Friday, 3 August 2018

How to use the Compare Option to Decide on Best Car Loan

Abhishek wants to buy a new car, this being his first car he is very excited and wants to take the decision after careful consideration. As he began to compare the various brands and models he realized that there are so many factors that require attention. He did not get bogged down and did manage to find what he wanted and also something the fitted within his budget!
Just like buying a car is a decision that requires careful comparison between options, so does choosing the right lender too! You need compare the loan options available before choosing the right one.
Comparing Car Loans to Choose the Right Option:
If you are looking for car loan you would know that there are numerous lenders in the market that can be approached. So how do you decide which is the best option for you? Here are a few factors that can help you make decision:
  • Interest Rates:
Needless to say interest rate is the first and usually the most crucial factor when it comes to choosing a lender for any kind of loan. So do look at the rates at which car loans are offered by various banks/NBFCs before you choose one. Interest rates range from 9-5% to 14% depending on which FI you approach. It is important to mention here that if you have a good credit score then you have an edge. You can approach any lender without being worried about your loan application being rejected due to a low score and you can negotiate a good deal for yourself too if you have a good rating.
  • Processing Charges:
Processing charges as is obvious from the name are charges that are levied by the FI for getting the loan application processed. They are not similar across board, some may charge a flat rate irrespective of the loan amount, and some may charge it as a percentage of the loan amount while other may not charge any fee at all. Obviously you would like to approach the one who does not charge any amount as this fee could burn a hole in your pocket but bear in mind that other aspects also need to be considered when making this decision.
  • Loan to Value Ratio:
Loan to value ratio is the amount of loan that you can get as a proportion of the asset value. This again varies across lenders. LTV defines the maximum loan that you can get as a percentage of the car value, the rest you need to pay from your own pocket. Thus you should have the rest of the amount saved to make as a down payment. If you have a larger amount saved you could opt to take a loan lower than the LTV ratio too, this will reduce your overall interest cost. If you have no savings to make a down payment then there are few FIs that offer 100% finance but you will have to meet the car loan eligibility set by the lender in order to get the loan sanctioned.
  • Prepayment Charges:
Prepayment charge is an amount that may be charged by the lender in case the borrower chooses to pay the loan amount before the term ends. These are mentioned in loan agreement and may be also mentioned in product details. It is a good idea to have clarity about these and compare the charges that would be levied by various lenders before choosing one. While some banks may not charge anything at all for a prepayment, some may not charge anything after some time has elapsed while others may charge an amount as percentage of the outstanding amount.
So buy your dream wheels but before doing that compare the various options available before choosing one.


Friday, 27 July 2018

Can secured cards help in building your score?


Let us go back to time and relive the moment when you first got your driver’s license. We bet, it would be a proud moment for you and you would have a feeling of accomplishment. But before you got your driver’s license, you must have went through a process of obtaining a Learner’s License. You must me thinking why are these people sighting this story to us? The topic clearly is about secured credit cards.

