Thursday, 11 October 2018

Types of business loans that you can apply for

Loans have made it easier to persuade the dreams at an easier and faster time than usual. Start-ups are fortunate these days to get the loan when the proposed plan is promising. While planning for a business loan, let’s understand the types of business that are available across.

1.Term loan
A term loan is the one where the loan is provided for a specific period mostly between two years to ten years with the interest rates agreed upon which can be fixed or floating. This is an unsecured type of loan and hence the risk probability for the lender is more.

2.Loan Against Property
If the borrower has a property that he or she can keep as the guarantee, it becomes easier to get the loan. The valuation of the property is done and the loan amount is sanctioned according to it. This is a secured type of loan and usual tenure to maximum is seven years.

3.Gold loan
If the borrower has gold jewelry or gold coins, even those can be kept as the guarantee against the loan amount that is sanctioned. When there is immediate and small amount crunch, this act as the best option as it is processed faster compared to other loans and the tenure is a maximum of two years.

4.Loan Against Shares or Financial Securities.
Bonds, shares, financial asset classes, fixed deposits, insurance, mutual funds also act as the loan guarantee. If an individual has any of this, then singularly or collectively they are kept against the loan amount that is borrowed. The interest rates here are again fixed or floating according to the mutual consent of lender and borrower. The tenure here also is lesser compared to term loans but can be more if compared to gold loans.

5.Cash Credit Facility
Cash Credit Facility is getting the cash instantly. These are smaller amount loans. Again an unsecured type of loan that is given after many checks and the after seeing the potential of the business. Tenure is lower than five years. This can be a good option if someone is applying for a personal loan bad cibil score.
6.Letter of Credit (LC) Facility
Either banks or a guarantor gives a letter of credit which states the credibility or an individual who is running the business. This has a lot of consideration from the past credential of the borrower.

7.Equipment Loans
There two types of equipment loans. One that is taken to buy the equipment and other is taking loan keeping the existing equipment as security. In the first case, it becomes an unsecured type of loan and in the second it’s a secured loan. If the basic business is established, these loans are easy to get but comparing the wearing of the machinery and its deteriorating valuation with the actual profit that can be achieved.

8.Personal Loans
A business loan is usually with a higher percentage of interest rates compared to personal loans. If the amount required is up to ten Lakhs or something, a personal loan may act as a better option than a business loan. Again, an unsecured type of loans with maximum seven years of tenure.

9.Nonprofit Business Loans
There are may co-operative organizations or community services which help the upcoming businesses. They offer negligible interest rates and sometimes no interest rates at all to the borrower. If possible, one should try getting these type of loans as in a longer run, these will be beneficial.

Small loans for small-scale projects. Here, one can get loans as low as five lakhs. In India, mostly the grah udhyogs opt for these types of loans.

11.Short-Term Loans
Where the borrower is sure of the project and needs an amount for the smaller tenure, he or she may opt for short-term loans. They are aided with lesser interest rates compared to normal loans. The tenure can be as short as six months.

Business comes with a great financial responsibility with a future vision of prosperity to oneself and people working with. One should make sure which option suits the best to them.

Friday, 5 October 2018

Will Low CIBIL Score Tow Away Your Car Loan?

