Vents MagaZine Music and Entertainment Magazine
Related Articles
Good and bad days exist simultaneously in our life. You can have all the money one day and might need to beg the other night (hypothetically speaking, of course). The point of emphasis here is: your financial stability is always quivering. And, sometimes, it gets to a point when you have got left with only one option, borrowing.
Then again, several things go into the money borrowing process:
- Type of loan
- Equifax credit score
- Choice of your lender
- Money borrowing eligibility
And other similar factors. There’s so much to swallow about the interest of principle, loan period, lender, personal loan, home mortgage, premium; there’s so much to swallow. However, it’s not that scary if you know the basic conditions to help you earn the loan at favorable terms.
So, let’s read some financial myths that might just be a huge block in your loan acceptance road.
Top 15 Borrowing Myths: Know The Truth
The loan and mortgage world is so full of random, confusing talks that one contemplates hundred times before even thinking of getting a loan. But, sometimes, it becomes inevitable to not apply for extra finances. For instance, you might need to start a setup, get your home insurance, or even buy a new car.
So, it’s about time to debunk some borrowing myths to let the loan conditions down your throat smoothly:
#1 Only A Good Credit Score Can Land You A Mortgage Deal
If there has to be something so familiar yet untrue, this must be it. Like it’s such a common yet false concept that every finance noob fears even thinking of a mortgage loan with their bad credit. However, let us break the good news to you, folks: it’s just a myth!
Yes, you can still apply and get a mortgage even on your bad or poor credit. Robert Heck at Morty explains that bad credit is among the common mortgage fears. However, there’re so many other factors other than a good credit score that decides your mortgage application status and pricing. Some of them are:
- Federal Policy
- Market Growth
- Housing Conditions
- Interest Rate Principle & Types
- Economy Growth
So, if, unfortunately, you aren’t among the good credit score range consumers, you can still look for a mortgage broker.
#2 Accept The Highest Amount Of Money Offered By Lender
You need $600 to repair your car, which recently met with an unexpected situation. You did your research, looked around, and found the best loan company providing loans at affordable prices and interest rates. Cool! You applied for the loan.
Next thing you know, you received an email with the subject: Congratulations! You’re eligible for a $2000 loan. Okay, now that’s happy news. Finally!
- You can get the LED roof you’ve always wanted
- You might change the tires you’ve been thinking of doing forever
Hold on! Easy there! If you can get that high payment loan, it doesn’t mean you should go for it. You must think of your repayment, loan period, and whether or not you need more money.
#3 You Must Have 20% Save Of Your House Down Payment
Image Credits: Freepik
No! Nope! Nay-Nay!
It’s bogus to say you must have 20% of the home price before thinking of the mortgage. In fact, some of the federal programs even allow you to pay none or 3% at the max as a down payment. So, to break it down for you:
- Federal Housing Administration demands a 3.5% down payment on a fair credit and 10% on a poor score
- The Veteran Affairs Program requires you to pay none in the name of a down payment (literally!)
- With Mortgage Default (CMHC) Insurance, you can easily get a mortgage with a 5% down payment in Canada
- Whereas, Private Broker Companies demand a 20% down payment to let you qualify for a loan
So, to summarize, there are different percentage options, and it all depends on which loan type and program you choose at the end.
#4 Pay Most With Cash | Less With Card = Good Credit Rating
It is true that you should maintain a good credit rating. However, it’s entirely false to achieve this by reducing the use of your credit card. Doing so will only cause two things:
- Your credit history will be less with only a few credit payments
- Credit lenders will see you as an irresponsible consumer who doesn’t know how to use a credit card properly
So, using cash for most transactions won’t help you build a good credit history, thus minimizing your chances of a good credit rating and thus making the lenders lose interest in your loan application.
#5 Accepting Double Loans Will Worsen Your Financial Condition
Coping with financial stress can take a toll on your mental health. And, when you’re struggling with several loan payments, it’s only understandable you might feel that way. However, to say that getting a big loan amid your other loans will worsen your financial situation is truly a false concept.
- Getting a big consolidative loan can help you deal with your other loan payments
- You’ll only be dealing with one loan payment in the future
- You don’t need to worry about multiple interest rates on multiple loan types
Still, the final say will always be yours because it’s you who have to deal with the lender conditions and loan payments.
#6 Good Debt Is Only A Mere Rumor Of Credit World
Well, it’s difficult to say if there’s a loan that you can consider a good debt because it depends on the reasoning and terms for the loan to give it the bad or good status. However, in the light of experts, here’s a little breakdown:
- As per Equifax’s Knowledge Center information, any loan that can be paid responsibly with on-time payments and meet the ‘affordable’ consumer standards is said to be ‘good debt.’
- A business loan that can generate more revenue to help grow your company and products in the market also falls in the ‘good debt’ category.
