Loans can be a challenging topic to talk about. Just mentioning the word “loan” will get a wide range of opinions and myths.
Some people view loans as helpful tools that can provide much-needed financial assistance, while others see them as nothing more than debt traps.
And then there are all the myths about loans circulating around – many of which discourage people from ever considering a loan.
But what if we told you that some of those common loan myths aren’t actually true?
In this article, we’ll be debunking common loan myths to help get you the accurate information you need.
Ready? Let’s get started.
Myth #1: Personal loans are only for people with bad credit
One of the biggest myths about personal loans is that they’re only for people with bad credit. This simply isn’t true.
While it’s true that personal installment loans generally have higher rates than other types of loans, like mortgages or auto loans, they’re not just for people with a bad credit history.
In fact, these loans can be a great way to finance a big purchase, consolidate debt or even improve your credit score.
Myth #2: Installment loans have high interest rates
One of the main reasons people are hesitant to take out a personal loan is the high interest rates.
While it’s true that these loan rates are generally higher than other types of loans, like mortgages or car loans, they’re not always as high as you might think.
Personal loan interest rates can vary depending on several factors, including your credit score, the length of the loan, and the lender you choose.
So, if you’re considering a loan, shop around and compare rates before applying. This will help you ensure you are making the lowest interest payments possible.
Myth #3: Only Banks Offer Personal Loans
Banks have long been the go-to source for personal loans, but that’s no longer the only option. Lenders like SkyCap are becoming popular with borrowers looking for a loan.
One of online lenders’ most significant benefits is that they offer more competitive interest rates than banks or other financial institutions. This is because lenders do not have the same overhead costs as banks, such as rent for physical branch locations.
As a result, online lenders can pass on these savings to borrowers through lower rates.
So if you’re looking for a loan, don’t just limit your search to banks.
Myth #4: Personal Loans Are Not Available for People With Bad Credit
When you have bad credit, it can feel like you’re ineligible for any loan. That’s just not true.
There are plenty of lenders who are willing to work with people with bad credit or no credit. In fact, some lenders specialize in loans for people with bad credit, including those with high levels of credit card debt.
Of course, it’s essential to understand that you might not be eligible for the same terms as someone with good credit. For example, you might have to pay a higher interest rate or put up collateral.
But the bottom line is that personal installment loans are available for people with bad credit.
Myth #5: It Is Hard to Get Approved for a Personal Loan
One of the most common myths about personal loans is that they’re challenging to get approved for. The truth is, loan approval is generally based on just a few critical criteria, such as payment history, credit score, and debt-to-income ratio.
The widely held misconception is that these loans involve a daunting application process that includes completing a stack of paperwork and meeting a long list of requirements to get approved for funding.
While qualification requirements vary based on the lender, approval is far easier than applying for a mortgage and involves less documentation.
If you’re considering an installment loan to consolidate debt, make a large purchase, or cover unexpected expenses, don’t let the myth that they’re hard to get approved for deter you from exploring your options.
Myth #6: All Loans Require Collateral
Personal loans are unsecured, which means they are not backed by collateral. This can make them more challenging to qualify for, as lenders see them as a higher risk.
However, installment loans are available for people with bad credit or no credit. These loans typically have slightly higher interest rates and may not be for as much money as secured loans that require a down payment.
Myth #7: Personal Loans Are Worse Than Credit Cards
Personal loans and credit cards are both forms of debt used to finance purchases or consolidate existing debt.
While these loans tend to have lower rates than credit cards, both products can be expensive if you don’t repay the debt in a timely manner.
If you’re considering taking out a loan or using a credit card, it’s essential to understand the terms of each product before you apply.
Personal loans typically have fixed rates, which means your monthly payments will stay the same for the duration of the loan.
On the other hand, credit cards have variable rates that can fluctuate with the prime rate.
In addition, when comparing loans and credit cards, it’s also important to consider the fees associated with each product. Personal loans may have origination fees, typically a percentage of the loan amount.
On the other hand, credit cards may have annual fees, late payment penalties, and cash advance fees.
If you’re unsure which type of debt is right for you, speak with a financial advisor who can help you compare your options and find the best solution for your needs.
Myth #8: Personal Loans Take a Long Time to Process
One of the biggest myths about personal loans is that they take a long time to process. In reality, these loans can be pre-approved and funded very quickly, often within a few days.
This myth likely stems from the fact that traditional bank loans can take weeks or even months to process. However, loans from online lenders can be approved and funded much more quickly.
An installment loan is likely your best option if you need money fast, and many lenders can approve and fund your loan within a few days.
So if you’re in a bind and need money quickly, don’t let this myth stop you from considering a loan.
Myth #9: You Can Only Get a Personal Loan If You Have a Salaried Job
One of the most common myths about personal loans is that you can only get one if you have a salaried job.
While it’s true that most lenders will require you to have a steady income to qualify for a loan, there are plenty of options available for those who are self-employed or have other sources of income.
Applicants are often asked to provide a few years of tax returns or other forms instead of pay stubs from an employer.
So if you’re self-employed or have some other source of income, don’t despair – you may still be able to get a loan. Just be prepared to provide some extra documentation to prove your income.
Myth #10: Personal Loans Always Hurt Your Credit
When used responsibly, personal loans can actually help improve your credit score over the long term. The key is to repay the loan responsibly by making all payments on time and in full. Consistently meeting these payments will help to keep your score healthy.
If you’re considering taking out a personal loan, don’t let the fear of harming your credit score stop you.
Myth #11: You Can’t Get a Personal Loan If You Have Another Loan
One of the most common myths about personal loans is that you cannot have multiple loans open at once.
Lenders will review your application the same way whether you have one or multiple loans open. The key factors that will be considered include your income, current debt to income level, and credit score.
You should not have trouble getting approved if you can demonstrate that you can repay the loan.
It’s also important to note that installment loans can be used for debt consolidation. This is where you use a new loan with a lower interest rate to pay off multiple smaller loans with higher rates. This can be a quick win when it comes to improving your finances.
Don’t let common loan myths stop you from getting the financing you need! At SkyCap, we specialize in installment loans for people with low or poor credit. Start your application today and quickly get the funds you need.