Friday, April 14, 2017

Personal Loan Myths You Never Knew

Sadly, there are several half-baked theories and myths about personal loans and many people believe that a personal loan is basically a debt-trap. However, there is no reason to dread personal loans any longer as many of these common myths are busted in this article!

1.Personal loans are the most expensive loan available

This is the most common reason why people avoid applying for a personal loans. Typically, personal loan interest rates are around 12-14%, which is more expensive than a secured loan but the interest on personal loans is way lower than credit card interest rates of 22-36%. 

Personal Loan

2.No Tax Benefits

Another big myth associated with personal loans is that they do not provide any tax benefits. There are tax benefits for personal loans. You can claim income tax benefit under Section 24 on personal loan which offers an overall interest benefit of 1.5 lacs for tax exemption that can be deducted from your taxable income. 

3.Only Salaried Employees are Eligible

Self-employed individuals, businessmen and NRIs also can get personal loans. While salaried employees find it easier to get approvals but self-employed individuals can also avail of personal loans if they can provide proof of income from their business. Businessmen may need to provide the income tax returns for 3 years. 

4.Always Apply for an Amount More Than Your Actual Requirement

This is a misconception among Indians - that applying for more than what you need currently would help ensure that you get approved for the amount that you actually need. Ultimately, your loan eligibility is determined by your credit rating and ability to repay the loan. Applying for a bigger loan will unnecessarily create a financial burden and a poor credit score if you are unable to repay it on time.

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