Even though we all live in the era of information when all kinds of sources are available to us in one click, people still depend on myths. Unfortunately, myths about loans are very common among us and usually, this is what stops us from taking ones and achieving our financial goals.
Instead of trusting the wrong beliefs, wise people refer to objective facts. If you are here to debunk most common loan and debt myths, you chose the right place. We recommend you not to trust the following 7 loan myths:
Myth #1: If people need a loan, they always go to the bank
Perhaps, several decades ago, people indeed didn’t have other alternatives to banks, however times have changed. Banks are no longer considered as the best place to obtain loans, at least for some groups of people. For instance, for low credit-score customers taking a bank loan will end up in a super high interest rate. Besides a good credit score, banks have many other strict requirements to their potential borrowers, not to say you’ll have to wait for ages until your loan request is going to be approved.
With the evolvement of the loan industry, we were introduced to online financial companies and peer-to-peer lenders. Most likely, you’ll find out that modern online loans via PersonalMoneyService.com have way more perks than traditional banks do.
Myth #2: Lenders never give loans to customers with bad credit
No doubt, people with excellent credit history never worry about being denied in their loan request. On the contrary, people with not-so-good credit scores believe that they are no longer applicable for other loans. Surprisingly or not, bad credit score doesn’t carry that much of a weight anymore. What matters nowadays is credit utilization ratio, which is a division of your credit card balances and a credit card’s total limit.
Myth #3: The fastest way to escape from a debt is going bankrupt
Bankruptcy shouldn’t be considered as an option to quickly get rid of your debts. This very complex procedure proves your insolvency and is then followed by many other serious consequences. Therefore, think twice if going bankrupt is really going to help your financial situation and not hurt your financial future.
Myth #4: Banks are not allowed to charge off from your bank account without your allowance
According to the “Right to Offset”, if you owe money to a bank where you also have a bank account, they have the right to charge you off what you owe from this account. The only way to escape this unpleasant situation is by choosing a completely different bank if you need to take a loan.
Myth #5: People make a good choice by making minimal payments for their debts
Setting minimal payments for your loan repayment will only make it worse. The thing is, the longer period you are given to repay your debt, the more interest rate there will be. Just think how much you will actually save if you shorten your payment period from 10 years to 5 or so. Even though you are going to pay a larger monthly payment now, you are not going to overpay later.
Myth #6: If you die, relatives will continue paying off your existing loans
Provided you don’t have any savings or assets that can be sold, debts won’t actually bother your family at all. Nonetheless, owning a property or other assets can be a significant reason for lenders to get their money back, which means your relatives wouldn’t have other choice but selling them all.
Myth #7: If you don’t pay your debts, you will get into prison
Fortunately, there are no laws that say you are going to get into prison for not paying your debts, according to officials. But there are certain categories of payments you should never forget about. Neglecting your fines, community charges, business rates and council tax will get you into Magistrates Court, so be very careful there.
Expect of these most popular loan myths, there exist many more that may sometimes confuse even experienced credit borrowers. We hope some of your views on loans have been drastically changed for better.