Personal loans can assist you in consolidating debt at lower interest rates or managing expenses when you are facing a financial shortfall. However, numerous personal loan myths are widely circulated, and it’s essential to separate facts if you intend to take out loans. Here are the most common personal loan myths debunked.
To obtain a loan, you must have perfect credit.
One of the most common misconceptions that small businesses have when obtaining a loan is that they must have perfect credit. In reality, businesses with a poor credit history can also be approved for a small business loan.
Of course, the higher your credit score, the easier it is to borrow and the more options you will have. However, if your credit score isn’t perfect, you shouldn’t rule out getting a loan.
There are loans designed specifically for businesses that are currently building their credit score, for example. You should expect to pay a higher interest rate on these types of loans, but if you’re in desperate need of money, it’s worth considering.
Personal loans are always subject to high interest rates.
Personal loans are largely misunderstood as always having high-interest rates. Personal loans, in reality, can be less expensive than other types of unsecured loans or even credit cards.
The key is to have a good credit score to qualify for the lower interest rates. If you want to get a personal loan, you should check out different lenders to compare their rates.
Personal loans are only available from banks.
One of the most common myths about personal loans is that they are only available from banks. While banks are among the institutions that provide loans, many non-banking financial companies provide personal loans.
Banks may reject an applicant’s loan application due to rigid norms. However, NBFCs and other digital lenders frequently accept applications from these borrowers at comparable interest rates and with more flexibility.
Personal loans always necessitate collateral.
Personal loans can sometimes be unsecured loans that do not require collateral and require necessitating little documentation. This is also one of the main reasons why the processing of a personal loan is quick and easy.
Only businesses in financial distress require a loan.
Applying for a loan is seen as a step back by many small businesses. However, any cash injection can play a critical role in accelerating your business and assisting you in meeting your goals.
There are numerous reasons why a successful business might require a business loan, including the need for new equipment or technology and the desire to offer a new product or service. It is not, in any way, an indication of a failing business.