A secured credit card is just like your learner’s license where you are not at risk while using it.
So first of all, what is a secured credit card exactly and how does it work?
A secured credit card is equivalent to a traditional card, unlike a prepaid card or a debt card. Its sole purpose is to help individuals who are in desperate need to improve cibil score. Also help people who do not have a credit history at all. Unlike other debit cards, a secured card has the same terms and conditions as of a normal credit card and you can enjoy the same privileges associated to a normal card.
As the name suggests, a secured card can be availed by depositing a particular amount as security, unlike normal cards which do not need deposits. With some banks, the bank will provide you high limit on your card as compared to the deposit you have made.
Now many people have a perception that if we do not make our payments on time, the bank can deduct money from our security deposit. This is absolutely not the case! As mentioned earlier, a secured card has the same terms as a normal card which compels you to make all your payments on time and avid keeping balances on your card.
The Big question here is how can a secured card help you build your credit score?
Now, if you have a bad cibil score, you probably must be thinking of getting a secured card but is it beneficial? How soon can you expect your score to see inclines?
The Answer to this is there is no quick mantra to improving your credit score in snap time. You will have to work hard on rebuilding your credit score, which eventually will take time. A secured credit card can help you achieve it as the credit bureau will consider your card just like any other financial product on your portfolio.
Tips to use your secured card wisely
Use it for small purchases
Owning a credit card does not mean you can go mayhem on your purchases. You should always remember the purpose to get a secured card on the first place. Make small purchases every month and try to make your payments on time. Only make purchases you can pay of easily without facing much of problem.
Do not go for minimum payment
Going for minimum payment can cause you a lot of damage, as these types of cards is availed on the basis of deposit money. You will have to pay additional penalties and other interests associated to the card. Try making the due payment in full to avoid such charges. You can feel pain interest and penalties for money your money.
Set payment alerts
No one is perfect; there are high possibilities on missing your payment due date. Set payment alerts to stay up-to-date with your payment dates to avoid unnecessary penalties and charges.
The best option is to opt for auto pay option
This is the best option available from every credit card lender these days. Be it a secured one or an unsecured one, you should always opt for auto pay option so that you do not face any problems of not remembering your payment date and the payment is automatically made on time.
A secured card can have some drawbacks of its own, but it can help you in the long run of building your ruined reputation on your credit report. It can help be secure a traditional credit card with an improved credit score.

Thursday, 19 July 2018

Five Points To Ensure That Your Loan Application Is Approved


There are various occasions when one needs an extra financial help. To buy a home, to study further, to start or expand the business, wedding, travel, to buy a car, to buy a bike are few of the examples where an individual might feel a crunch of cash and would want that help. Usually, that help is taken from banks or NBFCs (Non Banking Financial Companies). And that help is called a loan. A loan is basically an amount of money which is borrowed from someone or bank or NBFC that is expected to be returned with the interest decided on it. While one is applying for a loan, there is basic homework that needs to be done. In this digital-era, going through the bank’s website and getting the rough ideas is the best and the easiest way to work on it. One could easily get the basic information about the charges, document requirements, feasibilities and if the loan would be sanctioned or not. So they don’t need to practically go through so many banks and check to it.

Once the homework from the borrowers is done, its time to make sure that one should be well equipped with the things that would matter in getting the loan approved. Here are the five major points which banks see in order to sanction any loan

1. Credit Score / Credit Report
As the very well know the concept, credit score is a three-digit number ranging from 300-900 which comprises of the behavior of the credits one has taken and the repayments did. Any score higher than 700 have high chances of loan getting approved along with the lower interest rates. Credit Report is the detailed summary of all the credits taken and an individual whose score it is. An individual gets one Free Cibil Report every year from the credit bureau as per the RBI rules. Make sure that your credit score is always above 700, and if not go through your credit report and check where are the errors and try to correct them.

2. Repaying Capacity
There is a term called Debt Burden Ratio(DBR). DBR, as the name suggests, is the capacity of the individual to pay the debt against the expenses he/she has. It is usually considered 30:70 where the income should be divided into the 70% of expenses and 30% debt that one would be able to bare. If it fits perfect, the repaying capacity of the person is then considered and the loan amount is decided. Maximum it is compromised to 35-40 % in special cases, which would be the actual repayment capacity of the borrower.

3. Collateral
Except for the personal loan, whichever loan is processed would need the collateral. What is collateral? Collateral is basically any asset or property which is kept against the loan amount taken as a security. If in case, an individual is unable to pay the loan, the banks or the NBFC would acquire their asset to clear out the debt. The collateral value must match the loan amount taken, if it doesn’t, the loan is given only of the value of the collateral.

4. Personal Discussion
There are the representatives of banks or the financial institutions who would do the personal discussion with the borrower to ensure the reason of the loan, the characteristics of the individual, the intent of repayment etc. Based on this personal discussion, the representative decides if the loan amount would not turn to a bad-loan for them. If the cibil score is low, and the borrower is in the process to Improve Cibil Score, these people would understand the behavioral pattern and analyze the character of that individual.

