Loans are really important for different money needs, like buying a house, starting a business, or paying for school. But there are lots of wrong ideas about loans. In this blog, we'll clear up these myths and give you the real facts about loans, so you understand everything you need to know.
Personal Loan: Unsecured loans taken for personal use.
Home Loan: Loans taken for purchasing property.
Business Loan: Loans to start or expand a business.
Education Loan: Loans to finance educational expenses.
Auto Loan: Loans to purchase a vehicle.
Did you know? One of the most common loan in India is Personal Loan
Reality: While banks are the primary lenders, loans can also be obtained from Non-Banking Financial Companies (NBFCs) such as Bajaj finance, TATA Capital, L&T Finance etc, different Credit unions and peer-to-peer lending platforms such as Mobikwik, CRED Mint, LenDenClub NBFCs have grown significantly in India, offering competitive interest rates and easier approval processes compared to traditional banks.
Reality: Having a good credit score makes it more likely for you to get a loan, but it doesn't mean you'll definitely get it. Lenders also look at things like how much you earn, if you have a steady job, any debts you already have, and how much of the loan you're asking for compared to the value of what you're buying. It's important to have a good credit score, but you also need to make sure your other money stuff is okay.
Reality: The Reserve Bank of India (RBI) makes rules about loans to make sure everything is clear. Lenders have to tell you about all the fees like processing fees, charges for paying early, and fees for paying late. Make sure to read the loan agreement well and ask about all the charges before you agree.
Reality: Even if you work for yourself, you can still get loans, but it might be a bit different. Lenders usually want to see that you make money regularly, so you'll need to show things like your financial statements, tax papers, and bank statements. Some companies that give out loans, called NBFCs, are good at helping self-employed people get loans, and they have easier rules.
Reality: Paying off a loan before it's due can save you money on interest, but there might be fees for doing it, especially with fixed-rate loans. Before you decide to pay early, check if the money you save on interest is more than the fees you'll have to pay.
Reality: Thanks to online lending, getting approved for a loan is much quicker now. Some lenders can give you a personal loan almost instantly, sometimes in just a few minutes or hours, as long as you meet their requirements.
Reality: Interest rates can either stay the same (fixed) or change (floating). Fixed rates don't change during the loan, but floating rates can go up or down depending on what's happening in the market. Pick the one that works best for your money situation.
Reality: If you co-sign a loan, you're just as responsible for paying it back as the main borrower. If they can't pay, you have to. And if they miss payments, it could hurt your credit score too. Make sure you know the risks before you agree to co-sign.
Reality: Even if the interest rate is low, you still need to look at other things like processing fees, charges for paying early, and how long you have to pay back the loan. These things can make the loan cost more, even if the interest rate is low. Always check all the loan terms before you decide.
Fact: According to a survey, 40% of millennials in India prefer digital loans over traditional ones due to faster processing and minimal paperwork.
Tip: Use loan calculators available on bank websites to estimate your EMIs and compare different loan options before applying.
The Reserve Bank of India (RBI) makes rules for loans to keep people safe. Some important rules are:
Fair Practices Code: Lenders have to tell you all the rules and conditions before you agree.
Interest Rate Caps: For some loans, there's a highest interest rate lenders can charge.
Grievance Redressal: Lenders have to have a way to deal with complaints from customers.
Knowing the truth about loans is really important for making smart money choices. Clearing up common myths helps you pick the best loan and handle it well. Always read all the details, check different choices, and use money tools wisely. When you understand how loans work, you can use them well and take advantage of what they offer for your finances.
We EazyBankLoan understand the process of procuring a loan can be stressful. That is why we take care of your loan application process, saving you time and hassle by handling the paperwork and communication with the loan providers.
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| Topic | Summary |
|---|---|
| Understanding Loans | Loans involve borrowing money with the promise to pay it back along with extra money called interest. They can be secured (with collateral) or unsecured. |
| Types of Loans | Various types include personal loans (for personal needs), home loans (for property), business loans (for business needs), education loans (for educational expenses), and auto loans (for vehicles). |
| Common Loan Myths Debunked | - Not only top banks offer loans; NBFCs and online platforms provide competitive rates. - Having a high credit score increases chances but doesn't guarantee approval. - Loans have transparent fee structures. |
| - Self-employed individuals can still obtain loans, but criteria might vary. - Prepayment can save interest but might involve fees. - Loan approval can be quick with online lending platforms. | |
| - Interest rates can be fixed or floating; choose based on individual preferences. - Co-signing a loan makes you equally responsible. - Low-interest rates don't always mean cheaper loans. | |
| Regulations and Safeguards | The RBI implements rules like Fair Practices Code, Interest Rate Caps, and Grievance Redressal to protect consumers. |
| Conclusion | Understanding loan realities helps in making informed decisions. Always read terms carefully, compare options, and utilize money tools wisely. |
A credit score of 750 or above is generally considered good for personal loan approval.
Yes, but applying for multiple loans at once can negatively impact your credit score due to multiple hard inquiries.
Missing an EMI payment can lead to late fees, a higher interest rate, and a negative impact on your credit score. Continuous defaults can lead to legal action by the lender.
Yes, you can transfer your loan to another lender through a process known as loan refinancing or balance transfer, which can help you secure a lower interest rate.
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