Personal loans offer a broad range of benefits, from helping cover unexpected bills to allowing you to splurge on an expensive investment. However, if you don’t have a lot of experience with these financing options, you might be worried about moving forward, especially given the many negative myths surrounding them. The following guide clarifies some of these falsehoods to help you make a more informed decision.

What Are Common Misconceptions About Personal Loans?

1. You Can Only Get One If You Have Excellent Credit

Credit score reflects financial history, and it considers factors like credit-to-debt ratio and the number of open accounts. Because lenders often review credit scores when considering applicants, many people are under the false assumption that they won’t be approved due to a lower score. 

However, this isn’t true; lenders consider a variety of factors, such as income and employment history. Even if you have a lower score, a lender can determine that you’re a reliable borrower if you have a steady income and a stable job. 

2. They Require Collateral

In some cases, you might be required to offer collateral, such as a security deposit, a car, or your home, during the application process. However, this applies to secured options only. 

If you opt for an unsecured variant, you likely won’t need anything other than a signature and a credit check to move forward. Most personal loans are unsecured, and you won’t need a valuable asset to apply for one. 

3. There Are Limits on How You Can Use Them

Traditional variants have been designated for specific purposes. For example, a home loan might be used to purchase a property, while a debt consolidation option might be used to compile your existing debts into a single account.

Many people are surprised to learn that there aren’t any limitations on how they can use a personal loan. Once issued, the funds are available for you to spend on whatever you see fit. 

If you’re interested in applying for a personal loan, turn to the team at First State Bank in Russellville, AR. Serving residents throughout the River Valley area, this locally owned bank provides customers with the financial resources needed to get ahead in life. Call (479) 498-2400 to speak with a team member, or visit their website to learn more about your options.