5. Documents
Any loan that is processed, needs the documentation. Starting from the personal identification documents up to the required loan type documents are checked. When planning to apply for a loan or applying for a loan, one should be ready with all these papers to then avoid the delay.

If taken care of these points, and making sure that there is always a progress over these, getting the loan approved is just cake walk. One should always understand the thin line of importance in taking care over the five points mentioned above to missing one of them would make them pay a huge price which would help them achieve and conquer the dreams of better future they have seen.

Friday, 13 July 2018

How to repay Home Loan faster?


Owning a house of your own gives you one of the best feelings, but paying a hefty EMI on a monthly basis does put a strain on one’s finances. When a major portion of the salary goes in repayment of the loan, one is not left with enough money to spend on luxuries. Besides, the longer the tenure of the home loan, the more costly it becomes to own a house. With the high interest rate that one has to pay on home loan, it is always a smart decision to get rid of the loan as fast as possible. That is why repaying the home loan faster becomes a top priority for many people. Here are some simple ways that will help you pay your debt faster and save money in the long run.
  1. Avoid luxuries
You need to motivate yourself to build a corpus that you will use to repay your home loan early. Begin by having a close look at your monthly expenses. Identify where you can cut corners. Avoid spending on luxury items for a few years. You may avoid vacationing on a foreign location and save a lot of money. Let the peace of mind that you will achieve on becoming debt free motivate you to reduce your monthly expenses as far as possible.
  1. Increase the EMI amount as the salary increases
When you take a home loan, the EMI amount is usually fixed at 40%-50% of the monthly salary. Over the years, as your salary increases, the percentage of the salary that goes towards payment of the loan goes down. To repay the home loan faster, you should increase the EMI amount as and when your salary increases. If you maintain the ratio of salary that goes towards EMI you would be able to reduce the loan tenure whenever you get a hike in your salary. For example with a monthly salary of Rs 50,000 your EMI on a DHFL home loan would be fixed at 20,000. If your salary increases to 75,000 you must raise your EMI to 30,000. Maintaining this discipline will help you pay the loan faster.
  1. Pay the principal early
In the initial years of the loan repayment, a major portion of the EMI goes towards payment of interest. The rate at which the principal amount goes down is very less. If you plan to pay a slightly higher EMI, the additional amount goes towards the payment of principal amount. This helps in reducing your loan tenure.
  1. Make partial payments
Whenever you receive a lumsum amount, make it a habit to make a partial payment of the principal amount. You may receive a festival bonus or yearly performance bonus from your company, your fixed deposits may mature or you may get a gift from relatives. Use every such opportunity to divert funds to your loan account. Whenever you make a partial payment, you get the option of either reducing the EMI or the tenure of the loan. Make sure you reduce the tenure and not the EMI. Banks accept an amount as low as Rs 10,000 as partial prepayment of loan. But some banks do have a cap on the number of prepayments that you can make in a year. Check with you bank for details.
  1. Switch to a different lender
Since your home loan is a long term liability, the difference of even a small percentage in rate of interest can help you save a lot of money. If your current lender is charging a higher rate, you may shift to a different home loan provider. You need to consider the processing fee and other charges involved in the transfer to find out whether the shift is really worth it.
The long tenure of the home loan puts a strain on one’s finances. And if you have taken a loan with bad CIBIL score, your rate of interest would be too high. Paying your home loan fast is a smart way of getting in control of your financial life. You may have to make a few compromises, but you will surely save a lot of money in the long run.

Friday, 29 June 2018

If I Have Amex Card, Only Then Can I Get Good Credit Score?


