5 Misbeliefs You Should Avoid Before Applying for a Personal Loan

Financial crisis are sudden and may leave you in a mess! So if you find yourself in short of cash or need some urgent money, a personal loan can help you in this case. In India, there are quite a lot of banks and NBFCs (Non Banking Financial Corporations) that can provide a personal loan as a temporary credit to fulfil your urgent money requirements. But before you sign up for such a loan, here is a list of 5 misbeliefs that you must avoid :- 1. Personal loan charges unfair interest rates: In today’s time, getting a personal loan is quite simple and instant and you need not have to provide any collateral. And the interest rates charged on it are not more than 12-14% which is higher than any other loan types but less than credit cards that charge anywhere between 36% to 48% interest rate on cash withdrawals, yet people rely on credit cards instead of a personal loan. 2. All lenders charge the same interest rate in personal loan: It is not true. Every bank and NBFCs charge different rates of interest for a personal loan. To calculate the interest rate charged by different banks on a personal loan, you need to calculate the additional fee that each bank adds in a personal loan. To be more specific about the personal loan interest rate charged by different banks, you need to read the fine print carefully. 3. You can get a personal loan only if you are a salaried individual: This loan can be availed by both salaried and self-employed individuals. If you are a salaried individual, you need to provide a salary slip of last 3 months whereas self-employed business/professionals will have to provide latest ITR along with the total calculation of income, balance sheet, profit and loss for the last two years as certified by a CA. You can also get a personal loan against collateral such as jewellery, property, etc. 4. You cannot get a personal loan if your credit score is poor: It is a widespread myth. The truth is that banks do provide a personal loan to people with poor credit score too but the interest rate charged on such loans is higher than the regular interest rate. This is because you may be a risky lender to the bank. Also, such loans may also come attached with certain limitations. Banks have also come up with new loan schemes for candidates with poor credit score. While lending such loans, banks do not consider the credit history of the applicant. 5. The personal loan does not have tax benefit: It is a false claim made by several people. The truth is that you can avail tax benefits on a personal loan, so when you file your income tax return, this amount will not be added in your taxable fund. However, this benefit can only be claimed if you took the personal loan from a bank or NBFCs. Secondly, you can claim tax benefit on your personal loan if you used the amount for a valid purpose. These are the 5 common misbeliefs that you must avoid believing in while getting a personal loan. One word of advice: to get the best loan with competitive interest rate, it is good to do your own research. Never rely on friends and relatives completely because their purpose of getting a loan might differ from yours and think wisely and choose the best loan scheme to fulfil your urgent financial needs. Since personal loans are always offered at a higher interest rate as compared to other loan types, it is advised to consider this as the last factor and look for competitive interest rates on a personal loan.