Owning a car unlike in the past is no more a luxury. All young people want to buy a car for themselves as soon as they start working and those who already have vehicles are looking at upgrading their wheels or buying additional ones. All this love for cars is facilitated by easy availability of loans. Almost all financial institutions offer car loans at fairly easy terms. However for the loan to be sanctioned the applicant needs to comply with the eligibility criteria for the loan to be sanctioned.
Credit Score and Car Loan:
Like all loans car loans are sanctioned if the applicant meets the conditions laid down by the lender. There are various conditions that need to be met and one of them is a healthy credit score. A low CIBIL score indicates that the person has not been a responsible borrower in the past; this will obviously not inspire trust in the lender that the applicant has approached.
When you apply for a car loan, the first thing the prospective lender does is get the CIR of the applicant. Whether the application goes to the next step or not is determined by the credit rating of the applicant. So if your score is low does it mean that it is an end for your dream of getting a car or is there a way around it?
Does a Low CIBIL Score Tow Away Your Car Loan?
A low score is definitely not a good sign if you are looking for a car loan or for that matter any loan but there are steps that can be taken to deal with your situation.
  • Check Your CIR: The first thing you can do is a check your CIR before you apply for a loan. If your score is low then you should focus on identifying the reasons for the low score. There may be times when the score may be low not because of irresponsible credit behavior on your behalf but because there was some erroneous reporting by a lender, like there may be delayed payment which may have not happened or default on a loan which is not yours. You need to bring this to the attention of the rating agency that will get in touch with the lender to get the mistake rectified. This will take at least a month but if the score is low due to the mistake then you will see an improvement in your score and then you can apply for the car loan.
  • Work on Improving Your Score: If the score is low then it reflects irresponsible credit behavior on your part, in such a sceanrio you cannot look for a quick fix as a credit rating is built over time. However it is important that you identify the reason/s for the score being low and then work on improving them. This may take a while but it is better to wait for your score to improve rather than going ahead with a loan application with a low credit rating. A low credit rating means you have less choice in terms of which lender to approach and also that you may have to pay a high loan interest rate due to your score being low.
  • Get a Co-applicant: If you have a low credit score you can try and get a co-applicant to apply with you for the loan. However this will make sense only if the co-applicant has a better score than you. If the co-applicant’s score is as low as yours or lower then there will be no benefit in getting him/her as a co-applicant. Bothe applicants have to meet the eligibility criteria and other conditions as laid down by the lender and the applicant with the better score can become the primary applicant.
So a low score does not mean that your car dreams have to be towed away, there are ways that can help you deal with the situation. Hopefully one of the above ways can help you deal with a low score situation.

Friday, 28 September 2018

Difference between online personal loan and traditional bank loans

In the internet times, everything is fast. Somehow, somewhere the patience is decreasing. But, there are things which are happening at the lightning speed! So, one has to be fast. Now, while speaking about the speed of everything, the time required to achieve the dream has also decreased. The time of getting the credit which helps in achieving the dreams, in taking a new house, taking a car, going for that vacation, having a perfect wedding, starting a new business now is easier. But, it’s not about only getting the loan or the credit approved. It is also about how irresponsibly on handles it!

There are different reasons why an individual requires a loan. While home loans and car loans or education loans are specifically designed for those specific needs, a personal loan has a wide range of needs. Marriage, travel, medical emergency, house repairs, small business needs and many more are the reasons why one wants to apply for the loan. With many of the banks, HDFC personal loans are the ones which are a little popular once. Applying for a loan is also faster and easier these days. With online options coming into the picture, applying for loans now happens on fingertips. The online application takes less than five minutes. There are few of the sites that assure you the loan approval within three minutes. All that one has to do is submit e-copy for the documents like aadhar card or election card, PAN card, credit score if known. And it’s done.

However, while comparing it with traditional bank loans there is one major difference. An online personal loan when applied for does not promise a bigger amount that can be sanctioned. For smaller amount loans, they are good. But, while talking about traditional bank loans, depending on an individual’s credit history, credit score and the earning, the amount that can be approved can be bigger. Applying online for the loan may face a few complications. Sometimes even after the approval, as there would be some documentation errors, it can get canceled. While in a traditional loan, this can never happen. If the cibil score is below average, one can also apply for Loan for low cibil score. Online personal loans work amazingly for this. The percentage of interest is higher, but a small amount as 50000 or 100000 is approved instantly. While is an urgent need of funds, this would help greatly.

Either online personal loan or traditional bank loans, the credit bureaus work in the same way. One has to make sure that the repayment is done on time. The credit score is affected in the same way in either of the loan types. If missed or delayed payment, the score drops. It is important for an individual to understand the responsibility of the credit that is taken. A credit score is now not only checked at banks or NBFCs while applying for loans or credit cards, while taking jobs, applying for visas, going overseas, the score is checked everywhere. A Single goof up, and the score dips and all these things get affected.

As described, online loans are faster and are available at an easy and faster speed. One of the reasons it is so popular is the smaller amount that can be approved along with the easy disbursal in the bank account. While the traditional bank loans may take time but a huge amount seeing the conditions can also be approved. Loan for the low cibil score is also approved in either of the cases, but that does not imply that one stops caring about the score. Working on the score and taking a small loan in repaying the older debts can also be a good option!

