For most people today, borrowing money for any reason is never a good thing. From social stigmas to cultural issues and hearsay, there are plenty of factors that can hold back a person from seeking financial assistance whenever he/she needs to.
But, no good ever comes out of relying on hearsay. The best way to weigh up any option is to look at all the facts and data pertaining to it so you can make an informed choice. Getting a personal loan when the need arises should work much the same way.
However, the truth is that there are plenty of myths that surround a personal loan. As a consequence, most of you choose to do away with this option rather than take it up when it’s needed, for example when your savings are falling short. Busting these myths can make all the difference between you getting financial help at the right time and continuing to scrounge for money during desperate times.
So without further ado, let’s take a good look at what’s true and what’s not when it comes to personal loans as bust these common 5 personal loan myths.
Myth #1: “There’s no issue in taking out a personal loan for a friend or a family member”
Lending and borrowing money among friends or family members is commonplace in life. But, borrowing money from a bank and lending it to someone else won’t always turn out to be good. To begin with, try and find out why your friend or family member can’t borrow on his/her own.
If it’s because of bad credit, then it should be a red flag for you. For all your good intentions of trying to help out, you may end up in debt in case of any missed payments in the future. What’s worse? Any kind of wilful defaulting will put you in the eye of the storm when it comes to the bank’s recovery process. And we haven’t even started talking about the adverse impact it may have on your credit score, jeopardising your chances of bagging, say, a home loan, for yourself in the future.
Myth #2: “A personal loan is only for those with a fixed income or salary”
It’s a well-known fact that loan providers do prefer fixed-income earners when it comes to personal loans as their chances of successful repayment are higher. But, this isn’t to say that other income earners are ignored.
In fact, there are plenty of banks in Malaysia that offer personal loans for variable income and commission earners. Some banks even offer personal loans that expatriates can apply for by providing additional documents.
Myth #3: “Only a good credit score qualifies you for a personal loan”
Your credit history is one of the first parameters that’s evaluated in an eligibility check for a personal loan. Naturally, having a good credit score means you pass that part of the check with flying colours. A good score may even qualify you for a loan with favourable terms.
On the other hand, having a bad score doesn’t always have to end in disappointment. While the rates may not be favourable, chances are that you may have a couple of options to choose from. You could even try secured personal loans where you’ll need to put down some collateral. Read all you want to know about credit scores in our Credit Reports FAQ.
Myth #4: “Taking a personal loan may prove costly in the long run”
When you think about it, taking any kind of loan only adds to your debt, if any. But, what makes a personal loan a handy financial tool is that you can use the money as you see fit. Whether you want to renovate your house or plan to study further, you can use the money from a personal loan.
The useful part is that you can use the money to consolidate multiple debts. For instance, if your mounting credit card bills are too high, you can use a lower-interest personal loan to pay it all off and just have to deal with a single, more affordable payment. Read more about debt-reduction strategies in our blog 5 Useful Tips to Become Debt-Free.
Myth #5: “Applying for a personal loan is time-consuming and cumbersome”
With digital technology making great strides in the finance sector, this point couldn’t be further from the truth. Gone are the days when you had to go to a bank for each and every kind of financial transaction.
You can apply for a personal loan from the comfort of your home on your mobile device or desktop. All you need to do is upload scanned copies of the mandatory documents and fill out the application form online. What’s more? Some loans come with an in-principle approval period of just 10-15 minutes!
To sum things up, there’s always the danger of you believing everything when you hear much of the same quite often. But, a little groundwork can go a long way in helping you find the truth. Myths surrounding personal loans work much the same way.
If you’re looking to apply for a personal loan, you’ll be well-advised to consider some of the best ongoing personal loan promotions in Malaysia in a bid to make an informed decision. That said, always be cautious of the common personal loan mistakes to ensure you have complete clarity.
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