interest rates on personal loans are frequently lower than those on credit cards. Even if you have less flexibility in how you spend your money, they may offer better terms.
Myths about personal loans may make some applicants ignore their advantages. But in order to decide whether personal loans are a suitable fit for you, it’s imperative to separate the misconceptions from the actual facts.
The Best Personal Loan Offers in 2024
| Loan Provider | R.O.I | Processing Fees | Loan Amount | Cibil Score |
| Paysense Personal Loan | 18% – 22% (Reducing Per Annum) | 2% – 5% | 50.00 k – 10.00 Lacs | 700 |
| Werize Personal Loan | 15% – 22% (Flat Per Annum) | 3% – 5% | 30.00 k – 5.00 Lacs | 650 |
| Money View Personal Loan | 17% – 36% (Reducing Per Annum) | 1% – 5% | 5.00 k – 5.00 Lacs | 650 |
| IDFC Bank Personal Loan | 10.49% – 22% (Reducing Per Annum) | 1% – 4% | 1.00 Lacs – 40.00 Lacs | 700 |
| Incred Personal Loan | 16% – 33% (Reducing Per Annum) | 1% – 5% | 50.00 k – 10.00 Lacs | 650 |
| Aditya Birla Personal Loan | 12% – 28% (Reducing Per Annum) | 1% – 4% | 1.00 Lacs – 50.00 Lacs | 650 |
| Finnable Personal Loan | 16.95% – 30% (Reducing Per Annum) | 1% – 5% | 50.00 k – 10.00 Lacs | 700 |
| Hero Fincorp Personal Loan | 9.5% – 16% (Flat Per Annum) | 1% – 5% | 50.00 k – 10.00 Lacs | 700 |
| Muthoot Finance Personal Loan | 14% – 22% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 7.50 Lacs | 685 |
| Upward Fintech Personal Loan | 18% – 32% (Reducing Per Annum) | 2% – 5% | 25.00 k – 5.00 Lacs | 650 |
| Cashe Personal Loan | 1.5% – 3% (Fixed Monthly) | 1.5% – 2% | 10.00 k – 4.00 Lacs | 550 |
| Finzy Personal Loan | 10.99% – 18.99% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 10.00 Lacs | N/A |
| Fibe Personal Loan | 15% – 30% (Reducing Per Annum) | 1% – 2% | 8.00 k – 2.00 Lacs | 550 |
| Faircent Personal Loan | 25% – 30% (Reducing Per Annum) | 7% – 9% | 50.00 k – 10.00 Lacs | 700 |
| Stashfin Personal Loan | 2.45% – 4% (Fixed Monthly) | 2% – 2% | 5.00 k – 5.00 Lacs | 725 |
| Tata Capital Personal Loan | 10.5% – 14.25% (Reducing Per Annum) | 0.75% – 2% | 75.00 k – 25.00 Lacs | 720 |
| Standard Chartered Bank Loan | 11.49% – 20% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 1.00 cr | 740 |
| Bajaj Finserve Personal Loan | 13.5% – 15% (Reducing Per Annum) | 0.5% – 1.5% | 1.00 Lacs – 35.00 Lacs | N/A |
| Axis Bank Personal Loan | 11.15% – 16.25% (Reducing Per Annum) | 1% – 4% | 1.00 Lacs – 40.00 Lacs | 690 |
| ICICI Bank Personal Loan | 10.5% – 15% (Reducing Per Annum) | 0.5% – 1.5% | 1.00 Lacs – 1.00 cr | 700 |
| Fullerton Personal Loan | 14% – 32% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 25.00 Lacs | 705 |
| HDFC Bank Personal Loan | 10.25% – 16% (Reducing Per Annum) | 0.5% – 1.5% | 1.00 Lacs – 1.00 cr | 700 |
| Shubh Life Personal Loan | 28% – 44% (Reducing Per Annum) | 1% – 3% | 5.00 k – 2.00 Lacs | 650 |
| Loan Tap Personal Loan | 11% – 24% (Reducing Per Annum) | 1% – 2% | 50.00 k – 7.00 Lacs | N/A |
| KreditBee Personal Loan | 1.5% – 3% (Fixed Monthly) | 5% – 6% | 1.00 k – 3.00 Lacs | 550 |
| FlexSalary Personal Loan | 1.5% – 3% (Fixed Monthly) | 300% – 750% | 4.00 k – 2.00 Lacs | 550 |
| Mpokket Instant Loan | 2% – 4% (Fixed Monthly) | 50% – 200% | 500 – 30.00 k | 550 |
| MoneyWide Personal Loan | 17% – 24% (Reducing Per Annum) | 1% – 3% | 10.00 k – 3.00 Lacs | 650 |
| Insta Money Personal Loan | 13% – 36% (Reducing Per Annum) | 1% – 4% | 5.00 k – 25.00 k | 650 |
| Kotak Bank Personal Loan | 10.75% – 22% (Reducing Per Annum) | 0.75% – 2.5% | 1.00 Lacs – 50.00 Lacs | N/A |
| Cholamandalam Personal Loan | 14% – 22% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 35.00 Lacs | 675 |
| SBM Personal Loan | 14% – 20% (Reducing Per Annum) | 1% – 4% | 50.00 k – 25.00 Lacs | 700 |
| Axis Finance Personal Loan | 14% – 16% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 50.00 Lacs | 650 |
| Shri Ram Finance Personal Loan | 13% – 16% (Reducing Per Annum) | 1% – 3% | 1.00 Lacs – 25.00 Lacs | 680 |
| One Tap Loan Personal Loan | 24% – 36% (Reducing Per Annum) | 2% – 5% | 50.00 k – 5.00 Lacs | 650 |
| Credset Personal Loan | 18% – 30% (Reducing Per Annum) | 3% – 5% | 50.00 k – 5.00 Lacs | N/A |
It’s true that you’ve heard about personal loans before. However, did you know that there are a lot of incorrect ideas and misunderstandings about personal loans? Personal loans have long been a dependable and practical option for people seeking fast access to funds. Even for debt consolidation, it’s a good choice. Yet there are a lot of myths about them that prevent people from making wise financial decisions when it comes to borrowing.
