Wednesday, 22 February 2017

Reasons why should you opt for a balance transfer of home loan

Balance transfer of home loan is the process of transferring the unpaid principal loan amount from one bank to another. There are several reasons why availing this facility is beneficial to the borrower.
Falling interest rates- A home loan involves a substantial amount of money that is repaid over a long tenure. Even a slight reduction in the interest rate translates into significant savings in the long term. That is why an RBI rate cut always brings cheers to the borrowers. If the bank passes on the advantage of decline in interest rates to existing borrowers then they stand to gain a lot as there is a direct impact on their EMIs. But in case your bank is not too eager to reduce the lending rate you can explore different options and switch your borrowings to a different lender. Home Loan balance transfer will help you take advantage of the falling interest rate regime in the market.

Improved credit scoreIf you are stuck with a high home loan interest rate (because you had an average credit score at the time of taking the loan) your EMI burden maybe huge. But after regular on-time payments over a period of 2-3 years you can renegotiate the interest rate charges with the lender. In case they turn down the request you may consider the option of transferring the home loan. Sometimes your existing lender may lower the interest rate but may charge a high conversion rate for the same. You need to calculate the savings on the total interest liability in order to decide whether to continue with the existing lender or switch to a different one.
Switching from fixed to floating- Since a sizeable amount of income goes into servicing the loan the rate of interest is a matter of great concern for the borrowers. If you had taken a home loan at a very high fixed interest rate and subsequently the market improved and interest rates dropped it makes sense to close the old loan and shift to another bank that offers a lesser rate.
Renegotiation of terms and conditions-
If the EMI burden is becoming difficult to handle you may transfer your home loan and negotiate for a longer tenure with the new lender. Though a longer tenure will increase your interest payout, the EMI will be less taxing on your monthly income. You can also ask the new bank to change some other terms and conditions which your existing bank refused to entertain.
Top-up- Many banks provide you a top up loan that is over and above the existing home loan. Like personal loans the top up loan amount can be used for any purpose like home renovation, paying off an auto loan, debt consolidation etc. The rate of interest charged on this loan is usually lesser than the home loan interest rate. So if you need funds and your current lender is not agreeing on giving a top up, you can benefit from a balance transfer by shifting to a new lender who offers you this facility.

Quality of service- Another reason why you may want to switch your home loan to a different lender is the poor quality of services offered by the existing one. If you are unhappy with the substandard services and lethargic approach of your bank you can look for other better options. For example if the bank does not offer you special offers or privileges even though you’ve been consistent with the EMI payments you can think of a change.

Balance transfer usually makes sense in the early stages of the home loan tenure.  If the outstanding loan amount is low and the tenure is expected to end in a few years then it may not be ideal to go for a transfer. A balance transfer involves a lot of time, paperwork and expenses. The reduction in the interest payout should be significant enough to justify the efforts and the costs involved in transferring the loan. Inform your lender about your intentions before taking the final plunge.  Since banks do not want to lose their customer, sometimes they may give into your request and agree for a renegotiation. You may want to stick to the current lender if his offers are as appealing as the other competitors.

