In recent years, the number of people with personal loans has skyrocketed from twenty-three million to at least twenty-seven million, as per TransUnion. As a matter of fact, this type of loan was the quickest growing loan product in 2016.
You may be wondering why many people are attracted to taking out personal loans. Well, personal loans offer lots of benefits to the borrowers. However, they are not always the best solution for everyone.
At first, personal loans can be very confusing. Even so, the more you know about personal loans, the simpler it is for you to know what’s real and what’s fake. For a little help, below are five personal loan myths you should know. Read on!
High-interest Rates
The generally known misconception about personal loans is that they bear high-interest rates. Always! However, in reality, these loans can be more affordable than other unsecured loans. Remember that the secret here is to have a stellar credit score that enables you to qualify for low-interest rates.
If you plan to take out a personal loan, it is paramount to take your time shopping around with different lenders to compare interest rates. Knowing what various lenders offers can aid you in finding the best personal loans for people with bad credit at the best interest rate.
It does not have to be stressful and be an extremely time-consuming process, as well. You can easily and quickly compare interest rates and personal loan lenders by visiting websites like Credible.com.
Good Credit
Even though a stellar credit score helps if you are looking for a personal loan, it is not a standard or requirement to be eligible. There are many different lenders that provide personal loans to debtors with poor credit.
Besides credit history and credit scores, creditors can take into consideration your debt to income ration, employment history, and income. Your DTI refers to the total income that goes to loan repayment every month.
Moreover, if you have a low DTI, consistent employment, and steady income, you can surely qualify for a personal loan even with a bad credit score. However, there are a few things to take note, taking out a personal loan with bad or poor credit can impact the amount you can borrow.
Also, it can affect your interest rate. For this reason, it is essential to compare rates from various lenders so that you can find the best option for you.
Difficult To Get Approved
Another popular misconception surrounding personal loans is that borrowers have a hard time getting approved for a personal loan. This is probably the biggest myth that is easy to fall for, qualifies but actually wrong.
As a matter of fact, applying for this type of loan nowadays is as simple as filling out an online application and waiting for approval. Unlike getting a home loan or car loan, qualifying for a personal loan can be an easier process.
What’s more, it begins with comparing your personal loan options with fixed and variable interest rates, which you can simply do online.
Adversely Impact Your Credit Score
If protecting and maintaining your credit score is vital for you, you might be unsure about applying for a personal loan. You might be concerned about how a hard inquiry might impact your credit score.
Although hard credit checks can cut down a few points off your credit score, you can obtain more benefits with regards to your credit score from getting a personal loan over time. Say, for example, you are using a personal loan to merge or unite high-interest loans, which can help make your credit utilization ratio better.
Keep in mind that your credit utilization ratio indicates or shows the percentage of your credit limit at hand. Transferring or moving credit card balances to personal loans can help clear out available credit.
Banks Are The Only Lenders
Before the digital age, we can say that banks used to be the only personal loan lenders. However, due to the increasing popularity or fame of online lenders, borrowers now have a lot of options for taking out a personal loan.
Take note that you can gain lots of benefits and advantages by working with an online lender. Most importantly, the personal loan application process is very easy and fast; in fact, you might get the result of your application immediately.
Takeaway
Personal loans are an appealing funding option for many people. However, most of them don’t fully know the various aspects surrounding personal loans. There are several misconceptions or myths about personal loans which should not be believed in. So that you can enjoy the benefits of personal loans, you must go through the above myths to know what is real and what’s not. Knowing these misconceptions will guide you on your personal loan journey.
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