Note: A good debt can become downright bad if you still fail to pay it responsibly.
#7 Secured Loans Comes With Hidden Interest & Additional Fees
There are endless myths related to a secured loan, but hidden fees still top all the lists out there. Yes! It’s literally a myth!
No private or government lender can insert additional fees or interest terms after the loan approval.
The problem arises when:
- Consumer does not fully read and understand the loan conditions
- Debtor don’t ask the loan fees and interest prior the approval
So, no matter how big or small a loan you get, as long as the company is legal, they can’t add any condition after the approval.
#8 Personal Loans Takes Long To Process
Well, it’s an old saying that personal loans require a long process because, in the current era, you can easily apply and get approved for the loan in no time. However, it still includes the pre-approval, approval, and funding process, but the total turnaround time is still not an extended period. Here’s what you need to know about the total turnaround time of the following lenders:
- Online broker: 1-3 working days
- Peer-to-peer lender: 7-14 days
- Credit union/Bank: 1 week-1 month
In fact, it may take a few minutes or several days for your loan approval, depending on your lender.
#9 Secured Loan Providers Are Scammers
Image Credits: Freepik
It’s wrong to judge every person with the same eye, and so is the case with all the secure loan providers. Sure, you can find quite a handful everywhere, but they’re not always a fraud or scammer alert. Kacie Goff at Times shares that it’s quite easy to identify a loan scammer, and the top way being if it sounds exceptional that it almost sounds fake, then it’s a hundred percent a red sign. Moreover, there are other ways to check:
- Give the official contact number a call
- Check the provided domain online
- Visit the branch if possible
- Be aware of ‘no credit history, no income stability’ needed policy
- Look for an advance fee alert on the contract
Taking any pressure from the lender regarding any loan condition is an additional red sign you must notice.
#10 Poor Credit Score Can Cause Your Loan Rejection
It is somewhat true.
However, as we explained earlier, there are other factors than credit scores that decide your loan application’s approval status. For example, it can also depend on your lender, loan type, and loan terms whether or not you’ll get the loan despite your poor credit score.
#11 You Can Only Get A Personal Loan From An Official Bank
The answer to this is a big straight no!
It is a general concept that only traditional or mobile banks can give you a loan to improve your financial condition. The truth is you can get a similar loan on similar terms from organizations other than banks. Some of them are:
- Private Loan Business
- Non-Bank Financial Companies
- Online Broker Websites
- Payday Lenders
- Credit Card Company
You’ve got many more options to apply for a loan other than at a traditional bank. All you have to do is look around.
#12 Don’t Get A Secured Loan Unless You’re Going Bankrupt
Again, not true! The world of secured loans is so complicated that it has caused an unnecessary fear in the finance noob world. The truth is you can get a secured loan for several money reasons:
- You need funds for home improvement or revamp
- You met with an unexpected money situation (accident, health issue, mishap)
- You need emergency cash to travel with your friends
All these reasons don’t necessarily mean you’re going through a tough financial phase. Instead, it simply means you need additional finance for something you weren’t planning for.
#13 You Can’t Get A Personal Loan If You Already Have A Loan
Nope! Not True!
Whether you can apply for a personal loan or not depends entirely on you and not on your existing loan. Of course, you’ll be getting approval or not depending on the lender and your repayment history, but that’s the discussion for another time. Your lender can review:
- Cash flow or annual income
- Credit history
- Recent credit activity
Overall, you can still apply for a personal loan despite your existing loan.
#14 Payday Loan Can’t Affect Your Credit Rating & Score
It’s more like a misconception than a myth. A payday loan won’t help you build a score or improve your credit history. Heck, it might even not show up on your credit report. Still, it can have a bad effect on your credit rating in the long run
A credit expert Jacqueline at LendingTree shares harsh comments on the negative impacts of payday loans on your credit score and report. Yes, it might do more harm than good to your credit history.
#15 You Need A Collateral To Get A Personal Loan
If there has to be a loan type that requires minimum processing time and can get approved easily, a personal loan has to be it. And, with that being said, if it’s one of the good loans, it explains why needing collateral for a personal loan is just a myth. But moreover, it is a type of unsecured loan that again weighs high on why it must be collateral free.
Also, a personal loan requires minimum documentation and no collateral, so if any lender demands any type of extra income paper from you, just know it’s a scam.
Bottom Line
Borrowing money is simply a financial necessity that comes in handy in bad money problems. However, some borrowing myths can make you confused or even fearful to apply for one. Of course, there might be a little truth to some of them, but mostly they all are rubbish talks spread by people who didn’t care enough to verify the myth to be a fact or a rumor.
Of course, you don’t want to be one of them when getting a loan can improve your finances drastically.
Lastly, be the news breaker and share this article with all your finance friends who might think of all of these myths as literal facts!