Tuesday, 18 September 2018

Type of properties against which lenders provide loans

There are many times in your life when you need finances to fulfil your dreams but do not have ready cash available. Setting up a business, sending your child for education abroad, weddings and home renovations are just a few of these situations when one can rely on borrowed funds. For this one can either take a personal loan or a loan against property.
A personal loan is an unsecured loan that is usually given for a maximum period of 5-7 years, whereas LAP as the name suggests is a secured loan taken by mortgaging a property. LAP is available for a maximum tenure of 15 years. Personal loan EMIs turn out to be higher, because of shorter loan tenure and a high rate of interest ranging between 17-22%. LAP is a cheaper way of borrowing funds. The EMIs are affordable as tenure is long and interest rate is lower, generally ranging between 12-16%. The personal loan amount depends on the income level and CIBIL score of an individual. Loan amount against property is based on the property value. So you can make use of an idle asset and borrow much more funds than you can through a personal loan. Moreover, if you have a low income or a bad credit history, a personal loan for low CIBIL score may turn out to be very expensive on your pocket. Loan against property will be an ideal choice in such situations.
Let’s see the kind of properties that one can mortgage to get a Loan against property.
  1. Self-owned residential property
  2. Self-owned and self-occupied residential property
  3. Self-owned but rented residential property
  4. Self-owned piece of land
  5. Self-owned commercial property like shops, office buildings, malls etc.
  6. Self-owned but rented commercial property
Factories, warehouses, schools, hospitals and multiplex buildings also qualify for LAP. One can also avail for LAP for under construction property that is 90% complete and being built by an approved builder.
The easiest way to get LAP is when you have a property with proper maps and plans that are sanctioned by the town planning authority. Most banks and NBFCs offer loans for such properties that have a clear legal title.
What if you have a registered property without map? Since these properties do not have a clear plan sanctioned by town planning authorities they have some amount of risk for the bank. With such properties you may need to provide documents like a proper sales deed and proof of sufficient income, so that you can gain the trust of the bank.
Is GPA sufficient to get LAP? General Power of Attorney is a legal instrument that gives an authority to act on someone’s behalf. The GPA holder does not own the property. Since he does not have any legal ownership, most banks and NBFCs do not provide loans against such property. One may try his luck with private lenders or some housing finance companies who may do so, but charge exorbitant rates to cover up for the risk.
Can Lal Dora land and agricultural land be used for LAP? Lal Dora land refers to that part of the village that is left for keeping livestock. Banks and NBFCs do not grant loan for such properties. Private lender on P2P platforms may offer such loans. Loan against property is not provided for agricultural land as it is not mortgageable.
One of the main requirements for LAP is that the property should be free from any legal and financial encumbrances. When an application for LAP is submitted, bank does a legal check and valuation of the property. The amount of loan that gets sanctioned depends on the valuation done. One can borrow up to 65% of the value of property. Hence, the kind of property that you put up as mortgage can be a deal breaker or deal maker when you file your application.

Monday, 27 August 2018

Must To Do List Before Buying a Home

Buying your own house is kind of a big deal for people even today. Even with a lot of loan options available in market, one always stays at the edge when buying a dream home. Many of us make quick and wrong decisions when it comes to getting a property. The mistakes can be short term or long term. Short term includes your transactions with the property developer or the banker and long term may include you making silly mistakes while making the EMI payments. It is really important to understand these aspects before you dive into the property market pool.
If you are in market hunting for a home and do not know where to start, you are at the right place. Today we will cite you the must do list when it comes to buying a home.
  1. Know your credit score
It goes without saying that you will be opting for a loan when you are trying to buy a house and what is the main component when it comes to loan hunting, that’s right! Credit score. A credit score plays an important role when it comes to loan processing. Before you apply for a loan, know your credit score and understand where you stand in front of the home loan lenders.
  1. Start hunting for an ideal lender
There are many options available in market when it comes to home loans. Various banks and non-banking financial companies have different schemes related to home loans. You should know which lender will suit you better. The best suggestion would be to contact your home branch and see if you have any pre-approved loan options. ICICI home loans are the best lenders in the market who have attractive interest rates and less processing fees.
  1. Calculate total cost of the property
You may fall for various offers from the developers and the banks when it comes to buying a house. Many banks may portray that they give up to 95% funding on the house and after you make the 5% you come to know that the 95% funding was on the property price excluding government charges. Before you make the purchase, you should ask for the cost sheet from the developer and confirm what all components are included in the loan so that you do not have any surprises later. It is suggested to do a proper cibil score check to get maximum funding.
  1. Only buy what you are comfortable paying for
Many of us make this mistake. We go for a high value property just because we are eligible of getting the loan amount sanctioned. What about the future? We know nothing what would come across in the future. Before buying the house make a mental estimation stating if this is what you want? And if its worth it in the future to make life simple.

