When opting for a debt product, a lot of research goes into finding the best bank or Non-Banking Financial Company (NBFC), lending rates and best offers. While conducting this research, we come across a lot resources- some of them tell us the truth about a particular product or a lending institution, the other merely amplify popular myths and confuse borrowers.
So, here is a list of untruths about Personal Loans that we were thinking to be real:
With an existing debt, no lender will grant you a loan
Despite having an ongoing debt, if you have the financial competency to avail and repay a new Personal Loan, and provided your repayment history has been good so far, lenders will not reject your application.
Availing a Personal Loan adversely affects your credit score
A Personal Loan on which regular repayments are being made will help in building the credit score of the applicant. Paying the EMI on time and being consistent with the repayment will get recorded in the credit report of the individual and increase his/her score in the long run.
Availing a Personal Loan Reflects Bad Money Management Skills
Opting for a Personal Loan in no way means that the applicant has poor management skills when it comes to personal finances. A Personal Loan is meant to fill in those gaps where the existing resources are not sufficient.
A Personal Loan reduces Chances of getting Approval on a Home Loan
A home loan is a long term debt for which lenders check the financial background, income, repayment history, credit score and liabilities. Being able to avail a Personal Loan and repaying the same in full as per the tenure will increase the credibility of the borrower in the eyes of the lender and increase the chances of getting approval on the home loan application.
Personal Loans are the same, Irrespective of the Lender
Banks and Non-Banking Financial Companies (NBFCs) have distinct lending terms and rates that are unique for every lender. So, based on the profile of the applicant, he/she can avail Personal Loans at varying rates of interest and lending terms and conditions.
So, if availing a Personal Loan is on the cards, then these factors will help you in making the right choice and also eliminate the misconceptions you may had about Personal Loan.
Aman Khanna is an experienced financial advisor who is well known for his ability to foretell the market trends as well as for his financial astuteness. He has an MBA in finance from Toronto University as well as years of experience delivering seminars on sound financial practices and debt management.