Common personal loan myths to avoid

Personal loans are an extremely useful credit option. One can take up personal loans to meet expenses of vacations, manage marriage costs, pay for education costs etc. Applicants do not require pledging any security or collateral, the documentation procedure is hassle-free, and the loan is disbursed quickly. Also, such loans are available at competitive interest rates, wherein interest rates of Tata capital personal loan are lower for those with a strong credit score of 750 and above. 

Unfortunately, there are various myths linked with a personal loan that deter individuals from applying for a personal loan. Here, we will bust some common myths linked with a personal loan, which you should avoid believing. 

Processing personal loans are time-consuming

Many applicants wrongly believe that personal loans involve tedious approval procedures and have long disbursal time. However, the unsecured nature, i.e. no requirement of collateral of personal loans, allows the lenders to process the loan with minimal documentation and within 2-7 days of submitting the loan application. Some lenders also claim to disburse personal loans within the same day of making the loan application.

Those with low credit scores have no chance of availing personal loans

Though credit score is one of the most important parameters factored in by the lenders to assess the loan applications, having a low credit score does not mean outright loan rejection. A lender will also consider other facets of an applicant’s credit profile like his disposable income, employer’s profile, job profile, etc. while evaluating his loan application. Hence, those scoring favourably in these parameters can still have their loan application approved. However, the interest rate charged for such candidates might be higher than those with good credit scores. Moreover, the credit risk appetite of lenders varies widely, leading them to set different credit score cut-offs for approving personal loans. Hence, those having low credit scores should visit online financial marketplaces to compare the various personal loan offers available on their credit score and other eligibility criteria.

Personal loans have high-interest rates

Many believe personal loans to be an expensive credit option. However, lenders like Tata Capital usually charge higher Tata Capital personal loan interest rates to those having poor credit profiles to compensate for their higher credit risk. While personal loan interest rates for most lenders start from 10% p.a. and upwards, some lenders charge lower interest rates, starting from 8.90% p.a., to those having good credit profiles. Such interest rates cannot be considered as very high as personal loans are not backed by margin or collateral, as in the case of secured loans like a gold loan, loans against securities etc. The interest rates of other unsecured loan options like credit card EMIs and loans against credit cards have usually been found to be higher than the personal loans interest rates charged by the same lender for the same consumer.

Personal loans can be availed from banks only

Many applicants wrongly believe that personal loans can only be availed from banks. This makes them avoid applying with NBFCs or the new age digital lenders in events when banks deny their application for a personal loan. While digital lenders and NBFCs may charge higher rates of interest, they have far more relaxed loan eligibility and other lending norms than banks. With dozens of NBFCs and new-age digital lenders offering personal loans, those looking for personal loans should visit online financial marketplaces to compare personal loan offers from as many lenders as possible.

Those with existing loans cannot avail of personal loans

Personal loan lenders consider the applicant’s repayment capacity while assessing their personal loan application. Lenders generally prefer lending to those with monthly loan repayment obligations, including the EMI for the new personal loan to be within 50% of their monthly income. Thus, existing loan borrowers who can meet the 50% mark can get their loan application approved, provided they meet the other eligibility criteria fixed by the lender. Moreover, as longer loan tenures result in lower EMIs, those surpassing the 50% limit can reduce their total EMI obligation by opting for a longer loan tenure for their personal loan.

All personal loans incur prepayment charges

As the RBI has barred lenders from charging prepayment fees on prepaying or foreclosing floating rate loans, personal loans availed on floating interest rates does not incur any prepayment charges. However, in the case of personal loans offered on fixed interest rates, prepayment fees can go up to 5% of the principal outstanding or part prepaid amount.

Note that some lenders offering personal loans at fixed interest rates do not permit part-prepayment of personal loans, while others permit part-prepayment only after their borrowers have repaid a predetermined number of personal loan EMIs. Hence, consider the terms and conditions related to prepayments and foreclosure while comparing various personal loan options.

Brief on Tata Capital personal loan interest rate for those looking to avail personal loan through Tata Capital

Tata Capital personal loan interest rate begins from 10.99 % p.a onwards. Their offered loan amount goes up to Rs 25 lakh via a simple online procedure with minimal documentation and simple eligibility criteria. Their flexible tenures can go up to 6 years, wherein borrowers can repay their personal loan in the form of EMIs based upon their convenience. Tata Capital even offers quick loan processing as well as tailored personal loan offering to finance your diverse financing requirements.

Tata Capital personal loan interest rate determines the amount you require repaying in the form of EMI against a personal loan. Tata Capital personal loan interest rate is subject to fluctuations. Tata Capital personal loan interest rate can differ for every borrower based on factors such as credit score, repayment capacity, income, the amount required to be borrowed, repayment tenure, employment nature, reputation, FOIR, financial history and various other eligibility criteria. The more attractive rates you get, the smaller the EMI you require repaying. If you opt for Tata Capital, you can avail of an affordable and competitive rate on personal loans.

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