This topic will address nine common misconceptions or myths that have led to confusion among individuals about personal loans.
- Myth No 1: Collateral is Needed for Personal Loans
It’s not always necessary to offer an item as collateral to get approved for a personal loan. In actuality, unsecured personal loans are common. This implies that your credit score, not any asset, is the basis for acceptance from lenders.
Loans for homes and vehicles that are secured are secured by collateral. In the event that you default on a secured loan, the collateral may be taken back.
However, collateral is not needed for unsecured personal loans. Compared to a secured loan, there is less risk, but the interest rate could be a little higher.
- Myth No 2: It’s Difficult to Have a Personal Loan Accepted
Approval of a personal loan is typically contingent upon only a few essential factors:your credit score, work and income history, and debt-to-income (DTI) ratio.
There is a common misconception that applying for a personal loan is extremely difficult. A personal loan may have required fulfilling a lengthy list of necessary requirements and submitting heaps of paperwork in earlier days. Approval is much simpler and requires less paperwork than a mortgage application, even though qualifying conditions differ according to the lender.
Most financial institutions allow you to apply digitally within a couple of minutes. Usually, you’ll have to complete a few questions. After that, you might need to upload documents proving your identification, address, and evidence of earnings and employment.
- Myth No 3: Those with Poor Credit are not Eligible for Personal Loans
Since advertisements and marketing campaigns frequently target customers with the best credit, it is tempting to assume that personal loans are exclusively available to them. It is clear that borrowers with good credit often get better interest rates. But negative credit does not always exclude you from getting a personal loan.
These loans may occasionally be secured to reduce risk for the lender. Unsecured personal loans for those with bad credit are also available. They typically have greater charges and higher interest rates.
- Myth No 4 : Personal Loans are Only Provided by Banks
Over the past 20 years, there have been major changes to the lending sector. Not just banks but other lenders as well provide personal loans.
Fast approval processes and cheap interest rates are just two advantages of using an online lender. Some provide funds within a few days of approval and offer a loan decision in a couple of minutes.
- Myth No 5 : Credit Generally Gets Harmed by Personal Loans
Eventually, personal loans can raise your credit score if you use them wisely. Repaying the debt properly is essential, just like with any other type of credit. Regularly making on-time payments will support the health of your score.
Additionally, asking for a personal loan leads to a hard credit check, much like asking for a credit card or auto loan. Your credit score will be temporarily negatively impacted by this credit check. The benefits of the loan itself will soon exceed the negative effects of the credit inquiry if you keep your loan in acceptable condition and regularly make on-time payments.
- Myth No 6: Credit Cards are Better than Personal Loans
Personal loans have interest rates that are frequently lower than credit card interest rates for borrowers with good to exceptional credit and steady income. There can even be personal loan rates available that are lower than 10%.
Over 20 percent is the average rate nationwide for credit cards. This implies that if you use a personal loan rather than a credit card, you may finally end up paying less interest overall.
- Myth No 7: The Processing of Personal Loans Takes a Lengthy Time
One of the simplest methods for borrowing money is through a personal loan. A lot of lenders, especially those that operate online, are renowned for how quickly they process applications and deposit money into accounts.
- Myth No 8: Having a Salaried Job is a Requirement When Seeking a Personal Loan
Even though it is preferred by lenders to see a consistent source of income, self-employed individuals or those with alternative sources of income may still be eligible for a personal loan. Salary slips from an employer might not be accepted; instead, you might be asked to submit a few years’ worth of tax returns or current 1099 forms.
- Myth No 9: If You Already Have a Loan, You Cannot Apply for an Additional Loan
When you ask for a loan, each financial institution takes your DTI into account. A prior loan may raise your DTI, increasing your chances of being rejected. Some lenders will let you have more than one loan as long as you can manage the monthly payments.
Bottom Line
Getting a personal loan might be challenging. There are many misconceptions around getting a personal loan, but in actuality, there are some pleasant benefits. When you need it most, you can apply for a short-term loan that is simple to repay and will help you get back on your feet again. Getting a car loan is not the same as seeking a personal loan. Their conditions and criteria differ. Use the advice in this post to have a better understanding of the personal loan application procedure if you’re interested in applying for one. Personal loans are an excellent source of funding when your bank balance is quite low.