Financial literacy is a skill worth developing. One of its key aspects is empowering oneself with knowledge. Especially that of taking loans. With so many tempting offers out there, how can one come to terms with something reliable that will not hit your wallet so hard that it will need a certain kind of financial revival?
In this article, we take on the challenge of dispelling myths about personal loans. Read below to learn about the five most common misconceptions.
1. Only banks give personal loans.
While it may have been in the past, it is no longer part of our economic reality. In addition, banks tend to reject loan applications due to many strict requirements, while non-bank financial companies and digital lenders tend to approve loan applications from those who have refused a bank loan.
These customers can still get a loan at a reasonable interest rate and with an advanced start-up adjustment. Lending platforms such as I’m getting cash ensure the smoothest route for those who are tired of spending endless hours in bank queues.
2. You can not get a loan if you have a low credit score.
It certainly does not happen nowadays. While a low credit score may affect your application, it does not equate to an immediate rejection. Lenders consider many other factors before making a decision, including, for example, income, age, and a fixed income-to-income ratio.
After that, it is always worth trying it out before you close it, as there is a good chance that one of the many, well-tested lenders will be willing to lend you money.
3. Getting a loan takes a lot of time.
This statement could not be further from the truth. These days, all one needs to do to get a loan is to fill out a secure online application and upload the necessary documents. Then the waiting game begins, which will not last more than 48 hours. Generally, if you apply for a loan early in the day, it is more than likely that you will receive approval within the same business day.
4. Taking out a personal loan can hurt your credit score.
This is certainly not an empirical rule. If nothing else, getting a personal loan and paying on time can really improve your credit score in the long run. Once you apply for a loan, the lender will perform a rigorous credit check to assess your financial well-being. This can, of course, lead to some degree of loss. That said, by securing a stable loan with timely payments, you will get these points back and improve your rating overall. Eventually, it cancels out the initial impact of hard credit control.
5. Personal loans are much worse than credit cards.
This is not true, especially if you have a steady income and an excellent credit score. In addition, interest rates on personal loans have dropped significantly in recent years. These days, one can find a personal loan with an interest rate of 4.98%, while the national average interest rate for credit cards is 16.13%.
There are still many misconceptions about personal loans. Despite being extremely approachable, many still pierce their eyebrows when they hear about them. That said, when taken responsibly, repaying a personal loan can even help improve your credit score. In short, approach loans with a cool analytical mind to ensure your long-term financial situation.
Curriculum vitae author:
Giannis is a financial analyst but also a man of different interests. He likes to write about money and give financial advice, but he can also deal with relationships, sports, games and other topics. He lives in New York with his wife and a cat.
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