  1. Do a thorough check on the developer
You don’t want to be duped in this property tornado. You must have heard about a lot of examples where the developer has made a fraud and has run away with the money. Always buy property with reputed developers who have well known name in the market so that you minimize your chance o f being duped.
  1. Know the growth of your investment
It’s an amazing feeling of owning a house, but you will have to consider other factors as well when it comes to buying a house. Just make sure the property your buying should give you fruitful returns in the future. The property should be more like an asset rather than a liability.
  1. Pay EMIs on time
Buying a house on EMI is kind of risky, because if you do not pay your EMIs on time you may lose your property to the lender. This will not only affect you mentally but will also hurt your chances of getting a loan in the future.
Do not lose your sight on small mistakes you can commit while purchasing a house. This can cost you in the long home loan run.

Friday, 24 August 2018

Things to Take Care of while Applying for Personal Loan

Personal loan is an instant short term solution for cash strapped individuals. If you just search for “Personal loan” on Google you will get numerous options of lenders willing to offer loans at attractive interest rates. Some advertisements are so appealing that people simply get carried away and take the offer without finding out the important details. Here are some important things that one must take care of while applying for a personal loan.
Purpose of loan- The one key decision that one must make is whether to take a loan at all or not. One must draw a line between essentials and luxuries. While taking a personal loan for medical emergencies, education or repairing a house makes sense, one must not use it to finance a vacation abroad or invest in share market. Personal loan interest rates are usually very high, hence these loans must be take only in times of urgent need.
Research for options- One must not only compare the offers on personal loans provided by different banks, but also evaluate other options like a top up home loan or loan against property. Find out the interest rates, tenures offered, prepayment charges and other terms of various types of loans to get the best deal.
Check your credit score- Banks pull your credit report to assess whether you are a reliable borrower. They reject your application if you have a low credit score or else charge exorbitant interest rate to cover for the risk. It is wise to check your credit score before applying for the loan, so that you know your likely prospects of getting the loan sanctioned. If you have a low score, take some immediate steps like paying off your credit card debt to improve the score by a few points. A high score can be used to one’s advantage for negotiating for a lower interest rate.
Type of interest rate- Find out whether the bank charges a flat interest rate or reducing balance interest rate. Flat interest means that the borrower pays the interest on the entire loan amount for the entire tenure of loan. Reducing balance means that the interest is charged only on the outstanding loan amount. So as the EMIs get paid and the principal amount reduces, the interest payable also reduces. Flat interest rates are typically offered at a lower rate, but that does not mean that your total interest cost is less. Sometime reducing balance rate method results in lower cost of borrowings even if the rate is slightly higher.
Other charges- Apart from the interest rate, one must also find out about the processing fees and prepayment charges that a bank levies. Processing fee is usually 1-2% of the loan amount. Include it in the total cost of borrowing to compare the options you have. If you are struggling with cash flows find out how much late payment fees does the bank charge if you miss the deadline of paying the EMI amount. Prepayment fee is another charge that many banks levy in case you wish to prepay the loan when you have sufficient cash available. If you want to close the loan as soon as your cash situation improves then assess this cost before you make a choice.
Read the terms and conditions carefully- Sometimes the relationship manager hides a lot of things, just so that he can close the deal. Read the terms and conditions yourself before you sign the dotted line. You must know what you are agreeing to as the agreement becomes legally binding.
Avoid add on offers- Sometimes banks try to sell additional products with the loan like life insurance policies. Don’t believe them when they say you do not have to pay anything for it. It’s just that you do not pay anything upfront. The premium for such policies gets added in the EMI amount.
Borrow only what you need- Personal loan is a very expensive form of debt. Borrow only the amount that you need and not what you are eligible for. Bank executives use various sales strategies to get you to borrow a big amount. Do not give into such tactics. Why pay an interest on the amount that you don’t need?
Make sure you can afford the EMIs- Since personal loans usually have a shorter tenure and a high interest rate, the EMIs put a strain on one’s monthly budget. Do an honest assessment and borrow money only if you are sure of your capability to service the EMIs. Any missed or delayed payment will not only attract penalty but also pull down your score.

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.