There are tons of myths about personal loans and how it is not easy to get hold of the best personal loan lender, among many others. The internet offers a lot of informative tools, such as personal loan calculators, comparison pages, and interest rates. These are quite helpful, but many people believe the wrong things and believe in myths that surround personal loans.
Today we are debunking top 5 myths about personal loans:
Myth # 1: Banks are the best source for personal loans
You might believe that banks are the best source for personal loans or personal loans for students. It is not always the case. Each financial institution has different personal loan requirements. Some of the banks charge higher interest rates to the low-score borrowers, while some personal loan lenders target high-score borrowers at low-interest rates. So, depending on your financials, banks might not be the best option always. Online lenders and peer-to-peer lenders are some of the popular examples.
Myth # 2: You can get one loan at a time
False! If you have a good credit score and the right ratio for debt-to-income, you are eligible for multiple personal loans. But that means you will have to pay interest rates as well as the high debt-to-income ratio. Think twice before you put yourself in a risky position by taking multiple loans and failing to manage them.
Myth # 3: You cannot get a personal loan with a poor credit score
Though it is crucial to have a sound credit score to secure a good interest rate. You can still get a loan with a weak credit score. Bankruptcies and missed payments are not a big deal as they were before. If you have successfully managed to have a good credit utilization ratio in the past few years, you can get approval for your loan.
This ratio is acquired by dividing your credit card balance with your total credit card limit. However, the amount you can borrow and the interest rate can differ. You have better chances of getting a good interest rate by putting collateral for the loan, which could considerably reduce the rates.
Myth # 4: You can never reduce your debts with personal loans
It might seem that taking out more debt only adds to your existing debt pool and not lessen the burden. But it is not true in every case. In favorable market conditions, such as when the market rates drop, you could get larger personal loans and feasible personal loans monthly payments to refinance your existing loans. You can pay off other loans and consolidate them under one obligation.
Now, this doesn’t particularly lessen your debt total. But when used right, it could help you take advantage of the different fluctuations in the interest rates. Moreover, you could also renegotiate in terms of your loan for the one that is more favorable to your financial condition. The process is called debt consolidation, and it could immensely help you in saving on interest costs while leaving you with one personal loan monthly payments to take care of with lower interest rates.
Myth # 5: Loans cost less than credit cards
Compared to personal loans, credit cards are more towards the expensive side. But, nowadays, there is no one type of credit card in the market. There are many types of credit cards today, and one of the credit card types could surpass taking out a personal loan.
Assuming that you are borrowing a small amount of money, and that, too, for a short period (a year or less), it will be better for you to use 0% of APR credit card. This way, you could pay back the money without being responsible for paying off the interest. You don’t have to stress about your poor credit score either.
It is never wise to believe something you haven’t tried for yourself. Also, never blindly listen to myths or hearsay. Personal loans could be a strong accessory to help you achieve your goals. We truly hope that if you had also listened to the aforementioned myths, we have debunked a few of them. For more details about personal loans, contact Lunar Investments and Loans.