Considering a personal loan? Avoid These 4 Myths

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Before taking out a personal loan, clear up some of their common myths so you can make an informed financial decision. (iStock)

Personal loans are loans with a fixed interest rate and fixed monthly payments that can be used for almost any loan purpose. They are commonly used for debt consolidation, emergencies, home renovations, debt repayment, and more. Plus, most personal loans are unsecured – unlike home loans or car loans – which means you don’t have to mortgage an asset to get it.

Understanding the intricacies of personal loans can take some time. If you don’t fully understand how they work, you may fall for some of the common myths about personal loans. Keep reading to find out which four are.

WHAT TO DO BEFORE OBTAINING A PERSONAL LOAN

You can explore your personal loan options, visit Credible compare rates and lenders.

4 Personal Loan Myths To Ignore:

  1. Personal loans are too expensive
  2. Personal loans won’t work in an emergency
  3. Personal loans are intended only for high-level borrowers
  4. Applying for a loan for individuals is difficult

Myth 1: Personal loans are too expensive

Depending on your creditworthiness and income, individual loan rates may exceed 30%. But the average interest rates on personal loans are usually lower than the average interest rates on high-interest products like credit cards. For example, last February, the average credit card interest rate was 14.75%, while the average 24-month personal loan was 9.46%, according to data The federal reserve

Because of this, personal loans are commonly used to consolidate credit card debt. Using a lower interest rate personal loan to consolidate it or other high interest rate debt can save you hundreds of dollars in interest. If you are wondering what your personal loan rate and monthly payments might be, visit Credible to use them. personal loan calculator and find best rates for individual loans

Myth 2: Personal loans won’t work in emergencies

Unlike mortgage loans, personal loans do not require you to complete the process after applying for the loan. For this reason, during emergencies, personal loans can provide you with quick access to cash. For example, some lenders may deposit the loan amount into your bank account the day after the loan agreement is signed.

HOW TO MANAGE PERSONAL LOANS MORE EFFICIENCY

Myth 3: Personal loans are only for high-level borrowers

While it is true that the best personal loan rates and the largest loan amounts usually go to borrowers with a credit rating ranging from good to excellent (670 or higher) and high incomes, it is a common misconception that personal loans are only for top tier borrowers.

Some lenders offer customized loan options to borrowers with low credit ratings and low incomes. For example, some lenders approve candidates with a credit rating of only 580, which is a fair score on the FICO credit rating model. While you are more likely to get a higher interest rate on a bad credit rating, you can still get a lower rate than on a credit card.

To increase your chances of applying for a larger amount of personal loan or a better rate with a lower credit rating on a credit check, consider applying for a loan with another person who has a higher credit rating and higher income, if allowed. Just try to pay off the loan on time so that it does not affect the applicant’s creditworthiness.

Alternatively, you can work to improve factors such as debt-to-income ratio and poor credit rating. before applying for a loan… This can increase your chances of getting a higher grade.

Exposing 3 myths about personal loans

To explore all your personal loan options, visit an online marketplace such as Credible

Thanks to advances in technology, it is easier than ever to apply for a loan. In the pre-internet era, you had to call or visit a lender in person to apply for a loan. Today, you can apply for a personal loan from anywhere.

The process is faster – it may take less than 10 minutes for some lenders to apply for a loan. You just need to enter some personal information like your name, date of birth and income.

In addition, it is also easier to compare multiple lenders. If you are prequalified for a personal loan through an online lender, you can compare rates and conditions of multiple personal lending institutions digitally or via a mobile app within seconds of applying.

Final thoughts

Now that you’ve learned about some of the common myths about personal loans, you can make a more informed loan decision. Before you decide to take a personal loan, be sure to research all your options to make the best choice for your personal finance.

And if you end up picking one, learn how to manage them. For example, make sure you can pay off your loan on time to avoid late fees and serious damage to your credit score. It is important to understand how loans to individuals differ from business loans and car loans, as these two loans are secured and not unsecured loans.

If you need more information about personal loans, you can visit You can contact experienced loan officers to get answers to your questions.

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Have a financial question but don’t know who to contact? Write to the Safe Money Specialist at moneyexpert@credible.com and your question can be answered by Credible in our Money Expert column.

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