Know 7 Common Myths About Personal Loans

Know 7 Common Myths About Personal Loans

Personal loans are becoming the popular choice for meeting various financial needs, from urgent medical expenses to essential home repairs or even fulfilling necessary travel plans. One of the primary advantages of personal loans is their accessibility, which does not necessarily require any collateral to secure funds. These are called unsecured personal loans. This ease of access makes personal loans a convenient option, with a straightforward application process for borrowers.

However, misconceptions regarding personal loans frequently prevent prospective borrowers from considering this choice. Below listed are all those popular personal loan myths and the facts that lie beneath them.

Debunking 7 Common Personal Loan Myths

Myth #1: Personal Loans Are Expensive 

Contrary to popular belief, a true loan like a personal loan can be an affordable option for an individual. While interest rates on personal loans are frequently lower than those on credit cards, they might be higher than those on secured loans, such as mortgages. Interest rates also depend on various factors, including lender policy, credit history, and credit score. In comparison to personal loans with higher interest rates, you may be qualified for a personal loan with competitive interest rates if you continue to maintain a solid credit score. 

Myth #2: Personal Loans Are Difficult to Obtain

Obtaining a personal loan is not as difficult as it sounds. In comparison to a regular banking system, it involves less paperwork and doesn’t require a lengthy procedure. To get funds instantly, you can apply for an immediate personal loan up to Rs. 5 lakhs on the Zype app in just five minutes. Apply now to receive money right away. Furthermore, the approval is quicker  in unsecured personal loan as compared to secured ones. Even though lenders consider factors including income, employment history, and credit score, there are ways for those with less-than-perfect credit or low credit scores. In such circumstances, borrowers can choose higher-interest true loans and meet their emergency needs.

Myth #3: Personal Loans Ruin Credit Scores’

This is a misconception among borrowers that personal loans ruin credit scores. When managed responsibly, personal loans can have a good impact on your credit score. Responsible borrowing behavior demonstrates financial responsibility to credit bureaus, which improves creditworthiness over time. Hence, to keep your score healthy, it is important to make timely payments and not delay or miss out on your monthly EMIs against the loan. However, actions such as overborrowing or not repaying the loan on time may impact your credit score and you may find it difficult to obtain future loans from the lenders.

Myth #4: Personal Loans Are Only for Emergencies

While personal loans can be a lifeline during emergencies, they are not limited to such situations. This is the most common myth among borrowers. True loans such as personal loans can be helpful for a variety of purposes, such as financing a dream wedding, home renovations, and educational costs. Because personal loans are so flexible, borrowers can meet a range of financial demands without being constrained.

 Myth #5: Personal Loans Have Hidden Fees

While some loans may have fees associated with origination or late payments, these fees are typically disclosed upfront in the loan agreement. It is always advised that borrowers should review the terms and conditions carefully to understand any potential fees before committing to a loan. The common fees included are late payment fees, prepayment penalties, and origination fees. Generally, reputable lenders follow transparent lending practices, and any such hidden fees are mentioned by lenders beforehand.

Myth #6: Personal Loans Take Forever to Approve

In today’s digital age, obtaining a personal loan can be a quick and efficient process. Many lenders offer instant personal loans, allowing borrowers to receive funds within days. While some loans may require more paperwork or a verification process, the overall procedure has become smooth and hassle-free compared to traditional lending methods. Digital lending has simplified the loan application process for borrowers by eliminating lengthy and time-consuming steps. For example, Zype allows you to apply for a quick personal loan online with minimal documentation process and get instant funds into your bank account.

Myth #7: Personal Loans Should Be Avoided

There is a popular myth about personal loans that it is always risky. However, it can be a valuable financial tool when used responsibly. Whether consolidating high-interest debt, covering unexpected expenses, or financing a major purchase, personal loans offer flexibility and convenience. However, borrowers should be careful and borrow only what they can afford to repay personal loans 


There are a lot of myths about personal loans. However, personal loans can be a viable option for individuals seeking financial assistance. They are quite advantageous for borrowers, with fast approval processes and low-interest rates among their many advantages. People who are looking for funds for their financial needs can make well-informed judgments if they are aware of the truth behind these personal loan myths.

Frequently Asked Questions

Are Personal Loans Expensive?

Interest rates for personal loans can change based on several factors, including lender policy and credit score. While some personal loans could have interest rates that are higher than others, others might have competitive rates, particularly for borrowers with good credit score

What Are The Hidden Things In A Personal Loan?

Personal loan agreements may include hidden fees. These may consist of late payment costs, prepayment penalties, and origination fees. Before signing any loan arrangement, be sure you have read the terms and conditions completely. 

Is There Any Security For Personal Loans?

Personal loans fall into two categories: secured and unsecured. Secured personal loans require collateral, such as a vehicle or property, to secure the loan while unsecured personal loans do not require collateral but may have higher interest rates. 

Is It True That Personal Loans Have Very High-Interest Rates?

While some personal loans may have higher interest rates, especially for borrowers with lower credit scores, many lenders offer competitive rates, particularly for those with good credit history. Borrowers can look for competitive rates by comparing different lenders. 

Are Personal Loans High Risk?

Myths about personal loans include that they carry higher risks. This may turn out to be true if borrowers fail to make timely repayments. Defaulting on a personal loan can damage credit scores and result in additional fees and penalties. However, responsible borrowing and careful financial planning can mitigate these risks. 

Are Personal Loans Only Available For Salaried Individuals?

No, personal loans are available to a wide range of individuals, including salaried employees, self-employed individuals, freelancers, and even retirees, depending on the lender’s eligibility criteria. 

Is It Necessary To Have A Cosigner To Get Approved For A Personal Loan?

No, personal loans are available to a wide range of individuals, including salaried employees, self-employed individuals, freelancers, and even retirees, depending on the lender’s eligibility criteria. 

Are Personal Loans Only Suitable For Large Expenses?

Personal loans can be used for various purposes, including both large expenses like home renovations or purchasing a vehicle, and smaller expenses like consolidating debt or covering unexpected medical bills. They offer flexibility to borrowers in managing their finances according to their needs and goals.


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