There’s a lot of money and finance information out there. Online, in-branch or word-of-mouth advice can be as confusing as it is useful unless you take the time to figure out what specifically applies to your personal circumstances.
On top of figuring out which sources are most reliable, there’s the matter of dealing with long-held beliefs and financial urban myths. Sorting out the good from the bad tips isn’t always going to be easy, but it definitely doesn’t have to be difficult.
To help you on your financial journey, no matter what stage of growth you’re at, we’ve compiled and busted 10 of the most commonly believed finance myths.
1. It’s not wise to borrow outside of the big four banks
The big four banks are a good starting point for anyone searching for a loan. Naturally, you might Google them first, but smaller lenders like Credit Unions often have more competitive rates and flexible loan terms, and are regulated to the same strict standards as the big four banks by the prudential regulator APRA and guaranteed by the Federal Government’s $250,000 deposit guarantee.
2. If one lender says no, then they all will
Even if the bank you’ve been with for over 30 years won’t give you the loan you need, it doesn’t mean you’re out of options. Try other choices like credit unions, smaller banks and other financial institutions. Now that exit fees are banned, it provides consumers with greater power and choice when searching for a loan outside of their regular lender.
3. Lenders don’t like lending to single people
Creditors definitely have strict criteria and profiles which inform who they choose to lend money to; thankfully, romantic status is not one of them. It’s illegal to discriminate loans on this basis and a single person with strong earning capacity is just as likely to be approved for a loan as a dual income couple.
4. I should judge a loan by its interest rate
Not all costs of a loan are portrayed by the interest rate alone. There can be ongoing fees, set-up and administrative costs that should be considered. If you are comparing loans specifically to refinance, always take a look at the comparison rate, which factors in all costs into account.
5. Carrying a balance on my credit card will improve my credit rating
Credit worthiness is not influenced if a cardholder only pays back a regular balance slowly over a long period of time. This is likely to cost you and eventually make the lender money through interest payments. Again, sometimes a personal loan may be a better option.
6. Online credit enquires do not affect your credit rating
You might not know it, but every credit application you make is listed against your name for five years. A potential lender can request a credit enquiry to see loan applications you’ve made in the past, but won’t be able to see if they’ve been approved or not. To the blind lender, successive loan requests within a short time period may negatively affect your credit rating.
7. It’s the 21st Century and you need a credit card
Thanks to the roll out of payWave and Tap and Go eftpos services and the proliferation of debit cards, it’s highly unlikely that you will ever be in a position where a credit card is absolutely necessary. Surprisingly, personal loans can also sometimes have lower interest rates and more flexible repayment options.
8. You have to have money to see a financial planner
A financial planner is like a master builder, whom you consult with when starting to, or overseeing, building your wealth. To make sure that you are getting the most out of your resources and setting yourself up for a secure future you have to start out by laying a solid foundation. As they say, if you fail to plan, you plan to fail.
9. Super is for the future and not worth worrying about
Your superannuation is your money, there to guarantee you your future. Just like any other form of income, it is an asset which you have worked hard to build up over the years. The more attention you pay to it early on, the more money and better lifestyle you will have in retirement.
10. Financial advisors are only for people about to retire
You don’t have to be approaching retirement to benefit from first class financial advice. Whether you’re buying your first house, saving for a car, changing career paths or just wanting to plan for the future, you can unlock your potential and reach your goals sooner by getting financial advice at all stages of your life.
This article is written in partnership with People’s Choice Credit Union.
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