Common Myths About Personal Loans 2025

Meet Priya, she needs ₹1 lakh for her sister’s wedding. Someone recommends a personal loan, but she’s hesitant. She’s heard personal loans are slow, expensive, and tricky to get.

We understand that there’s a lot of confusing information out there. That’s why we’re here to help.

Myth #1: Only Traditional Banks Offer Personal Loans

Truth - Banks aren’t the only financial institutions offering personal loans. NBFCs and fintech firms also offer competitive personal loans. They often have more flexible processes and sometimes faster approval, especially via digital channels. 

Myth #2: Personal Loans Have Long Processing Times

Truth - Today, you can apply for a personal loan online and get an instant decision. With a simple paperless application and a quick disbursal process,  you get quick access to funds to meet your financial emergencies.

For example, Hero FinCorp Instant loan App can process your loan request in as little as 10 minutes and disburse it shortly after, allowing you to focus on your needs, not the paperwork.

Myth #3: Only Salaried Individuals Are Eligible for Personal Loans

Truth - That’s not true. Self-employed professionals, freelancers, and gig workers all qualify. Lenders look at the stability of income, documentation, and repayment capacity, more than a formal salary slip.

Want to know where you stand? Try our personal loan eligibility calculator, and get clarity in seconds.

Myth #4: Personal Loans Have Sky-High Interest Rates

Truth - Personal loans are a class of unsecured loans as they have no collateral. While unsecured loans tend to carry higher rates than secured loans, they’re still much lower than credit card interest. Instant personal loan rates now typically start around 19% to 30% per annum (starts at 1.58% per month), depending on your credit profile.

Myth #5: You Should Only Apply for Personal Loans During Emergencies

Truth - That’s outdated thinking. Get personal loans to cater to your instant or short-term financial needs without hampering your long-term savings. You can opt for one for medical bills, weddings, international trips, or home renovation. Think of them as goal-specific, flexible tools, not just emergency fixes.

Myth #6: You Can’t Foreclose a Personal Loan

Truth - There are lenders that allow prepayment, often with a minimal penalty of as low as 5% + GST. Doing so can save you interest and improve your credit history. However, check your lender’s terms carefully.

Myth #7: You Can’t Take Personal Loans With Existing Loans

Truth - Having existing loans doesn’t disqualify you. Lenders assess your overall repayment capacity. If your combined EMI-to-income ratio remains healthy and if your EMIs occupy less than around 40%–50% of your income, you’re still in the game!

Myth #8: No Personal Loan for Low Credit Scores

Truth - The truth is, your credit score impacts your loan eligibility. That being said, a low credit score does not automatically disqualify you. Lenders also consider your income, job stability, and repayment track record. Some will still approve your application if the rest of your profile is sound. At most, you’ll be charged a higher interest rate.

Myth #9: Personal Loans Have a High Risk of Rejection

Truth - Rejection only happens if lenders are convinced that you’ll be unable to repay the loan. After all, they consider multiple factors, such as income, credit score, and debt-to-income ratio, and many more. Your chances are good if you can repay.

Myths vs. Facts, Now Decisions

We hope that these myth-busting insights have given you more clarity on how personal loans work in today’s world. To recap, you can use personal loans to manage your planned or unexpected obligations. All you need to worry about is borrowing only what you need, understanding the repayment terms, and choosing a trusted lender.

Need funds quickly?  Apply for Hero FinCorp’s Personal Loan.

Frequently Asked Questions

1. Can I get a personal loan of as low as ₹50,000?

Yes, NBFCs like Hero FinCorp offer instant loans of as low as ₹50,000 in 10 minutes.

2. How to get a personal loan at low interest rates?

To get a personal loan at a low interest rate, maintain a credit score of 750 or above, have a low debt-to-income ratio, and choose a shorter repayment tenure.

3. Can I apply for a personal loan if my salary is below ₹20,000?

Yes, several NBFCs like Hero FinCorp offer personal loans against a salary of as low as ₹15,000 per month.