Don’t you dream of a premium life? You open any social media these days and out of ten posts you see, five of them will be on premium lifestyle. These lifestyles influence us to work harder and drive as a motivational factor to achieve our peak.
There are many brands in the market which are termed to be premium. Let us take credit cards as an example here and understand how credit card works and does credit card help you achieve a premium lifestyle. You receive at least ten calls per month from various telesales departments offering you various credit cards. Even if you have a couple of them with you, you will seek some more just to have financial backup. Which is the most premium credit card in the world, you would like to get your hands on? American Express! An American express card itself is a statement of being premium and makes you stand out in the crowd. There are a lots of benefits associated with American express card. It is not the only one of the oldest card lending company but also the most premium card market has to offer. It’s really hard to get your hands at one of these.
So you must be thinking, if the card has such a premium feel to it and also has a lot of benefits, can it also boost my credit score in a short span of time?
The answer to this is unfortunately a NO. Though American Express is an exclusive brand in regards to credit cards the credit rating system remains the same. You cannot expect a premium treatment on the credit front if you hold your American express card and make all your payments on time.
First of all let us understand how a good credit score is built,
Make time to time payments
Every credit card comes with a payment deadline. You need to understand the terms of the card and make your payments on time. This will not only keep your mind at ease but also will help you boost your credit score. If you make your payments on time, you can see a boost of 35% on your score. Before you opt for any financial product, check when you can make all your payments to avoid late charges and additional interest on the balance.
Keep your card accounts open
If one day suddenly, you think of closing all your credit card accounts just because you are tired of it, think twice! Closing such accounts will not only affect your cibil score but will also hamper your score growth. Use your cards wisely and spend only what is necessary. This way you can restrict your limit.
Get rid of bad entries on your report
There are two possibilities here, your report can look bad because of your past late payments or else there could be an error made from the bureau’s end. If you find mistakes from bureau’s end, you can immediately report it to them to amend the mistakes and get your score up. But, on the other hand if your score is bad because of your past late payments, you can contact the lender and explain them why did that happen and you will not do it in the future. The lender making amendments on your report will be on the sole discretion of the lender.
Don’t hunt for new finance products at once
Do not get privileged if a credit card telesales you and offers you a card. It’s their job and they get incentives out of it. But on the other hand, if you give them permission to process your card there is a hard inquiry made on your report which stays on for at least 7 years. This will then result to multiple inquires on your report and your credit score will go for a toss.
Owning a premium card does not mean it will accelerate your cibil rating process. The method used by bureaus remains the same even if you have the basic credit card of all. Just stick to the basics, pay your dues from time to time and you will see a spike on your credit report.

Friday, 15 June 2018

What is the Right 'age' to Apply for a Home Loan?


Most people buy a house only once in their lifetime. This is usually because of financial limitations rather than a choice. After all, a house or flat in a good location is quite expensive, and since most people fund their purchase with the help of a loan which has a tenure ranging between 15 years to 25 years, it’s usually not possible to take two home loans.
Now, when comparing your loan options viz. HDFC home loan, SBI home loan, etc. you are likely to consider factors like interest rate, loan term, prepayment charges, etc. However, do you know what’s the right “age” to apply for the loan in the first place?
Home Loan and Age
Believe it or not, your age matters a lot to the banks when you apply for a loan. Although factors like your CIBIL score, repayment history, etc. are important too, your age can also affect your loan application.
The reasoning here is simple- the retirement age of a salaried individual is generally believed to be 60 years, and that of a self-employed/business-owner 65 years. So, if you take a home loan, then its tenure should end before your retirement age (which could be either of the two options depending on your situation). So, getting a loan at a young age is a good idea.
Another reason why applying for a house loan at a young age is beneficial is financial security. This largely has to do with the interest rate.
Here is the thing- the interest rate, whether it’s an HDFC home loan or a PNB home loan, is never impervious to market changes. So, the interest rate fluctuates throughout the tenure. The question is- what are you to do when you are 10 years into a loan and with 10 years still remaining, the interest rate goes up?
When the financial burden of a house loan increases because of a hiked interest rate, then you are usually left with just two options-
·        Increase the EMI so that the tenure remains the same
·        Increase the loan tenure so that the EMI remains the same
Now, while there is nothing wrong with the first option as it does save you money on the interest and helps repay the loan sooner, it’s not always viable. This is because it’s not always possible to bear the increased EMIs. Thus, the second option can come in handy, although this is where your age can pose problems.
Your bank will agree to increase your loan tenure only if they think you are capable of repaying the outstanding balance. For instance, if you are 40 years old and your loan term ends in the 10 years, then the bank may not be comfortable in extending the term by another 5 years. This is because you will be much closer to your retirement age, and your income growth won’t be much either. On the other hand, say, you are in your 30s and have a high CIBIL score, then you can easily increase your loan tenure by 5 years or even more.   
So, what’s the right “age”?
At this point, we have established that getting a home loan when you are young is always better than when you are old. However, what’s the right age really? Unfortunately, there is no exact answer to this question. However, most experts will agree that the right age to get a loan is late 20s or early 30s. In fact, the sooner you repay your debt, the better. Opting for a long-term only increases your financial burden as you end up paying a lot in interest. Plus, there is always the risk of increase MCLR rate, etc.
Bottom Line
Buying a house at a young age certainly has its advantages. However, you should also focus on the other factors, such as inculcating the habit of saving money, improving credit management, maintaining a good credit report, increasing your CIBIL score, etc. These things can greatly reduce your debt burden as you can qualify for a low interest rate loan easily and also enjoy better terms. Even more importantly, the sooner you take responsibility, the better. Good luck!

