5 Persistent Myths About Loans Busted

Many Filipinos have misconceptions about loans, many of which are based on fear or lack of awareness. For example, some people believe that once you take out a loan, you’ll soon drown in debt and be hounded by collectors. This scenario isn’t completely untrue—you’ll definitely get saddled by thousands (or even millions) of pesos worth of loans and receive calls from revenue agents if you don’t settle your dues. However, this will only happen if you don’t pay; if you’re an outstanding customer, you’ll be more than fine.

Below, we list more persistent myths about loans and debunk them for everyone’s better understanding:

Loans Are Bad for Your Financial Health

Most people associate a loan with bad financial management. After all, if you have enough money for all your needs, why would you need to borrow from a lender? However, the truth is that it’s always on a case-to-case basis.

In some circumstances, loans can increase your financial burdens; in others, they can actually improve your financial outlook. For example, if your current loan from Lender A has a high interest rate, you can take out a loan from Lender B with a lower interest rate to pay off the former. This way, the overall cost of monthly payments will be more manageable.

Loans can also be good if it’s an investment that will increase your capacity to generate more income. Say you want to be promoted at work but you need to earn a certification for it. To accomplish this ASAP, you can take out a loan and enroll in a training program to get the requirements needed for your promotion.

Just remember that even businessmen take out loans. When used wisely, the money you borrow can help you achieve your goals.

Only Banks Offer Loans

One of the most persistent myths that surround loans is that only banks offer them. While it’s true that there’s often a wider variety of loan products available in banks, these establishments aren’t the only lenders there are. A good example of non-bank lenders would be financial technology (fintech) companies that offer an option for a quick cash loan Philippines’s consumers can easily access.

Many of them are purely digital, which means you can submit an application online through a website or an app. What’s more, you don’t necessarily need a bank account. These fintech companies can disburse your loan proceeds through your e-wallet.

If you aren’t that confident of your chances of getting approved for a bank loan, these digital lenders can be your next best alternatives. In fact, they may even be better if you’re only planning to borrow a small amount.

You Need to Be Employed to Be Eligible for a Loan

Most if not all lenders will look for proof of income before your application for a loan can be processed and approved. This is like a form of guarantee, knowing that you have the means to pay off what you owe. However, pay slips from an employer aren’t the only form of “proof of income.” If you’re a freelancer, you can also provide a copy of your tax payments or receipts. A bank statement may also suffice.

The bottom line is that as long as you can truthfully prove that you have a reliable source of income, you can apply for a loan and be approved.

Loans Take a Long Time to Process

This one isn’t a complete myth. Some lenders, including banks, may take a while to process and approve your loan application. There are many reasons behind this. For example, if you’re borrowing a large sum of money, there may be more requirements and the screening process may be a lot stricter. Some lenders also receive multiple loan applications per day, so it may take some time to get to your file.

On the other hand, the aforementioned non-bank digital lenders are usually faster. All the steps are conducted online, from the submission of your application documents to approval. There’s no need to visit a branch at all! The actual approval also takes a lot less time; usually, you’ll receive a notification in 1 to 3 business days.

Loans That Aren’t From Banks Have Unfair Interest Rates

One of the most appealing things about bank loans is that the interest rates are usually lower. This doesn’t mean, however, that all non-bank loans have high or unfair charges. What you have to keep in mind is that unsecured loans (those that don’t require collateral) often have higher interest rates. Whether you’re borrowing from a bank or otherwise, you can expect personal and cash loans to have higher interest rates compared to secured loans.

The key is to do your research. There are digital lenders that take advantage of their customers, while others are more trustworthy. You should also check the terms and conditions of the loan before you agree to anything. If you aren’t familiar with terminologies or if something is unclear, don’t hesitate to ask the company’s representatives. All in all, you’ll find that many non-bank lenders offer quite fair and competitive interest rates for loans.

The bottomline is that loans are often misunderstood. Thus, myths like the ones mentioned here continue to persist. However, loans are actually powerful financial instruments. When you avail the right one for your needs and use it right, you can get a better handle on your financial management.