Personal loans can sort out consolidating debt at lower rates of interest or managing expenses if you have a financial shortfall. However, there are many personal loan myths on offer and it's important to separate fact from fiction if you are planning to borrow. Listed here are the biggest personal loan myths debunked.
1. Myth: Personal loans always have high-interest rates
A common misconception surrounding personal loans is they always carry high-interest rates. The truth is, personal loans could be less expensive than other types of unsecured loans or even credit cards.
The key is having a good credit score that permits you to qualify for those lower interest rates. If you're interested in obtaining a personal bank loan, it's important to shop around with various personal loan lenders to see how rates compare.
Seeing what different lenders offer will help you get the best loan at the best rate. It doesn't have to be time-consuming either. You can quickly and simply compare rates and lenders by visiting PayPasser.com.
2. Myth: You need good credit to get a personal loan
While a good credit score helps if you're shopping for unsecured loans, it's not really a set in stone requirement to qualify. There are many lenders that offer personal loans to borrowers with less than perfect credit.
Aside from credit ratings and credit history, lenders can also take into account your earnings, history of employment, and debt-to-income ratio (DTI). Your debt-to-income ratio is when your main income goes to debt repayment each month. If you have a solid income, consistent employment, along with a low DTI, those could help offset an undesirable credit score.
There are a few trade-offs to bear in mind, however. Getting a personal loan with fair or bad credit can impact the number you can borrow and, more importantly, your interest rate. Again, that's why it's essential to compare interest rates from different personal loan lenders to obtain the most affordable option.
3. Myth: It's hard to obtain approved for a personal loan
This is another of the biggest personal loan myths that's simple to believe but entirely wrong. Actually, trying to get a personal loan these days is really as easy as completing a credit card applicatoin on the internet and waiting between a few minutes to a couple days for approval.
Compared to getting an auto loan or mortgage loan, getting approved for a personal bank loan can be a much simpler process. And it starts with comparing your choices for private loans with variable and fixed rates, which you can conveniently do online with PayPasser.
4. Myth: Trying to get a personal loan hurts your credit score
If preserving your credit score is important to you, you may be hesitant about trying to get personal loans. You may be concerned about the way a hard credit assessment may affect your score.
While hard inquiries can trim several points off your score, you can glean more credit score benefits from obtaining a personal loan in the long run. If you're utilizing a personal bank loan to consolidate high-interest credit card debt, for example, that may improve your credit utilization ratio.
Your credit utilization ratio reflects the percentage of the available credit limit you're using at any time. Shifting charge card balances to some personal bank loan can release available credit and as long as you don't replenish new balances around the cards, that may work in your favor for credit rating.
5. Myth: Banks would be the only personal bank loan lenders
This is among the personal bank loan myths that used to be true. But thanks to the growing popularity of online lenders, you now have more options than ever to get an unsecured loan.
Working by having an online lender to get a personal loan can provide advantages. The application process can be easily and you'll get instant or near-instant approval.
Once you're approved, your individual loan might be funded in a matter of days. Online lenders can provide flexible repayment options and terms and potentially yield lower rates of interest when compared with brick-and-mortar banks.
If you're wondering your options for getting unsecured loans online, PayPasser might help. You can view loans and compare rates from different lenders in one location, without triggering a hard credit assessment.