Getting a personal loan is a great way to take care of unexpected financial requirements. This type of loan is a highly popular loan product in India as the availed amount can be utilized for meeting any type of financial need. Be it requiring funds to handle wedding expenses or to pay medical bills or even to buy a smartphone, a personal loan can come in handy to address all type of emergencies that require quick financial assistance. Additionally, this type of loan is unsecured which means that you don’t have to submit any collateral to avail the loan amount. Getting a personal loan in India has now become easy due to its instant availability and easy application process. However, potential borrowers do have certain apprehensions which keep them away from availing this type of loan. Read on to know about common misconceptions about personal loan in India.
Having a low credit score is the only reason for loan rejection: Many borrowers assume that a low credit score is only the reason for the rejection of the loan application. However, it is important to know that the credit score is not the only important criteria lenders consider when assessing your loan application. Your salary, age, employment status, number of dependents and other factors are taken into consideration along with the credit score. These factors are checked to determine your repayment capacity. While credit score is an important factor to help lenders determine your credit eligibility, it is not the only factor that can be the reason for loan rejection. Your loan can get rejected due to loan income, high income to debt ratio or even if your company is not listed with the borrower, your employment tenure with the current company and other.
Personal loans are available at high-interest rates: This is one of the common misconceptions that borrowers in India have. When applying for an unsecured loan, you must have a good eligibility criterion including a high credit score, high income and low existing liabilities to be able to get a loan at a low rate of interest. Lenders in India set interest rates based on borrower’s repayment capacity and credit score. Having a high credit score and repayment capacity makes it easy for you to get the loan at a low-interest rate, whereas, low credit score and low income can attract a high rate of interest. Borrowers with good credit score can get a personal loan at an interest rate as low as 10%.
You can get a personal loan only from a bank: Banks are not the only financial institutions in India offering loans. There are several NBFCs and fintech companies like Upwards offering instant personal loans. Banks generally follow a strict eligibility criterion when offering loans, however, NBFCs and digital online lenders are more flexible and even offer loan without submission of salary slip or bank statements.
You cannot avail a personal loan if you have an existing loan: If you believe that you cannot apply for a fresh personal loan if you have an existing loan, then you are highly mistaken. Lenders in India offer personal loans based on your repayment capacity and current income. The loan application is either rejected or accepted based on your existing EMIs and monthly income. Ideally, your EMI outflow should not be 50% more than your monthly salary.
Personal loans can be availed by salaried individuals only:
This is a common belief when it comes to availing a personal loan in India. However, a personal loan can be availed by both salaried as well as self-employed professionals based on documents provided. The documents required for a loan application for salaried and self-employed individuals are different. Few lenders in India offer personal loans only to salaried individuals since there is a regular inflow of funds every month.
You cannot foreclose a personal loan: This is another myth relating to repayment of the personal loan amount. Many borrowers think that they cannot foreclose a personal loan before the end of the tenure. But in reality, the personal loan amount can be repaid before the end of the tenure by paying the required foreclosure charges. Lenders in India have tenure of 3-12 months only after which the loan can be foreclosed.
Processing time: If you believe that processing time for a personal loan is long and requires you to follow a long documentation process, then you’re wrong. With digital transformation, getting a loan has now become simple as you can apply for it online by directly uploading the documents on the lender’s website or application. Additionally, instant approvals have led to instant disbursals, thus making it easy for you to take care of financial emergencies on time.
Conclusion
In the year 2019, availing a personal loan is convenient as one does not have to visit the lender’s office or follow a lengthy documentation process. Whether you want personal loan in Bangalore, Delhi or Mumbai or even in Chennai, you can know more here on how to make an easy loan application to get the loan amount you desire.