Can I deduct the interest on a loan from the Personal Income Tax?

One of the most frequent doubts that arise when applying for a loan is knowing if your interests can be deducted on the income statement. If you want to resolve this question and know if you can deduct the interest on a loan from the personal income tax, you have come to the right place. 

Can the interest on a loan be deducted from personal income tax?

Can the interest on a loan be deducted from personal income tax?

Year after year, once we start generating enough money, we have to make the Income Statement. And one of our obsessions is without a doubt locating those cats that are deductible from personal income tax (IRPF). It is for this reason that many people wonder if the interest on a loan can be deducted.

And unfortunately we have to give you bad news: in most cases these taxes are not tax deductible. Why is this so? Well basically because when we request this money it is not considered as an income in the income statement. And not being it cannot be deducted. Since it does not mean an increase in our capital, we cannot make a profit when making the income statement.

But this is not always the case. There are certain types of loans whose interest can be deducted year after year. Let’s see in which cases it happens.

Cases in which I can deduct the interests of my loan in the Personal Income Tax

For real estate capital returns

As long as you apply for a loan with the intention of making an improvement to your usual-use home, you can deduct the interest on the income statement. Yes, you read it right. If you decide to make a reform and request a loan or if you want to change the bathtub for a shower tray, all the interests of those loans are deductible. Regardless of which way you request them. Either through private lenders, loan companies or your bank.

In loans for the acquisition of commonly used housing

If you have bought your home before January 1, 2013 you are one of the lucky ones since in this case you will be able to deduct the interest on your loan. But, be careful, you can only deduct in the case of mortgage loans and not for specific expenses associated with your home. For example, if you have applied for a loan to face the mortgage in a specific month, it will not be deductible.

The controversial case of family loans

The controversial case of family loans

One of the most frequent doubts that arise is when we make loans between family members. Is it necessary to declare them? Everything will depend on the type of loan in question. Let’s look at it more calmly below.

  • If it is a loan between family members, we would find capital that is free from the Inheritance and Gift Tax. For what reason? Because the money that you have been offered has to be returned. It may have no interest, but sooner or later you will have to return it to its owner. In these cases, and to avoid these loans being considered covert donations, it is best to write a contract between both parties. In this contract everything has to be recorded. From the principal, the interests (even if they are at 0%) and the stipulated repayment period. To avoid problems, the contract must be legalized through the Tax Agency.
  • If they are donations you will not have to declare the money since it is a donation and not a loan. What is the difference? Basically this type of capital lacks return. In other words, we are not going to have to return it to our relatives, but they have given it to us completely free of charge to help us. Donations, however, are subject to Inheritance and Gift Tax.

Loan Calculator – Calculate Cheap Loans Online Free!

Use internet to find the cheap loan

Use internet to find the cheap loan

When looking for a cheap loan, a free loan calculator that can be found on the Internet can help. Loan calculators can calculate within a few moments what monthly rate you have to calculate with a loan. Calculating loans with a loan calculator from the Internet is not only easy, but also quick.

If you want to find out how changes in the effective interest rate affect the monthly loan installments and the total cost of a loan, you can find out with a loan calculator. When calculating loans with a loan calculator, you can change the individual variables of a loan and see how they affect costs. You can choose a smaller loan amount or a longer term.

Find cheap loans with low interest rates.

Find cheap loans with low interest rates.

Using a loan calculator, you can check in advance of a loan request whether you can afford a loan or which loan amount is eligible. However, everyone interested in a loan must know how much they can or want to spend on a loan. You can calculate loans with a loan calculator, calculate how much money is available each month in order to pay monthly loan installments, the prospective customer must do this himself. In this case, income and expenditure must be compared, in addition to all fixed costs, all other variable costs must be calculated to find out what amount remains for a loan.

With the loan calculator you can then determine how much credit you can get for the available monthly rate. To reduce the monthly charge, it is enough to extend the loan term. However, when comparing loans with a loan calculator, you should be aware that the loan interest is not binding, since in most cases it is interest based on creditworthiness, it is therefore adjusted to the creditworthiness of the borrower.

The better this is, the lower the annual percentage rate will be. However, in order to find out what interest rate you can expect, it is necessary to request a personal loan offer. A loan calculator can thus help you find a low interest rate and thus a cheap loan, calculate loans or determine the exact costs and the monthly installments, however, only after a specific loan offer.

Credit despite attachment – is there such a thing?

Most people experience various financial situations throughout their lives. So there are times when you are really good and you can afford everything you need, and then there are times when it is financially tight. At this point, it can sometimes happen that a wage garnishment is carried out, and one is, so to speak, at the subsistence level.

It is only good that there are also credit providers who give you a loan despite attachment and help you out of the financial misery. Certainly, the conditions for a loan may be a little stricter despite attachment, but that also takes the financial burden off your shoulders!

Credit as a way out and responsibility

Credit as a way out and responsibility

When you are faced with a garnishment of wages, you can get very sick and ask yourself how you should finance your life in the future. After all, in addition to the basic things like eating, drinking and care products, you also need new clothes or a new household appliance every now and then.

And the loan comes into play despite the attachment, which can help even the worst financial situations. Depending on which provider you get information from, you have a wide variety of options to choose from. So you should first of all think about the amount of credit you would like to draw on at all.

Basically, amounts from a few hundred USD to several thousand USD are possible, but you should be aware that the requirements of the provider become stricter the higher the loan amount. After all, the garnishment of wages plays a very important role when it comes to lending, and for this very reason many lenders require a guarantor who has to step in if the repayments can no longer be made. The interest rates at the various providers are also variable.

These can range from 2 percent to 4 percent or even more. It can already be seen that, despite attachment, the loan is not a panacea for financial worries and should not be used carelessly. It is therefore important to examine the various offers very carefully before deciding on a lender.

Live happily with the right loan

Live happily with the right loan

Certainly, you should think a lot about the loan amount, because at this point you should not be guided by exuberant wishes. The sum should therefore only be so high that you have the necessary funds available that you need for a normal life. It is also important to take due account of the repayment, as the loan is not a free ticket despite the attachment. So when it comes to the monthly installments, you should calculate very carefully here and consider what amount you can easily spend monthly to service the loan.

The bottom line is that credit without attachment can certainly be a valuable aid, but you shouldn’t blindly plunge into it and sign the first best contract. If you take this into account, you can lead a carefree life again despite the attachment of wages!