Personal loans come in handy while dealing with financial emergencies and for achieving key milestones in your life like renovating a home, a family trip, or even buying a new vehicle. There are a few individuals who take personal loans with lower interest as part of their debt consolidation strategy. Thus, personal loans are preferred as they serve multiple financial dimensions, which help to improve the lifestyle of the individuals along with resolving their financial woes.

However, the decision to take a personal loan in Singapore is hampered because credit cards are preferred to meet the emergency expenses.  They are considered to be the mainstream financial instrument which can be used for multiple purposes. Also, numerous misconceptions have been developed by individuals related to personal loans resulting in losing the benefits offered by these loans.

Here are a few important myths related to personal loans and the reason why you should not believe them:

Banks are the ideal source for personal loans: This is one of the most common myths as although banks also provide loans, many licensed moneylenders offer personal loans at competitive rates and their services are faster when compared with banks. Like banks, licensed moneylenders are guided by the rules and regulations formulated by the Ministry of Law and hence, they are a reliable funding source. Furthermore, they adopt a fast loan approval process with minimal documentation, reducing the duration of the waiting period for loan approval; in some cases, it is less than a day. This is much more beneficial when compared with banks where you may have to wait for weeks for getting the loan approved.

A good credit score is the main prerequisite for personal loan approval: Although a good credit score is beneficial as lenders always check your credibility, a few licensed moneylenders also fund applicants with bad credit. The reason is that they consider your current financial position to ascertain your ability to repay the amount, unlike banks where your credit history is also checked. Hence, this is the best opportunity for those with bad credit as by repaying the amount as per the loan contract they will be able to improve their credit score.

Interest rates charged by moneylenders are higher: Interest rates are an important aspect since it determines the installment amount which is directly proportionate to your monthly budget. But it is important to note that moneylenders cannot charge interest rates specified by the Ministry of Law and at present, the maximum interest rates are specified at 4%. Hence, under all circumstances, licensed moneylenders cannot charge interest more than 4% per month.

Only salaried people are qualified to get a personal loan: The benefits offered by personal loans are also available to self-employed individuals and professionals. These individuals just have to submit their income proof documents along with other specific requirements of the lenders for availing personal loans.

Collateral is required for availing personal loans: Since personal loans are unsecured, collateral is not required while applying with the licensed moneylenders for a certain amount. However, the maximum amount of collateral-free funding varies amongst the moneylenders. Hence, it is essential to check these details while applying for the loan.

Purchasing through credit cards are cheaper than personal loans: Credit cards are used since banks provide a higher credit limit, but the interest amount is also charged higher. When borrowed with the licensed moneylenders, the personal loans can be availed with the maximum interest rate of 4% per month. In case if you have a good credit score, the lenders may fund you with the lowest interest rates prevailing in the market.

It is better to explore and find out facts rather than believing myths related to the personal loan which enables to reap the benefits offered by it. Personal loans help you to develop the right financial strategies and reduce your financial burden, however, it is essential to compare interest rates and other fees of multiple personal loan lenders for availing greater benefits.