Wednesday, 15 February 2017

How to Use Online EMI Calculator Effectively

Most personal loans and home loans offered by lenders today are based on the EMI structure. You can compare these loans easily online, by using the loan EMI calculator. However, before you do that it helps to know a few things about EMI loans.
What is an EMI?
EMI is an abbreviation for Equated Monthly Instalment. When you get a loan, you repay it in smaller amounts on a monthly basis, which are called EMIs. Generally, an EMI includes both the principal, and the interest, and stays the same through the period of the loan. However, in some cases the EMI may change during the tenure. There are three possible scenarios that can make it happen. These are:
Case #1: Floating Interest
If the interest applied on your loan is fixed interest then the EMI stays the same throughout the tenure. However, if it is floating interest, then the EMIs might change, if the lender changes its policy regarding the interest rate in future.
Case#2: Progressive EMIs
If you have opted for a loan that comes with progressive EMIs then your initial payments will be smaller, which will gradually increase until the completion tenure. These kinds of loans are best suited to those who have just started their career, and can afford to pay higher EMIs as their income increased over time.  
Case#3: Prepayment
Say, you got a promotion at work, or receive a large heritage recently. You can use the money for prepayment of your loan, in which case the EMIs will become smaller. This is because the new EMIs will be based on the remaining debt(reduced after the payment). However, you might have to pay a certain fee for this option.
How to Calculate Your EMI
EMI calculation is based on one simple formula which is:
[P x R x (1+R)^N]/[(1+R)^N-1]
Here P is the loan amount or the Principal, R is the rate of interest per month, and N the number of instalments.
To understand the formula better, consider the following example:
Let the loan amount be Rs. 6,00,000, rate of interest be 10%, and tenure duration be 10 years (or 120 months). Comparing with the formula we have:
P= 6,00,000, R= 10/(12X100)= 0.0083, and N= 120
So, EMI = [6,00,000 X 0.0083 X(1+0.0083)120]/[(1+0.0083)120-1]
 EMI= [6,00,000 X 0.0083 X 2.696] / [2.674]
EMI=  Rs. 5020.97
Advantages of EMI Loans
All kinds of loans can be broadly divided into two categories- EMI loans and term loans. The latter comes with a fixed maturity date, and interest rate unlike the former, in which these values can change.
There are many advantages of EMI loans, some of which are as follows:
1. Flexibility- Most EMI loans grant a lot of flexibility. You can choose to prepay, or enjoy a lower interest rate if your loan comes with floating interest rate.
2. Affordability- For many people an EMI loan is the only way to afford a house or a car. If you have a good credit score, and your credit report shows timely payments and responsible credit usage, then you can easily get an EMI loan.
3. Manageable Pressure- You can settle for a convenient EMI loan repayment structure that you can manage. You have to pay affordable EMI payments every month, which won't affect your budget, and add minimum financial pressure.
Using EMI Calculators
Thanks to Internet you can easily compare EMI loans online easily. EMI calculators make it really simple to calculate EMIs of a certain loan. To calculate the EMIs all you need to know is the principal amount, rate of interest, and the duration of the loan. You can enter these values in whichever calculator you are using and you will get the results almost immediately.
You can make the most of EMI calculators by doing the following:
·         Make sure you have a list of all good loan options that you want to compare before you start calculating the EMIs.
·         Record not just the EMIs but also other factors such as interest and tenure duration.
·         Use a spreadsheet for recording all the values for easy comparison.

EMI calculators save a lot of time that you would otherwise have to spend by calculating EMIs using a standard calculator. Thus, use an EMI calculator to choose the best loan easily.

Thursday, 9 February 2017

Hacks to Choose the Right Lender

If there is a need there is a loan! Well almost! So regardless of what you want there are loans that can help you meet your financial needs, most of the time as long as you fulfill certain conditions and of course as long as your desire is within the purview of reality and practicality. There is a home loan that can help you buy a house, an auto loan for a new vehicle, education loan to continue your higher studies and a personal loan for things that do not fit in one of the above categories. There are different types of loans and numerous lenders. Well you know which loan to opt for depending on your needs but which lender should you choose? Here are a few ways that can help you choose the right lender:
v  Look at Your Credit Score
Before looking at lenders, a good place to start your quest for the right lender is assessing your credit report. A look at your Credit Information Report (CIR) ahead of applying for a loan or looking at lenders can help you tremendously. By looking the report you will be able to assess if you are eligible to get a loan or not; most main stream lenders look at the credit score as a starting point to determine if the loan application can be accepted. If your score is good (above 750) then you have nothing to worry about and can approach any lender without a worry. Score lesser than that lower your negotiating power but a score till 650 is generally not a cause of worry. For scores less than that you may have to look at co-operative banks, private lenders etc or agree to pay higher interests. Of course the best thing would be to try and increase CIBIL score if you have the time to do so and can delay you loan for a while.
v  Research, Research and Research:
There is neither a substitute nor a shortcut to this one and in today’s world researching for the required information is not difficult. There is a lot of information available online and offline too. With the available information you can find out about lenders, their terms and condition and whether you match them, the interest rates at which loans are available and also the turnaround time taken by the lender to approve and sanction a loan. It makes sense to go to a lender who will be willing to accept you loan application based on the eligibility criteria and credit score and the lender matches your needs too. So if you need an instant personal loan and the lender has a turnaround time of 4-5 days then it makes no sense to approach such a lender.
v  Understand the Fine Print:
As they say God is in the details, so just don’t look at the interest rates and loan tenure when choosing a lender focus on the fine print too. This includes finding out about all costs that are to be paid upfront or later for a loan. This may include expenses like processing fee, legal fee, fore-closure charges etc. Some times in the case of a home loan an insurance policy may be bundled with your product without you being aware of it. Later you may realize that buying a home insurance policy might not be the only way to provide security to you loved ones, there are other options available too.  Check about approval time and other not so clear terms. Choose after you have clarity about all the policies and their implications. Talk to friends, co-workers and family members to find out about their experiences.
v  Compare Rates/Terms:
This goes without saying; the first thing anybody would do is to check the interest loan rates when choosing the lender. However looking at rates is not sufficient, it also important to find out if the rat is fixed or floating or semi fixed and what method of rate calculation is used? Is the interest calculated of flat or reducing balance basis? Generally loans that are available at fixed rate at lower interest rates but in the long run they could be more expensive then reducing loan rates. A loan calculator can be used to calculate the difference between two options.
v  Talk to a Few Lenders Before Choosing One:
Even if you have researched online and you think you have found the right lender, do get in touch with a few lenders before making the final choice. Do not apply at different places as this will lower the credit score due to hard enquiries but you should talk to the bank representatives to get a better picture of what is available and if your understanding is in the right direction. This will give you a better perspective and help you in making the right choice.
So whatever you need, choose the right lender with the help of above hacks. Choosing the right lender can help you save a lot of money and a little trouble too!

