When you come across a financial hurdle affecting your purchasing power, you may feel the need to take a personal installment loan. A personal loan is a credit instrument typically providing a more favorable interest rate than a credit card. Most lenders offer a quick approval process allowing you to access the cash when needed.
Although personal installment loans are beneficial for emergencies, the myths circulating that this form of loan often deters people from seeking funds. Educate yourself about the misconceptions about taking an installment loan by getting familiar with the most common myths about this type of borrowing method.
Personal Loans Require Collateral
Personal installment loans are secured, which means you don’t need collateral, such as property or other assets, to obtain the loan. One of the key reasons people opt for personal loans is the lack of complexity in the process. You don’t need to get involved in a lengthy process that involves offering collateral against the loan.
Lenders usually approve personal loans based on a borrower’s creditworthiness. If a borrower default on an installment loan, they may face penalties or be taken to court. However, they will not lose any personal assets in the process.
I Can’t Get a Personal Loan Due to Low Credit
A low credit score can impact your interest rate or ability to get a loan, but it does not mean you will instantly get rejected. Lenders also look at other factors when lending you money, such as your income, age, and fixed obligation-to-income ratio.
The eligibility criteria to get approved for a loan vary among lenders, but their main intention is to assess your ability to repay a loan. So, even if your credit score is low, you can still get a loan if you can prove that you are a reliable borrower.
The Process of Getting Approved is Lengthy
Some people avoid personal installment loans because they fear the process of getting approved is lengthy. However, this is not true today. When you choose a reputable lender that operates online, you will find that its primary purpose is to streamline the lending and offer a seamless experience to borrowers.
A platform known for its quick approval process is FlexMoney. Their main goal is to make borrowing easy for customers, so they offer a simple application process that operates 100 percent online, along with a quick decision and funds transfer. You can visit Flexmoney.com to learn more about their application process and determine your eligibility for a loan. Their quick artificial intelligence assessment will determine if you’re approved within a few hours and allow you to access cash as early as 24 hours.
Personal Loans Always Have High-Interest Rates
Since personal loans don’t require collateral, it is natural for lenders to charge a higher interest rate most of the time, as lending money can sometimes be risky for them. However, this doesn’t automatically mean all personal installment loans have high-interest rates.
Lenders’ interest rates can vary depending on their base rate and credit profile. According to a recent Federal Reserve System report, the average personal loan APR was 11.23 percent in November 2022, whereas the rate for credit card plans was over 19 percent. Therefore, borrowers with good credit scores and stable incomes may receive a lower rate than credit cards.