Top 6 Misconceptions Of Personal Loans

Tell anyone that you are considering taking out a personal loan. They will probably give you the side eye and tell you to reconsider your decision.

However, their reaction might be different if you tell them that you have taken out a home loan, or a renovation loan. There might be an explaination for this.

It may be that people usually associate personal loans with the inability to manage your own finances. Or in worse case scenarios, with loan sharks and unlicensed money lenders.

Thus, it important to be aware of the misconceptions of personal loans before dismissing them as an alternative for borrowing money. There may be times when you take out a personal loan for reasons such as to cover the cost of your education, home or a new business. These are considered good debt. Why? This is because in the long run, these debts will more than pay for themselves.

Benefits Of Personal Loans

With digitalisation, accessing financial help has become easier for many. It might be through different types of loans through financial institutions and alternative lenders. Personal loans continue to be an attractive option among Singaporeans. Though some people may still have some doubts or misconceptions about them.

A personal loan is a highly beneficial way to borrow money. It enables you to use the funds liberally. You can use this type of loan to purchase a home, consolidate debt, carry out home repairs or upgrades or pay for higher education.

This level of flexibility is beneficial. It can make a significant difference in one’s life but personal loans are usually disregarded for various reasons. This is typically because borrowers are not always aware of how personal loans actually work.

Dispelling The Misconception

There are a number of misconceptions regarding personal loans. Dispelling these misconceptions are essential for determining whether or not getting a personal loan is the ideal solution for your financial situation. While a personal loan can appear to be complex in the initial stages, doing your research makes it is easier to distinguish between facts and fairytales.

Common Misconceptions Of Personal Loans

1. Getting A Personal Loan Is Difficult

The concept of applying for a loan can be overwhelming for many people. This is because many of them think they must visit a bank. Apart from them, they also worry about the details. Taking out a loan can be easy with provisions such as being able to compare loans online, going through the costs and fees from the comfort of your home, and even reading reviews.

The reality is that applying for a personal loan is not as hard as you might think. In the past, getting a personal loan involved going to the bank and going through a lot of paperwork. This was followed by waiting for several days and weeks to find out whether or not you have been approved.

  • In the past, consumers relied on their credit unions and banks, which you still can if you want to. Currently, many people opt to look for loans online. This offers several advantages. These include being able to compare between different loans online with regards to their terms and rates. Looking for loans online is convenient in comparison to physically going to a bank and waiting for the chance to meet a banker. However, it is important that the loans you look for online are offered by a licensed financial institution.
  • Licensed online lenders make it possible for you to apply for loans from anywhere and compare various offers. Fortunately, technological advancements have helped to streamline the process and many lenders have made it possible for people to apply for loans online. This convenient and quick application process will save you lots of time.
  • Before applying for the loan, it is important to understand all the requirements for the loan. Also ensure that you have all the documents that you are expected to upload. When you are ready, you can fill out the loan application on your device and look forward to receiving the funds within a short period of time.

2. Personal Loans Are Not Suitable For Emergencies

When you need money fast, a credit card might seem to be the most ideal option. Especially so for people who do not have savings or funds set aside for emergency situations. However, a personal loan is still a worthwhile consideration.

People wonder about how long it will take them to get a loan. If you apply for a loan online through a licensed money lender and everything goes well, you will most likely receive your loan within the day!

3. Personal Loans Require Collateral

You will be glad to know that when applying for a loan with a licensed moneylender, no collateral is required. Their loans are unsecured, meaning that you do not having to provide anything in exchange for the loan.

4. You Must Have A Salary To Qualify For A Personal Loan

Many self-employed individuals think they are not eligible for personal loans. However, lenders have become increasingly flexible with their requirements. To cater to the needs of the self employed, lenders are aware of how important it is to meet their financial needs.

Many licensed moneylenders cater to the needs of different income earners. This is as long as there is a good proof of income and you have been working for at least a year. You can rest assured that being self-employed does not exempt you from qualifying for a loan.

5. Personal Loans Will Damage Your Credit Score

People often believe that borrowing money has an adverse effect in regard to credit scores. This is regardless of whether you use a personal loan, credit card or any kind of loan. Although borrowing excessive amounts of money can have a negative impact on your credit score, increasing credit utilization can actually help to improve your credit score.

6. Consumers With Bad Credit Cannot Get Personal Loans

You do not need excellent credit when applying for a personal loan. Good credit enables you to qualify for loans with the best terms and the lowest interest rates. However, there are options that are available for people who have less than average credit.

A personal loan can ease your financial circumstances. Consolidating credit card debt with a personal loan, for example, can lower interest costs and make it easier for you to get rid of debt faster.