Friday, 3 February 2017

Your Obligations as a Loan Guarantor

Being a loan guarantor is a big responsibility. The moment you sign the documents you get a liability on your shoulder. Thus, if someone has requested you to become a loan guarantor for them, even if they are family, make sure take your time before impulsively saying "yes".
What does it mean to become a loan guarantor?
When you become a loan guarantor you give a pledge of legal binding for the repayment of the borrower's loan amount.  Generally, the same terms and conditions that are applicable to the borrower, are applicable to the guarantor as well. Thus, if for some reason the borrower fails to repay the loan, the entire responsibility will be left on your side. If need be, the lender can also sell off your assets for getting the loan amount back.
There are mainly two types of loan guarantors, who have different obligations:
1. Financial Loan Guarantor
As a financial loan guarantor you take the financial responsibility of the borrower. This means you are liable for repaying the loan should the borrower fails or decides not to repay, causing a CIBIL dispute.  Finance institutions generally ask for financial loan guarantors when the loan amount is high, and so is the risk. Examples include land mortgage loans and education loan for MBA.
In the process of becoming a financial loan guarantor you also usually have to provide your asset papers and proof of income.
2. Non-Financial Loan Guarantor
Non-financial loan guarantors are not liable for loan repayment, but merely serve as a contact person in regard to the borrower. Finance institutions generally ask for non-financial loan guarantors for short term loans, or small- loans. Unlike financial loan guarantor, in case of non-financial loan guarantor you just have to submit KYC(Know Your Customer) documents.
Risks of Becoming a Loan Guarantor:
There are many risks of becoming a loan guarantor, such as:
Lowered Creditworthiness
If the borrower defaults on their loan, then not only their CIBIL score is damaged, but yours too. This is because you are equally responsible for the loan repayment, and have to bear the same consequences as them.
It can take a long time to improve CIBIL score. Thus, every action that can affect it negatively should be taken seriously. 
Affect on Your Loan Applications
Most home loans and other big loans have a long tenure. So, if you have to get a loan for yourself when the borrower's loan is not repaid yet your lender may not approve your application. This is because you are already liable for another loan, that of the borrower's, and sanctioning a new loan could be risky on their end. You may have to wait until the borrower repays their loan in full before getting a loan for yourself.
Risk of Losing Property
Becoming a loan guarantor, especially a financial loan guarantor can have serious repercussions. If both the guarantor and borrow fail to repay the concerned loan in time, then as per ‘Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002′ the lender is authorized to seize the guarantor's property and sell it for recovering the loan amount.
It goes without saying that becoming a  loan guarantor for anyone is a truly risky business. Thus, it is best if could avoid it. Here are a few good reasons you can give to someone who has requested you to become a guarantor for them:
·        I might need to take a higher education loan myself in a couple of years. However, I won't be able to apply until I am free from the obligations of a guarantor.
·        My cibil score will be affected negatively, and it is already not in a good shape.
If it is difficult for you to refuse still, then you can also offer them the option of taking a home loan insurance policy. With this policy they have to pay a premium, and in return the bank who has offered the policy will bear the responsibly of a loan guarantor.

Unless the requesting person is really close to you, and you are confident they will be able to repay a loan, never say "yes" to becoming a loan guarantor. If you not able comment anything at the moment, request them to give you time. Make your choice carefully, as it is a big decision that can change your life.

