The interest rate from the Indian bank is higher so can a personal loan be taken in the USA to pay back the loan in India? If yes, then will there be major tax challenges or any other such hurdles? Is it worth considering or no?
Assuming someone will loan you the money, sure. The question is - will you pay back the loan with earned INR or USD?
If you are earning USD and pay back the loan in USD, then yes it would be more beneficial to pay a lower interest rate.
If you earn INR and convert it to USD to pay back the loan, then the higher INR interest rate presumes that INR will inflate faster than USD, so you'll be converting to USD at worse rates over time than your initial conversion, possibly negating the benefit of the lower interest rate.
There is no tax impact of borrowing or paying back a loan in the US - unless the loan if for a mortgage on a US property or is for a legitimate business purpose (in which case the would be deducted as a business expense, not a personal expense. I do not know if there is a tax impact to paying off a loan in India.
There are a number of questions to ask.
- Where do you live and work? exchange rates can shift unpredictably, so it's safer to have your loans denominated in the same currency as your salary.
- Are the terms and conditions of the two loans comparable?
- Can you even get the loan you seek? personal loans tend to be for relatively small amounts of money over relatively short terms. Lenders will often be unwilling to lend to people who don't live/work in their country (partly because of point 1, partly because they may have difficulty enforcing the loan outside the country)