Financial literacy is a skill worth developing. One of the essential aspects of it is to empower yourself with knowledge. Especially that of taking a loan. With so many tantalizing offers, how do you settle on something trustworthy that won’t hurt your wallet so much that it needs a special kind 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 provide personal loans.
While this may have been true in the past, it is no longer part of our financial reality. Moreover, banks tend to refuse loan applications due to many strict requirements, while non-bank financial companies and digital lenders tend to approve loan applications from those who have been refused a loan in a bank.
These customers can still get a loan at a reasonable interest rate and with advanced customization to boot. Lending platforms such as take liquid ensure the smoothest navigation for those who are tired of spending hours in bank queues.
2. You cannot take out a loan if your credit rating is low.
This is certainly not the case these days. Although a low credit score may impact your application, it does not equate to immediate rejection. Lenders consider many other factors before making a decision, including but not limited to income, age, and a fixed obligation-to-income ratio.
After that, it’s always worth trying before you quit, because chances are one of the many approved lenders will be willing to lend you some money.
3. Taking out a loan takes too long.
This statement could not be further from the truth. Nowadays, to take out a loan, all you have to do is complete a secure online application and upload the necessary documents. Then begins the waiting game, which will take no more than 48 hours. Typically, 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.
It is certainly not a rule of thumb. On the contrary, taking out a personal loan and making payments on time can actually improve your credit score in the long run. Once you have applied for a loan, the lender will perform a credit check to assess your financial well-being. This could of course lose some points. That said, securing a solid loan with on-time payments will recoup those points and improve the overall score. Ultimately, this negates the initial impact of the credit check.
5. Personal loans are much worse than credit cards.
That’s not true, especially if you have a stable income and a great credit score. Additionally, personal loan interest rates have come down significantly over the past few years. Nowadays, one can find a personal loan with an interest rate of 4.98%, while the national average credit card rate is 16.13%.
There are still a lot of misconceptions about personal loans. Although they are very approachable, many still frown upon hearing about them. That being said, when taken responsibly, paying off a personal loan can even help improve your credit score. In a nutshell, approach the loan application with a cool analytical mind to secure your long-term financial situation.
Authors biography :
John is a financial analyst but also a man with different interests. He enjoys writing about money and giving financial advice, but he can also dive into relationships, sports, games and other topics. Lives in New York with his wife and a cat.
Stay up to date with all the information.
Browse the news, 1 email per day.
Subscribe to Qrius