Friday, 27 January 2017

How Education Loans Are Changing the Fate of Students

Quality education, irrelevant of the domain, is extremely important. In a country like India where hundreds of thousands of students compete for limited jobs, the education background can make a big difference. Unfortunately, a lot of times sharp-minded scholars are unable to proceed with their admission procedure despite securing seats in some of the most reputed Institutions of India and abroad. The reason? Lack of enough funds to pay for the college tuition. However, education loans are slowly becoming the best solution for financial issues like these. These days, not only education loan procedure has become simpler, but the interest on education has also become affordable.
Here are some of the most amazing ways a higher education loan is changing the life of the students for the good:

Easy Education Accessibility
One of the most significant ways education loans have changed the life of the students, is by making quality education available to them despite of high costs. A meritorious student thus has to no longer limit himself to substandard colleges and other education institutions due to financial problems. If a student is laborious and ambitious to establish a promising career he can easily get an education loan to pay for college tuition that is far from the reach of his parents.
Easy Availability
There are a number of government and private finance institutions that offer education loans for all kinds of courses and certifications. Thus, whether you need an education loan for MBA, or an engineering degree you can easily get it as long as you have a promising academic record. It also helps if the applicant has a CIBIL score higher than 600, which is considered above average. As for the loan itself, your loan papers get approved within just 2-4 weeks in most cases. 
Interest Rate Benefits
One of the best advantages of education loans is that they come with lower interest rates in comparison to other kinds loans. Sometimes the government also provides subsidy for the benefit of the meritorious students. For instance, if the loanee is female then they get an additional concession of 0.5% on their interest rate. Plus, if the loan amount is below Rs. 4 lakhs then you don't even have to provide any kind of collateral, and there is no margin to be paid.
Repayment Abeyance
Another major advantage of taking an education loan is that you can enjoy the moratorium period. You have to start repaying your loan only when it has been an year since you graduated, or six months since you started a job.
Education loans are quite helpful to students- there are no two ways about it. However, despite their benefits they do have some disadvantages as well. Here are some of the most prominent ones:
Tough Eligibility Criteria
Although the merit of the student plays a vital role in the approval of their loan application, sometimes that's not enough. Most banks consider many other factors when evaluating an education loan application. For instance, if the applicant has a history of defaulting or CIBIL dispute, or has poor credit score then their application may be rejected.
Repayment Pressure
Often there is some level of pressure on the student who is pursuing their education by taking a loan. After they graduate, getting a job becomes almost crucial lest the lenders starts pressurizing them for repayment. The same can happen if some for reason the student is unable to finish their college on time. When there are co-applicants involved (usually the parents), then there is pressure on them as well. Failing to repay on time can damage their CIBIL score apart from the student's.

All in all, education loans may be tricky to deal with, but can make someone's dream come true when all the other doors are closed for them. There are so many laborious students who come from poor families, and when they are unable to fund their higher education themselves they can take a personal or education loan to make it possible. If you are going to apply for an education loan yourself make sure your CIBIL score is decent. If your score is lower than 600 then it is best to improve it first. This will greatly improve your chances of loan approval.

Thursday, 19 January 2017

You can now take a loan to close your delinquent accounts

Marriage date for Sandeep Tripathi’s only daughter was fixed and as is the case of most Indian weddings, a lot of arrangements were to be made. Sandeep who was averse to credit had never taken a loan and while he did possess a credit card, had never ever used it. However, situation was different this time around and he decided to utilize the credit limit available to him on his card.
But with so many things on his mind he completely forgot about paying the credit card bills on time. The payment became overdue and his account showed an outstanding debt. This brought an immediate dip in his credit score. After the D day when Sandeep was clearing his desk he found his unopened credit card bills. The payments on the 2 cards were 25 days and 95 days overdue. What steps should Sandeep take now for bad credit fix?
As we all know that the payment history directly affects a person’s credit score. Any missed payment is an indicator of credit risk. It signifies that the borrower is not able to meet his current debt obligations and warns the lender that he is a risky candidate. Sandeep had plans of taking a personal loan next year to fund his younger daughter’s higher education. But since his score was less than the minimum CIBIL score for personal loan he would find it difficult to arrange funds in future.
Here is what Sandeep did to get out of the situation.
Most credit card companies do not report overdue accounts until the next billing cycle. Delinquencies are usually reported 30, 60, 90 and 120 days past the due date. The greater the number of missed payment the more severe is the effect on the credit score. After a period of 120 days the account is sent to a collections agency which has a much more severe impact than a delinquent record.
Sandeep pulled out his credit report and saw that while credit card 2 overdue payment appeared, credit card 1 late payment was still not showing on the report. He immediately called the Credit Card 1 company to explain his situation. He requested the company not to report it to the bureau with the promise that he will make the payment within 10 days.
On contacting Credit card 2 co. he found that they were going to send it for collections. He knew that an outstanding debt that was overdue for more than 120 days will have severe consequences for his credit score. The card company agreed to wait for another 30 days provided he made the payment in full along with the interest and late payment charges.
Mr Sandeep wanted a solution for bad credit fix as he was foreseeing a loan requirement in the near future. Late payment records would only ruin his score. He needed the money to repay these overdue amounts and improve credit score. Loans for bad credit score saved him in these difficult times. He applied for a personal loan for low CIBIL score.
Though he had to pay a slightly higher rate of interest, it helped in paying off both the credit card balances. The credit card companies overlooked the short stint of late payment and did not report any delays to the credit bureau. Had Sandeep not taken the loan for bad credit to pay for his past due accounts his credit score would have taken a further hit. It would have made it difficult for him to get credit in future since history of late payments acts as a warnings sign to future lenders.
Personal Loan for CIBIL defaulters helped Sandeep pay off his delinquent account in full. He could convince the card company to remove the late payment record off his account. In this way he was able to avoid a lasting damage to his credit history. Reducing the amount owed gave an immediate boost to his credit score. Sandeep made timely payments on this new loan and within a year he was able to see a significant improvement in his credit score.

