Demonetization, its Advantages & Points to Note
Everyone in India and abroad was surprised by the government's announcement to replace existing currency notes of Rs. 500 and Rs.1,000, which accounts for alm . . .
From sponsoring a foreign trip to help you buy your dream car; from taking care of medical emergencies to assisting you in starting your own business, loans can help you in many ways. However, strangely, there are few myths associated with borrowing. Some think it is a tiring process that takes weeks, while others think that no loan is sanctioned without collateral. Well, like all myths, they should be ignored. The fact is that in recent years, things have changed and the lending sector has become more customer-friendly. Therefore, it is high time you learn more about these popular myths about loans and experience the changes for yourself. Here we try to debunk some of the myths for you.
Busting the Credit Myths
I am not good enough:
Nothing kills more dreams than doubts. It may sound a bit philosophical, but actually, many customers reject themselves even before approaching the lender. They feel that they do not have the right credentials such as eligibility criteria. Therefore, here is a fact – irrespective of low salary or poor credit score or old age, you still stand a chance to get a loan. Financial institutions customize loan plans according to the profile and requirement of the applicant. So, give yourself a chance and apply for the loan with confidence before drawing conclusions.
I don’t have collateral:
There are two types of loans – secured and unsecured. While secured loans require the presence of collateral, unsecured loans do not. However, the latter has steeper interest rates. So, if you earn a healthy monthly income and are confident about repayment, there is absolutely no need to put any asset on the line. In fact, personal loans are unsecured loans and are one of the most sought after loans.
My poor credit score makes me ineligible:
Well, it is true that lenders give good weightage to credit score while evaluating the loan eligibility of an applicant. Undoubtedly, good credit score not only raises your chances of loan approval but also gets you better terms from lenders. Somehow, there is a wrong perception that this is the only factor, which is considered. Lenders know that delays or defaults in repayment in the past may not completely reflect the present situation where you own a valuable asset to use as collateral or have a decent income. Some lenders see other criteria as well and sanction the loan. In fact, if you repay your current loans on time, your credit score can improve.
Time-consuming and complicated application process:
Even when people are ordering food on apps, they think the lending sector is still stuck in the era of files, and folders. In digital India, things move at a great pace and now lenders reply in around 48 hours of your application. The verification and documentation processes have also become smoother and hassle-free. The bulk of the work is done online and often lenders send their representatives to the customer's home to take care of the rest of the formalities.
High rate of interest:
Another widely spread credit myth is that one simply cannot take a loan because the rate of interest is very high. Well, the interest rate and other relative terms depend largely on your profile and different lenders levy different rates. In fact, most interest rates in loans range between 8-16 per cent, which is comparatively lower than the interest, charged on credit cards (almost 20-35 per cent). Also, you can opt for a longer tenure to keep EMIs smaller.
Apart from those mentioned above, there are also myths like ‘only big financial institutions give loans and that too to only salaried customers’ or ‘loans have no tax benefits’ that usually discourage people. But if you have cash requirements, you should consider taking a loan. In fact, a loan can help you fulfil your dreams faster and sort out financial problems in a moment. With so many financial institutions offering different types of loans at reasonable terms and conditions, you can not only pick the kind of loan that suits your purpose the most but also negotiate the lending terms. All you need to do is manage it well once disbursed. So, now that you are acquainted with the common myths surrounding loans, you can debunk them for others.
The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.