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Many myths about personal loans continue to circulate, often because of misinformation shared online, outdated financial advice, or misunderstandings passed on by friends and family.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.
 

₹2,00,000

₹10,011

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: