Some people are intimidated by the idea of obtaining a loan. Whether it’s a personal, a business or a home loan, it can be quite challenging to understand all the nuances of how they work. You may have heard how hard it is to get approved for one. Don’t believe everything you hear. We’ve spoken with financial experts and gathered some useful information for every potential borrower. Let’s debunk these top 7 common loan myths.
Getting Approved for a Small Personal or Business Loan is Almost Impossible
It’s definitely not the easiest and quickest process, but obtaining a loan shouldn’t become an insurmountable challenge for you. Financial experts advise preparing for the possible difficulties during the application process to avoid trouble. “Have all your documents in order, be prepared and optimistic,” states Michael Adam, CEO, and founder of Bankmybiz, a website connecting entrepreneurs with business lenders.
The Best Way to Get a Loan Is Through a Bank
For many years, traditional banks have been the main institutions of small personal and business loans. In some situations, they still remain a mainstay. But for borrowers who need a relatively small amount of money, it’s more exhausting to obtain a bank loan. Loans from banks can be appropriate for entrepreneurs looking to borrow a huge sum of money over a long time period. As for small personal loans, alternative lending options often provide faster and easier approvals within just a few days. You can easily find trustworthy 24/7 payday loans direct lenders with the help of reviews and former customers' feedback.
You Won’t Get Approved for a Loan If You Have Bad Credit Score
Though the bad credit ratings might be the reason for not obtaining a loan, the modern lending environment has become more open low credit scores. “When it comes to getting credit, traditional banks might be more restrictive than alternative options,” mentioned Michael Kevitch, founder, and president of Small Business Funding. Payday loans and private lenders can be a great alternative option, especially for business owners. These lenders usually base their decisions on the financial reality of the company rather than on the financial history of an entrepreneur. Such lenders may take a closer look at the industry type, business performance, and cash flow.
You Won’t Get a Bad Credit Home Loan
Another myth concerning the low credit ratings is that only people with defaults can qualify for them. Bad credit home loans may not only help borrowers with a past bankruptcy or defaults but also provide a wonderful chance to protect your credit record. Everybody may experience sudden financial trouble when credit cards and your home loan seem to get out of control. It can lead to putting defaults on the credit score of the borrower, and as a result, limit their ability to get loans for the next 7 years.
In order to get back to an affordable single repayment, go ahead and consolidate your debts. Once you have demonstrated at least 6 months good history and resolved your financial hardship, you can refinance your home loan back to a normal one with a great rate.
The Worst Way to Get a Loan Is Through a Bank
There can’t be one perfect funding solution for every person or business owner. However, traditional banks are far from the worst lending option. Banks may limit only the growth of young companies which tend to grow very fast due to their industry (IT, health-care). Other than that, going traditional way can benefit the moderate and steady growth of a well-established business.
The More Money You Want, The Less Likely You Will Be Approved
This myth is common in online communities and forums. Financial experts assure that banks actually prefer lending bigger sums because larger loans will bring them more profit in the long run. Yet, make sure you take only what you can afford to pay back.
The Interest Rate Is The Most Important Factor
Interest rates are definitely one of the most significant aspects to consider before applying for a loan. Also, pay attention to other factors, such as the loan terms, repayment plan, and what the loan can be used for.
These were the top 7 myths every borrower should know. All in all, the most important thing to do before you apply for a loan is to talk to an expert and receive the right advice about your particular financial situation.