Popular Myths About A Personal Loan

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Popular Myths About A Personal Loan
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Personal Loans

• Personal Loans have become a popular finance
  solution for customers in India.
• Almost all leading banks and other financial
  institutions are offering personal loans.
• With a rise in demand and supply of loans, a
  personal loan is subject to a number of
  misconceptions and myths.
• Due to these widespread myths surrounding
  personal loans, people are hesitant to apply for
  a personal loan.
• Lets look for popular myths and misconception
  regarding personal loan in the next slide.

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Popular Myths Regarding Personal Loan
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Myth 1 Only Salaried Individuals Are Eligible

• One of the most widespread myths about a personal
  loan.
• Many people drop the idea of getting a personal
  loan in financial exigencies, believing that
  personal loans are provided only to salaried
  individuals.
• However, the truth is that self-employed people,
  business owners and NRIs also qualify for a
  personal loan.

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Myth 2 Higher Interest Rate

• People tend to believe that a personal loan has
  higher interest rates than other types of credit.
  
• In reality, the average interest rate applicable
  on a personal loan (12-16 per annum) is much
  lower than that on credit cards (2.5- 3 per
  month).
• In times of emergencies, most people draw out
  their credit cards.
• Nowadays, it is pretty easy to get a personal
  loan.
• You dont have to pledge any asset as collateral.
  
• Hence, it is wise to opt for a personal loan when
  you need immediate cash.
• You could also enjoy the benefits of the seasonal
  offers and schemes on personal loans.

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Myth 3 Lengthy Complicated Approval Process

• Many customers believe that a personal loan
  approval process is complicated and
  time-consuming.
• On the contrary, a personal loan requires minimum
  documentation and other processing formalities.
• Now, with the rise of many online lending players
  in the market, you can apply for a personal loan
  online in just matter of seconds and get instant
  approval.
• For physical document verification, lenders send
  a representative to complete the documentation
  process to the customers residence.
• Personal loans usually take 2 to 5 working days
  for disbursal.

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Myth 4 Poor Credit Score Makes You Ineligible

• A credit score is one of the most important
  factors in a personal loans approval. A good
  credit score helps you negotiate a personal loan
  with better terms. 
• If you have a bad credit score dont be
  disheartened, there are some lenders that offer a
  personal loan for bad credit with certain
  limitations attached.
• A bad credit score doesnt eliminate your chances
  of taking a personal loan.
• Lenders have come up with new loan schemes which
  do not attach great importance to the credit
  history.
• Moreover, various NBFCs are willing to offer
  personal loans to the customer whose personal
  loan application has been rejected by traditional
  banks due to a low credit score.

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Myth 5 Personal Loan Used For Only Personal
Reasons

• Many customers are confused about the usages of a
  personal loan and believe that it is used for
  only personal reasons.
• In reality, a personal loan can be used for any
  legitimate purpose until the lender doesnt
  impose any restriction on its usage.
• You can use it for other purposes such as
  business venture, debt consolidation, purchase of
  a home, purchase of a car, etc.
• Lenders dont ask about what a personal loan is
  being used for as long as you make timely
  payments.

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Myth 6 No Tax Benefits

• This is one of the biggest myths due to which
  people hesitate to opt for a personal loan.
• Please note that a personal loan is not
  considered as income.
• According to Section 24(b) of the Income Tax Act,
  1961, a borrower can enjoy tax exemptions on the
  interest paid on a loan used for the purchase or
  renovation of residential property.
• But this is only applicable if the loan was
  borrowed from a bank or financial institution.
• If you use loan for higher education, you can
  claim tax benefits on the interest paid on loan.

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Myth 7 Only Big Banks NBFCs Provide Personal
Loans

• If you believe that only top banks or NBFCs
  provide personal loan, then you have not done
  proper homework.
• In fact, smaller banks and other lending
  institutions provide personal loan at
  comparatively lower interest rates.

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Myth 8 Personal Loan Affects Your Credit Score

• Getting a personal loan doesnt affect your
  credit score in a negative way as long as you
  repay the loan on time.
• In fact, if you repay the loan on time regularly,
  it helps build your credit score.
• However, defaulting on EMI payment will reflect
  poorly on your credit history.

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Myth 9 Ineligible, If You Have An Existing Loan

• There is no rule which prevents you from applying
  for a personal loan if you have existing loans.
• While approving your loan, lending institutions
  check your repayment capacity by calculating your
  net disposable income after considering all
  repayments such as loan EMI and credit
  card payments.
• If you are juggling with multiple loans, to ease
  its burden you can use the debt consolidation
  facility to combine multiple debts into one.
• Your personal loan application may get approved
  despite existing loan at the same time, provided
  your repayment capacity is satisfactory to the
  lender.

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In Short

• If you run into any financial emergency, just
  ignore these myths and apply for a personal loan.
  
• For more information about personal loan, please
  visit Afinoz.

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Thank You !!!