5 Common Myths About Personal Loan You Probably Believe

Key Takeaways: 
 

• Personal loans don’t always have high interest; comparing lenders can get you cheaper rates.
   
• You don’t need a perfect credit score; fair scores can also get you loans, though at higher rates.
   
• Taking a loan won’t ruin your credit if you repay on time; it can actually improve it.
   
• Loans aren’t just for emergencies; you can use them for travel, weddings, or even home upgrades.
   
• Not only do banks offer loans, but NBFCs and fintech apps often approve faster with fewer documents.
   

BONUS: RBI CUT THE REPO RATE BY 50 BASIS POINTS, LOWERING EMIS FOR EXISTING BORROWERS AND MAKING NEW PERSONAL LOANS MORE CHEAPER.

A personal loan is an unsecured loan offered by banks or lenders to meet individual financial needs, repaid in fixed monthly instalments. 

Let’s understand this with an example, how Nitesh applied for a personal loan at a higher interest rate because of some myths around him: 

Nitesh Verma, a 28-year-old sales executive from Jaipur, believed a popular online rumour: “Bitcoin always doubles in value every year.” Encouraged by friends and flashy social media posts, he took a personal loan of ₹2,00,000 in early 2022 to invest in Bitcoin.

He was convinced it was a guaranteed win, not realising how unpredictable the crypto market can be. Unfortunately, prices fell sharply within months. While his investment lost value, the loan repayments stayed the same.

Here’s a snapshot of Nitesh’s situation:
 

Nitesh learned the hard way that crypto doesn’t come with guarantees, and believing myths can be expensive.

Why Personal Loan Myths Persist?

Many myths about personal loans continue to circulate, often because of misinformation shared online, outdated financial advice, or misunderstandings passed on by friends and family. Social media platforms and messaging apps can spread half-truths quickly, making it hard to separate fact from fiction.

For example, one person’s bad experience with high interest might be shared as a general rule, while someone else may wrongly claim you need a perfect credit score to get approved. These ideas then get repeated without being checked.

Myth 1: Personal Loans Always Have High Interest Rates

Rina Shah, a 32-year-old IT professional from Pune, needed funds for a medical emergency. She expected personal loans to be too costly, but after checking with a few banks and fintech apps, she was surprised to find a low-interest offer due to her good credit score.

Here’s how her options compare:
 

Rina chose the fintech loan, saving over ₹500 a month. Not all personal loans are expensive, you just need to compare smartly.

Read More – Personal Loan Myths Debunked: What Every Borrower Should Know

Myth 2: You Can’t Get a Loan Without a Perfect Credit Score

Amit Kulkarni, a 30-year-old freelance designer from Nagpur, had a credit score of 675—not excellent, but decent. He needed ₹2,00,000 for relocating to a new city. Initially worried he'd be rejected, he was surprised when multiple lenders made him offers.
 

Amit chose NBFC Y. Although the interest was slightly higher, he still got the loan without needing a perfect score.

Myth 3: Taking a Loan Hurts Your Credit Score

Priya Mehra, a 29-year-old marketing executive from Chennai, was hesitant to take a ₹1,50,000 personal loan for a professional course. She worried it might lower her credit score. However, after researching and speaking with her bank, she went ahead, committing to on-time payments. Let’s have a look on her credit activity: 
 

Priya’s responsible behaviour improved her score significantly.

Myth 4: You Can Use Personal Loans Only for Emergencies

Karan Joshi, a 34-year-old engineer from Ahmedabad, always believed loans were for emergencies only. But when he wanted to renovate his kitchen and take his family on a holiday to Kerala, he explored personal loan options instead of dipping into his savings: 
 

Karan repaid the loan comfortably over three years, while still preserving his emergency savings.

Also Read - Top Mistakes That Can Get Your Personal Loan Application Rejected in 2025

Myth 5: Only Banks Offer Personal Loans

Sneha Rao, a 31-year-old graphic designer from Bengaluru, needed ₹1,00,000 for a design course abroad. She first approached her bank, which offered a loan but required several documents and a longer approval time. A friend recommended she try a fintech app instead. Let’s explore more about Lender’s Type and Loan providers: 
 

Sneha chose the fintech app for its speed and convenience.

Conclusion

Personal loans are often misunderstood, thanks to outdated advice, half-truths, and online rumours. From assuming they always have high interest rates to thinking only banks offer them, these myths can stop people from making informed financial decisions.

Personal loans are flexible tools that, when used wisely, can support various life goals, from education and travel to home improvement. Even those with average credit scores or non-emergency needs can access them through a range of lenders, including NBFCs and fintech platforms.

Before you decide, it’s vital to check facts, compare offers, and understand your repayment ability. By clearing up these common myths, you can borrow smarter and avoid costly mistakes.

FAQ’s

Q1. What is an instant disbursal personal loan?
An instant disbursal personal loan is a loan where the approved money gets credited to your account within hours, often the same day.

Q2. How does an instant personal loan work?
A personal loan instant means quick approval and fast transfer of funds, usually through online applications with minimal paperwork.

Q3. Where can I get a fast personal loan?
You can get a fast personal loan from banks, NBFCs, or fintech apps that offer online applications and digital KYC.

Q4. How can I get a personal loan at the lowest interest rate?
The lowest rates are given to borrowers with high credit scores, steady income, and a good repayment record, so comparing lenders helps.

Q5. Can I get a personal loan without income proof?
Yes, but it is rare. Some lenders may offer it if you have a strong credit history, collateral, or an existing relationship with the bank.

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About the Author

LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?