By continuing, you agree to LoansJagat's Credit Report Terms of Use, Terms and Conditions, Privacy Policy, and authorize contact via Call, SMS, Email, or WhatsApp
Disclaimer: The information published on LoansJagat is intended for general informational and educational purposes only and should not be considered financial, legal, or investment advice. Interest rates, loan terms, statistics, and other data may change over time and may vary by lender or source. Please verify the latest information and consult a qualified financial advisor or the respective Bank/NBFC before making any financial decisions.
Subscribe Now
About the author
LoansJagat Team
Contributor‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.
Related Blog Post
Simplify All Your Loans Into One Affordable EMI
Customers Served
Debt Consolidated
1200+ Reviews
Locations in India
Club all Loans & Credit Card Bills into Single EMI
Quick Apply Loan
Consolidate your debts into one easy EMI.
Takes less than 2 minutes. No paperwork.
10 Lakhs+
Trusted Customers
2000 Cr+
Loans Disbursed
4.7/5
Google Reviews
20+
Banks & NBFCs Offers
Other services mentioned in this article
Rohan, a 28-year-old IT professional, needed ₹10,00,000 for a medical emergency.
He had heard that "Personal loans have very high interest rates" and "Self-employed people do not get loans."
Does this sound familiar? Have you ever skipped taking a loan because of such myths?
But wait! Rohan decided to do some research instead of believing these rumours. He checked his credit score (780) and salary (₹75,000/month), and guess what?
He discovered he could get a ₹10,00,000 loan at a 12% interest rate, which would bring his EMI to ₹22,244/month for five years.
Just like this, we will bust some common myths today! Look at the 5 biggest personal loan myths you should forget right now!
Have you ever faced an emergency or had an important plan but did not have enough money? You might have considered taking a personal loan, but after hearing about others, you hesitated. Let’s clear the confusion with real facts!
An unsecured personal loan means you do not need to provide property, gold, or any collateral. You can use it for medical bills, wedding expenses, or even a dream vacation. The process is simple: apply online, submit documents, and await approval.
Read More – Personal Loan Myths Debunked: What Every Borrower Should Know
But often, friends and family say things like “Personal loans are too expensive” or “Only salaried people get approved,” which is not valid anymore!
Do a little research: Check your credit score, use an EMI calculator, and compare bank offers. Ignore myths, understand the facts, and make the right decision!
Myth 1: Personal Loan Interest Rates Are Very High
Many people think personal loans are expensive, but that’s not true. Interest rates depend on your credit score, income, and loan amount.
Example:
₹10,00,000 loan for 5 years at 10.5% interest → EMI ₹21,493, Total Interest ₹2,89,580.
Factor | Impact on Interest Rate |
Credit Score (750+) | Low (10.50%-16%) |
Stable Income (2+ years job) | Medium Impact |
Loan Amount (Below ₹15,00,000) | Better Rates |
Example:
Criteria | Sneha (Personal Loan at 14% interest) | Riya (Credit Card Loan at 44% interest) |
Loan Amount | ₹8,00,000 | ₹8,00,000 |
Interest Rate | 14% |
Myth 2: Applying to Multiple Banks Reduces Loan Approval Chances
If you apply to 6-7 banks in 6 months, your credit score may drop slightly (5-20 points). However, the real reasons for rejection are low income stability and high debt.
Example:
Sahil: Applied to 3 banks in 6 months. His score dropped from 760 to 745, but he got approval because his EMI-to-income ratio was 30% (Salary: ₹1,50,000/month, EMI: ₹45,000).
Shruti: Had a 720 credit score but applied to 8 banks. “Credit score? Gaya tel lene!” Her score fell to 680, and her loan was rejected because her EMI was 55% of her salary.
Golden Rules for Loan Approval
Myth 3: Only Salaried People Get Personal Loans
Today, banks also offer personal loans to self-employed individuals, freelancers, and business owners.
Eligibility Criteria Comparison:
Parameter | Salaried | Self-Employed |
Minimum Income | ₹15,000 - ₹30,000/month, depending on the lender and city. | Minimum annual turnover and yearly profit after taxes. |
Documents | Salary Slips, Bank Statements |
Example:
Raj (Photographer): A freelancer earning ₹8,00,000 per year. Axis Bank gave him a ₹5,00,000 loan at 18% interest.
EMI: ₹14,687.50 for 4 years.
Pro Tip:
If you are self-employed, submit a CA-certified financial statement for your business. It can increase your chances of approval by 40%.
Myth 4: Personal Loans Have a High Risk of Rejection
Reality: A significant percentage of personal loan applications are successfully approved.
