Top Financial Myths Busted

Being in a myth can either make you miss out on the opportunity or mount losses for you, especially when talking about the world of finance. Your hard-earned money deserves more growth, your repertoire as a prudent loan customer must lead you to attractive interest rates on your credits later while ensuring you stay protected at all times. Sadly, the preconceived notion we carry becomes a game spoiler for all of us financially. It's time we say NO to financial myths and evaluate our options logically to stand firm all the time. Let's begin the financial myth-busting process here.

The Financial Myths People Carry

Financial myths surround investments, insurance, loans, and credit cards. Myths can revolve around the modus operandi or the cost-benefit analysis. Let's debunk all such myths to make informed financial decisions.

Paying Credit Card Dues Partially is OKAY

People acting under this impression are sinking deeper with their credit card dues compounding at a massive interest rate of 30-40% per annum. One should pay the entire credit card dues on time to avoid such interest charges and the financial pressure that comes with them.

Be disciplined with your credit card purchases. This will help keep your credit card bill affordable and prevent you from falling into a debt trap.

If you have already piled up debt by paying the due partially, act before it gets too late! Take a personal loan at lower interest rates and use it to finish your credit card debt immediately. Keep being disciplined to save enough for a smooth personal loan repayment. It will help boost your credit score.

Withdrawing Cash from Credit Cards is Cool

Credit cards come with a cash withdrawal feature. It works much like a debit card which you use to withdraw cash from bank ATMs. However, with a credit card, cash withdrawal will have interest from the point of instance itself. There will be no interest-free credit period. With credit card purchases, you get an interest-free credit period of 30-45 days.

Credit card cash withdrawal invites interest charges of 30-45% per annum. Imagine the interest payment you will need to do when it's charged daily and at such an astronomical pace. So, if you are made to withdraw cash from credit cards, pay back the amount immediately. Otherwise, financial miseries will likely mount.

Personal Loans are Available for Salaried Only

No, not at all! Personal loans are also available for self-employed professionals and non-professionals. Yes, here, they need to submit different income documents such as Income Tax Return (ITR), Form 60, Audited Balance Sheet & Profit & Loss Statement (For Self-employed Non-professionals).

A Fixed Home Loan Interest Rate is Better Than a Floating Home Loan Interest Rate

Carrying this financial myth will only make you repent when you see the difference in home loan repayment after its lifetime.

A fixed home loan interest rate will inevitably have fixed rates throughout the loan tenure, which can be as long as 30 years.

A floating home loan rate means the rate of interest will vary throughout the tenure as per the decision made by the Reserve Bank of India (RBI) regarding the repo rate. It's the rate at which the RBI lends to commercial banks across India. The greater the repo rate, the greater the lending rate and vice versa.

If this makes you believe that a fixed home loan rate is better, think again!

Fixed home loan interest rates will always be around 3-4% higher than a floating home loan rate.

Also, if floating-rate home loans witness a long period of interest rate reduction, they can be finished before the original loan tenure.

Getting Started with Mutual Fund Investments is Better When Aged Above 40

This is a false notion you need to discard right away. You will lose out on the opportunity to get your wealth substantially higher by delaying investing in mutual funds that far.

Instead of starting with mutual fund investments when above 40, start doing so from your first salary itself. Your investment portfolio should constitute 80-85% of equities at say from 25-40 years of age. As you age beyond, the proportion should reduce to 60-75%.

This way, you can strike a balance between risk and reward and achieve your financial goals at the time you want.

Health Insurance Offers Death Coverage Too

It's probably the biggest financial myth surrounding India's existing and potential health insurance policyholders. While health insurance covers treatment costs arising out of illnesses and accidents, it does not include death benefits. Better be aware of this fact when purchasing a health insurance policy. So that your dear ones don't have to suffer in case you did and leave them in the middle.

Buy a term life insurance policy that offers death benefits. Select the right policy offering coverage to the tune of up to INR 1 crore.

Both life and health insurance serve different purposes and are a must-have for everyone.

Summing Up

It's better to be aware than being in ignorance and facing problems. So, no more preconceived notions, please, particularly with financial matters. We hope you will do in-depth research to make the right financial choice. For more financial updates, do visit zarooribaathai.in.