Wednesday, 6 June 2018

Can I Lower My Education Loan Debt after College?

Education is given huge importance in India. Whether we talk about engineering or medical, business administration or lectureship, every stream has its share of competition here. However, good education isn’t cheap. This is the reason why a number of students apply for education loans, especially when it’s a premier institute such as the MIT, or Oxford, etc.Although an education loan is a debt, in essence, it’s considered a good debt. This is because it’s a debt that increases your value just like a home loan would. So, when you take an education loan, you are not put in a bad light in any manner. The banks treat you as if you have a high creditworthiness unless you make some bad financial decisions that reflect in your credit profile or lead to a low CIBIL score.  That said, repayment can be an issue especially since you aren’t earning yet and it could also be your first loan ever.The following are some tips on how you can lower your debt after finishing college:

1. Look for Provisions
Given the nature of student loans, banks often offer different relaxations to meritorious and financially-weak students such as interest subvention, easier repayment terms, etc. In fact, female students can get a flat 0.5% concession on their interest rate.

2. Don’t Overlook Moratorium Period
Mortarium period is a grace period that the banks offer after you finish your education. During this period, you don’t have to repay the loan. So, you can use the time to find a job and get settled.While you are not required to start paying the EMIs during the moratorium period even if you get a job immediately after finishing college, there is a huge advantage of doing it anyway.Here is the thing- the banks start imposing interest as soon as the student loan funds are disbursed. So, all 3-4 years of your college, this interest gets accumulated which can easily grow so high as to match the principal amount itself. However, if you start repaying it while you are still studying, and during the moratorium period as well, then by the time you get a job and are able to start the repayment with full EMIs, the cost of the EMI will be very low.Many banks offer interest rate concession up to 1% for students who start the repayment during the moratorium period. So, that’s another big advantage.

3. Debt Consolidation
If you have taken another loan apart from the education loan itself, such as a personal loan or car loan, then you can consider applying for debt consolidation.In this, all the loans are merged to form a bigger but single loan. The advantage of this is that repayment becomes simpler and easier. Plus, you can also request for a lower interest rate which is not that difficult unless you have a low CIBIL score.

4. Plan for Rate Fluctuations
If your loan has a floating interest rate, then it means it can go both up and down during the term. Since there is no way of telling what the market conditions are going to be like in the future, it’s best to prepare for the worst-case scenario i.e. a high interest rate. So, make sure you have emergency funds that can be used to pay the EMIs if they grow bigger.

5. Don’t Mind the Work
When you have a student loan on your shoulders, then it should be your top priority to get it cleared. This is because when you start a career, then the income usually isn’t too high. So, unless you try to save every single penny and try to earn money through as many ways as possible, it can take a long time to repay the loan in full.Many students work overtime or work for incentives that increase their average monthly pay which helps clear the debt faster.

In Conclusion
So many students get so caught up in their jobs after finishing college that they don’t think about lowering their debt at all. However, it’s not that difficult. More than that, you absolutely must get rid of it asap so as to maintain a high credit score and low stress.