Friday, 13 January 2017

Things You Must Know About Supplementary Credit Cards

Credit cards have made our lives a lot easier today- there are no two ways about it.  Before they existed, the only option was to take a loan, which was time-consuming and inconvenient, especially when a small amount of money was required. However, credit cards emerged as the perfect solution for instant loans. Now, whether it is a medical emergency, or funding requirement for a small business, even if it is not the best credit card it comes in handy in any situation.
Apart from a credit card, you can today also get supplementary credit cards for extra comfort. A supplementary credit card is basically an additional credit card which is issued under your primary credit card. You can get these cards for your family members so that they can also enjoy the benefits of a credit card. Different banks have different rules regarding the issuing of supplementary cards, in terms of maximum no. of card allowed to be issued, and associated fees and credit limits.
How Does a Supplementary Credit Card Work?
The thing about supplementary credit cards is that they don't carry a separate credit limit. In other words, all the supplementary credit cards will be payable under the primary credit card, and not separately.
In most cases the cumulative credit limit on the supplementary credits is the same as on your primary credit card. For instance, if your primary credit card has the limit of Rs. 2 lakh, and if you have 2 supplementary credit cards, then each will have a limit of  Rs. 1 lakh each. In other words, whatever is the limit of your primary credit card, it is divided equally among your supplementary cards. The limits are also applicable on your ATM withdrawals.
Another benefit of using supplementary credit cards is that all the transactions are filed under your primary card. Thus, if you are the primary card holder you can monitor all activities on the supplementary cards from your own account.

Advantages of Using a Supplementary Credit Card
A supplementary credit cards holds the same benefits as a primary credit card. However, depending on your bank there may be some changes. Here are some of the most common benefits of supplementary credit cards:
·        Convenience: You can get supplementary credit cards for your parents, so that in times of emergency they can have access to money easily. The same goes for your children. If they are over 18 years of age, you can get them their own individual supplementary credit cards to ensure they don't have to worry about money in future.
·        Cash Withdrawal: Sometimes you need physical currency, when digital money won't do.  In a situation like this you can use your supplementary credit card to withdraw cash from an ATM, just like using a credit card.
·        Expenditure Monitoring: One of the best ways to teach your children about good credit-usage habits is to give them supplementary credit cards. That way you can easily monitor how they use their credit. You can get detailed reports every month, and keep an eye on their finances.
·        Reward Points: One of the many reasons why people use credit cards is to enjoy the reward points they offer whenever you shop with them. Supplementary credit cards also offer the same advantage. With every purchase made with a supplementary credit card you get a certain number of reward points which can be covered into cash later.
How Much Does it Cost to Get Supplementary Cards?

In most cases you can get supplementary cards for free from your bank. However, sometimes you have to pay a small fee for the service. In some cases you may get a certain no. of supplementary cards for free, and for extra you have to pay a fee. One important thing to understand before you apply for supplementary cards is that the primary card holder is solely responsible for the payments of all the supplementary cards. Thus, you must provide these cards only to those who you know can be trusted with them. Falling behind payments can lead to a poor CIBIL score, and marred credit report