When in need of funds, personal loan is the best option you have. These short term loans can be granted by the banks within a week. After sanctioning your loan, you can you use it for any purpose, for example - vacations, education, enrolling your kid in co-curricular activities, buying a car or a bike etc. The best part is the bank or NBFC through which you will sanction your loan will not chase you for what purpose you have applied for loan.
Apart from these benefits there are certain drawbacks of taking personal loans but are actually a myth. After finishing this article you will change your mind about the disadvantages of personal loans.
1. One of the Expensive Loan is Personal Loan
Personal loans interest rates are higher than any other loan. The usual interest rate is from 10.99% to 17.99%, while the interest rate on credit card is 13.24% to 22.99%. So, automatically you are paying more money than you are using it.
2. There is No Term Like Tax Benefits
Before opting personal loan you already considers that on these loans has no tax benefits available with the facility. But in reality you have the facility of tax deduction on earning of declared business or tax deduction on interest applied on property construction.
3. Only Indians and Salaried Man Can Get Personal Loans
Besides businessmen, self-employed individuals, NRIs are also able to take personal loans. Nowadays one more thing is in fashion and that is you can take loan on the basis of house rent income.
4. Tiring Procedure of Approval
Personal loans are easy to get sanctioned from banks. It hardly takes 36 to 48 hours to finish all the paper procedures.
5. Personal Loans are Provided by Only Big Banks
This is completely a myth that only banks with higher turnover can give you personal loan. Other financial institutions also provide personal loans with lower interest rate and with proper time limit under which you can repay the amount.
6. You are Not Eligible if You Have Poor Credit Score
Yes, it is true that a poor credit score can be hurdle for you if you ask for personal loan. But apart from banks there are certain other financial institutions from where you can get your loan with lowest interest rate. or you can improve your CIBIL Score to apply for one.
7. By Using Personal Loans There’s No Benefit in Credit Cards Debts Paying
Once you use a credit card then you are bound to pay a higher rate of interest, which is not less than a penalty of using credit card. And if you failed to do so, then the interest rate will be charged on the calculation of compound interest. Personal loans are better than credit cards.
8. Personal Loans are Not Less Than a Burden
If you are already under a burden of paying several other interests on other loans then it will look a burden to you. But if you opt for only one loan and that is personal loan you will have to pay only interest on only one borrowed amount. It automatically decreases the burden of paying interest on more than one borrowing.
9. Apply for More Money Through Personal Loan Than you Required
Since you have applied for more money than you actually need you are now bound to pay more interest and what if you’ll get fail to repay the amount on time. It will create bad credit score and it will be difficult for you to take loan next time.
10. You Can Take Personal Loan From Many Lenders
Yes, you can do that but if you take personal loan from more than one financial institution then every institution will ask for your credit history and the paper work may take longer time than usual. It can also reject your application by not finding it eligible to fill the repay amount on time.