Debunked Personal Loan Myths

summary:

“…what is a personal loan: A personal loan doesn’t require collateral because most are for less than R15,000. The cost to borrow this money is the interest rate the lender charges you…”

“…Applying for a personal loan is easier than it used to be thanks to technology, the application process is much more streamlined – sometimes even free. Now, many banks allow you to apply for a personal loan online – as you can do right here…”

“…People often wonder, “How long does it take to get a personal loan?” The answer depends on which financial institution you’re getting a loan from.  As well as whether you have good credit or bad credit. Every bank has its own policies regarding loan approval and funding….”

“…One of the most common myths about personal loans is that they cost a lot.  The truth is they don’t – personal loans charge interest, just as a credit card does, but there is often a big difference between the annual percentage rates…”

“…Shopping around for a personal loan is a smart move, but there are a right way and a wrong way to do it…Applying for multiple loans at once could actually work against your approval odds, instead of in your favour. Remember to review the personal loan requirements for each lender first before moving ahead with your application…”

Personal Loan Myths Debunked

Personal loans are the most diverse of all your borrowing options. But what exactly is a personal loan? And how does it differ from other policies out here? A personal loan is ‘unsecured’ money you borrow from a lender. Unsecured because most personal loans don’t require the borrower to provide any collateral. When you borrow money to buy a car or a home, the car or home act as collateral, if you don’t pay back the loan, the lender repossesses your car or home.

A personal loan doesn’t require collateral because most are for less than R15,000. The cost to borrow this money is the interest rate the lender charges you: the higher your credit score, the lower your interest rate. If you’re considering a personal loan, take steps to improve your credit score if it’s less than ideal. Even a small difference in interest rates can save you a substantial amount of money over the term of your loan.

There is more than one way of putting a personal loan to work. Use a personal loan to consolidate debt, do home upgrades or repairs, pay medical bills, start a business, cover the cost of a dream wedding or vacation, pay an outstanding tax bill, or even buy a car.

That kind of flexibility is excellent and could make a real difference in your life. However, for some reason, they are often overlooked because borrowers don’t always understand the ins and outs of how they work. Or how to make them work for you. We at QuickCredit dig deep to debunk some of the most common personal myths out there to help you decide whether a personal loan is a right fit for your financial needs.

Common Misconceptions About Personal Loan

With so many personal loans out there it can be confusing at first but the more you know, the easier it is to separate fact from fiction. Here are some common myths busted:

Applying For A Personal Loan Is a Lot Of Work

How hard is it to get a personal loan? Not as difficult as you might think.

Applying for a personal loan used to mean going to your bank and filling out a stack of paperwork, then waiting for days or even weeks to hear back about whether you’re approved. Thanks to technology, the application process is much more streamlined – sometimes even free. Now, many banks allow you to apply for a personal loan online – as you can do right here.

It’s vital to review your lender’s personal loan requirements before you start your application, making sure you have any supporting documents approved and uploaded. Documents often include your recent pay slips and a copy of your South African ID.

*note. If you are not already a customer of the bank you’re applying for a loan with, check to be sure that you can start the loan application process online. In some cases, you may have to meet with a banker in-person to get the ball rolling.

Personal Loans Arnt Worth Considered In An Emergency.

Life is inevitably full of unexpected surprises – and is often good at life throwing you curve balls.  When this happens, which it will you will need money – quickly. Our first thought is always the credit card  – and while a credit card may seem like the best option but you shouldn’t discount a personal loan.

People often wonder, “How long does it take to get a personal loan?” The answer depends on which financial institution you’re getting a loan from.  As well as whether you have good credit or bad credit. Every bank has its own policies regarding loan approval and funding.

Online and alternative lenders can also offer fast funding and are worth exploring depending on your needs. Remember to pay attention to the fine print and loan conditions to ensure you’re getting the best deal possible.

A Personal Loan Is The Most Expensive Way To Borrow.

One of the most common myths about personal loans is that they cost a lot.  The truth is they don’t – personal loans charge interest, just as a credit card does, but there is often a big difference between the annual percentage rates.

If you have a higher credit score, you may find that a personal loan from a bank carries a lower interest rate than a credit card offers. And getting a personal loan from your bank can also help pay off or consolidate your debt.

There’s also a difference in how the rates for personal loans versus credit cards are calculated. With a credit card, the rate is usually tied to an index rate. If that index rate increases, your credit card APR (annual percentage rate)  rises as well. With personal loans, the rate can be fixed, meaning it stays the same over the life span of the loan.

* Watch out for an origination fee. This is a fee some lenders charge upfront for a personal loan, and it’s typically deducted from the loan proceeds. If you are applying for a loan at a bank you are already apart of – see if they can waive this cost for being a loyal client.

Applying For More Than One Personal Loan Increases Your Odds Of Getting Approved

Shopping around for a personal loan is a smart move, but there are a right way and a wrong way to do it. Every time you apply for a personal loan, it registers on your credit report. It’s important to take applying for a personal loan seriously as each inquiry knocks a few points off your credit score. Applying for multiple loans at once could actually work against your approval odds, instead of in your favour. Remember to review the personal loan requirements for each lender first before moving ahead with your application.

So now that you know the truth about personal loans take a look at all the things you can do with your new personal loan below.

A personal loan is meant to improve your personal finances or help you afford essential things you don’t have the cash to pay for. So what can you use your loan for – the short answer is, “anything.” Lenders typically don’t ask what the money is going to be used for beyond a perfunctory multiple choice question on some online applications.

Consolidate student loan debt.

Pay off payday loans.

Consolidate credit card debt.

Pay medical debt and expenses.

Pay pet medical expenses.

Helping a family member.

Repay a loan.

Pay a tax bill.

Boost your credit score.

Invest.

Pay for your wedding.

Pay for a vacation.

Pay for a funeral.

IVF.

Adoption.

Loans are not one size fits all – with many variables that differ from lender to lender. Remember when it comes to your finances reading the fine print is a must. as there is a lot to consider when taking out a personal loan. Take time to go through your loan requirements, check your credit score to see where you stand – and make the necessary changes to your report before applying – repairing your score before your application allows you time to compare your options and help find the right one for you.