Approval Formula:
Credit Score (30%) + Income Stability (40%) + Low Debt (30%) = Higher Approval Chances
Example:
Fintech apps like PaySense and MoneyTap offer pre-approved loans through soft enquiries (which don’t affect your credit score). This doubles approval chances!
Myth 5: Credit Cards Are Cheaper Than Personal Loans
Reality: Credit card debt can be 3 times more expensive than a personal loan!
Let’s Do the Math:
Personal loans are much cheaper than carrying credit card debt long-term!
Parameter |
44%
EMI | ₹19,106 | ₹83,601 |
Total Interest Paid (1 Year) | ₹1,09,000 | ₹3,52,000 |
Verdict | Much cheaper | Extremely expensive |
ITR 2-3 years, Business Proof
Loan Amount | Up to ₹50,00,000, varying by lender. | Up to ₹30,00,000, depending on the lender’s assessment. |
*T&C Apply
Personal Loan
Credit Card Debt |
Interest Rate | 10 - 24% | 36 - 48% |
Tenure Flexibility | 1 - 7 years | No fixed tenure |
EMI Burden | Fixed | Minimum payment trap |
Prepayment Charges | 0 - 3% | N/A |
Example:
Pro Tip:
If you need emergency funds, use your credit card’s 50-day interest-free period. But after that, take a personal loan to pay off the credit card debt and save on high interest!
The biggest reason for personal loan myths is a lack of financial knowledge and an old mindset. Many people don’t know the latest bank/NBFC rules and rely on friends, family, or viral social media posts.
For example:
10-15 years ago, personal loan interest rates were 18-25%, but today, digital competition and RBI regulations have reduced them to 10-12%. Yet, people still believe in old numbers.
Also Read - These 5 Common Lies Loan Agents Tell—Don’t Fall for Them
Many think only salaried people can get loans, but today, freelancers, gig workers, and small business owners can qualify by showing ITR/GST proofs.
1. Fear Leads to Bad Decisions
People avoid personal loans and take credit card cash advances (40%+ interest) or borrow from moneylenders instead of getting a loan at 15-20%.
2. Confusion About Collateral
Many believe a personal loan needs property or gold as security, but 90% of personal loans are unsecured (no collateral required).
3. Missed Opportunities
Due to myths, people avoid loans for emergencies or business growth and end up in financial trouble.
Interest Rates Are Flexible:
Loan Approval Is Easy & Digital:
Loans Are More Transparent:
Factor | Impact on Interest Rate | Impact on Approval |
Credit Score | Higher score → Lower rates | Higher score → Higher approval chances |
Income Stability | Stable income → Favorable rates | Stable income → Higher approval chances |
Debt-to-Income Ratio | Lower ratio → Better rates | Lower ratio → Higher approval chances |
Employment Type | Salaried > Self-employed (in terms of favourable rates) | Salaried > Self-employed (in terms of approval likelihood) |
Loan Amount and Tenure | Shorter tenure → Lower rates | Reasonable amount → Higher approval chances |
A personal loan can be a smart and affordable financial option if you understand it well. The key is to ignore myths and focus on facts:
Before applying: Check your credit score, compare lenders, and calculate EMIs to ensure they fit your budget. Whether it’s for an emergency, a big purchase, or debt consolidation, a well-planned personal loan can save money and reduce stress.
"Toh doston, agle baar loan lene se pehle, myths pe mat jao… EMI calculator pe jao!"
1. Are personal loan interest rates always high?
No! Interest rates depend on your credit score, income, and loan tenure.
2. Can self-employed individuals get personal loans?
Yes! Banks offer loans to self-employed people with proof of income (ITR for 2-3 years). Example: A freelancer earning ₹8,00,000/year can get a ₹5,00,000 loan at 18% interest. Tip: Submit CA-certified financial statements to increase your chances.
3. Will applying to multiple banks hurt my credit score?
Only if you apply too many times. Each "hard inquiry" (formal application) drops your score by 5-10 points. Apply to only 3-4 banks in 6 months. Tip: Use fintech apps for pre-approved offers (these do not affect your score).
4. Is a personal loan cheaper than credit card debt?
Yes! ₹5,00,000 personal loan at 15% (3 years): Total interest = ₹1,22,000. Same amount on credit card at 42%: Total interest = ₹3,15,000. Tip: Use credit cards for short-term needs but take a personal loan for big expenses.
5. How can I improve my chances of getting a loan approval?
Keep EMI-to-income ratio below 50%. Add a co-applicant with a high credit score. Show stable income (2+ years in a job or business). Avoid multiple active loans (ideally, have 2 or fewer).
