Wednesday, 23 August 2017

HFC Vs Bank: Where To Get That Home Loan from?

Every Indian family dreams to own a house of its own. If you have already selected the house of your choice, the next logical step is to find a lender who will provide the necessary funds needed for the purchase. If the project of your choice is approved by both banks and housing finance companies, then you need to decide which one to go for.

Since banks have been the traditional source for home loans they account for the maximum share of housing finance market. Banks are governed by RBI. HFC are new entrants in the market who are also playing a significant role in this space. HFCs are regulated by National Housing Bank who makes sure that they follow the standard industry practices. With so many choices of financial institutions how does one decide which one to choose? Since housing loan is a long term commitment that impacts your finances in a big way, one needs to be doubly sure before taking a final decision.

Since the interest rate, processing fee, loan amount sanctioned and the eligibility criteria are the key deciding factors; lets evaluate how the banks and HFC score on these parameters.

Interest Rates

Bank home loan interest rate is based on MCLR which is linked to macroeconomic factors like the RBI lending rates. HFCs on the other hand determine interest rates according to the Benchmark Prime Lending Rate which is not governed by RBI. This gives HFC greater flexibility in fixing interest rates. They can give low interest loans to credit worthy borrowers or high interest loans for low CIBIL score borrowers. The disadvantage with Prime lending rate based model is that HFC may be slow in passing the benefits of interest rate cuts to customers. While banks are quick in passing on rate cut benefits to their customers so they mostly offer better interest rates than HFC.

Earlier the HFC home loan interest rates were usually more than the banks. But since the last decade they are offering loans at interest rates comparable to banks. Since interest rate influences your EMI it becomes the prime deciding factor. So shop around and choose the most competitive one.


Both banks and HFC offer attractive interest rates to people with a high CIBIL score. If you have a low CIBIL score you may not even stand a chance of getting approved by the bank. Banks have very stringent eligibility requirements and they do not sanction loans to high risk individuals. HFC are flexible while evaluating CIBIL scores. They offer loans for low CIBIL score though they balance their risks by charging higher interest rates.

Loan Amount

Banks are permitted to fund only 80% of the property cost. Moreover they do not factor in costs like stamp duty and registration charges while determining the property value. So one needs to spend a huge amount from one’s own pocket. If an individual is not able to arrange for this down payment he cannot get his house funded by the bank. HFCs on the other hand have a high loan to value ratio. They can devise ways to enable the borrower to take on a larger loan amount and contribute less from his own pocket.

Processing charges & processing time
The time taken to process the loan and the processing fee charged for the same also determine which option to choose. Usually banks are more stringent when it comes to eligibility criteria, requirements and paper work; and hence take more time to disburse funds. HFC have a relaxed paperwork and processing requirement. This enables an easy approval process and a quick disbursal of funds. People who are in immediate need of funds very often choose a HFC because of its quick processing even if the interest rates are comparatively higher than the bank.

While selecting between a bank and HFC the decision may come to who offers a better interest rate. If the interest rates are comparable one may choose the option that provides faster loan disbursal and low processing fee. Choose HFC over banks when you need a high loan amount and you cannot make a big down payment or in case of loans for low CIBIL score

Saturday, 19 August 2017

How Long Must I Have Credit Before I Get a Near-Perfect Credit Score?

Let’s assume you pay all your bills on time, you do not carry any debt on your shoulders and also have a great mix of accounts on your credit report you are proud about it. Yet every time you pull up the cibil report there is one factor which appears to be blocking you to reach the perfect score you always imagined. 
If you have just started out in the world of credit you won’t be having any idea on how to manage accounts, how to maintain a perfect cibil score. But if you are a seasoned person in the credit world you will need to be an ace in regards to credit management.  Many fail to achieve this as there are many credit related things which should be considered,
How to ensure gaining Maximum Points Available considering ‘How Long Have You Had Credit’?
What is your target?
As we know there are different credit bureaus in our country and all of them handle the credit ratings differently, but the basic factors to consider credit ratings is the same, i.e. credit history, mix of accounts, utilization of credit also credit inquires made from time to time. In India priority is only given to Cibil ratings by Indian banks. Consider your target on an early stage and plan it accordingly for example, a credit score of a three year old account will be entirely different than the person who has a credit account from twenty years. You can achieve what a twenty year old credit account has not in three years if you maintain the habit of paying bills on time.
Pay your bills on time
Many have perceptions on having to prepare for the perfect cibil score. What people don’t know is you can avail a loan with score of 750 or above. Yes you saw it right! It’s easy to maintain a score above 750 instead of running for a perfect score and achieve your financial goals.
To build an amazing credit report for a long run, just make your payments on time, keep your expenses low which can lead you to debts. Keep a mix of accounts like consumer loan, credit cards and keep sufficient balances on all. You can definitely track your progress by cibil score calculation from time to time.
Do not close your account and get it removed from your report
If you want to achieve that perfect score do not try to remove any existing account by closing the same. Keep all your accounts live and keep making small transactions through the same, many people think if they close the account the report related with the account vanishes, but that is not the case. The closed account gets reflected on your cibil report for a brief amount of time.   
Opening a new credit account will lower your average credit age
The idea here is to not going for multiple credit accounts when you do not need any. Cut off your luxury expenses and only but what you need. If you are getting another credit this will definitely et reflected in your cibil account and it will lower your credit age.
The Impact to Your Credit Scores
Once you keep a track on the credit scores and make payment from time to time it will lead you to a healthy financial we know these days as a part of verification there are companies which also pulls up your cibil scores just to analyze you on how responsible are y in terms of managing money. A healthy credit score will always get you of the edge in times of emergency situations by opting for any emergency loan.
It does not matter how long you need the credit before for making a perfect score, it’s about your integrity for paying the bills on time. If you pay the bills on time it will only help you to improve cibil score and lead to a secure future.

Thursday, 10 August 2017

How Can One Repair Their Credit Score?

If there is one thing you should know about credit scores, it’s that finding a personal loan, home loan, etc. can be really difficult unless yours is a good. Your credit score will play an important role at various points of your life. So, it’s really important that you monitor it well and take the necessary steps to improve it whenever necessary.
The following are some of the best ways to repair your credit score:
1. Removing Settled Accounts
You can’t expect to improve CIBIL score if the credit report mentions an instance of debt settlement.
Debt settlement is usually the last resort for a bank or NBFC that’s not able to receive the full loan amount from a borrower. So, when a person defaults on a loan, the bank gives them an option to pay only a small portion of the actual debt and be done with it. While exercising this option removes all the problems for the time being, it ruins the credit report. So, if you ever decide to take another loan in the future then the mention of debt settlement in your credit report can make it nearly impossible to succeed in your endeavour.
You must get your bank to remove the remark on debt settlement from the credit report if you want to improve CIBIL score. You can simply contact them and explain your situation. If you can convince them that you are ready to repay the pending balance they might agree to your request.
2. Becoming Careful with Payment Deadlines
One of the easiest ways to improve CIBIL score is to start paying credit card bills on time. The same goes for other kinds of debt payments, such as loans, mortgages, etc. There are two benefits of becoming punctual with payments:
·        You don’t have to pay fines or penalties for late payments.
·        Your credit report shows a consistent pattern which not only helps in increasing your CIBIL score but also makes you a good candidate for pre-approved loans.
3. Lowering Credit Utilization
Perhaps the reason why you are unhappy with your free CIBIL score is because you were using your credit cards too much, which led to high credit utilization. So, by limiting that you can repair the credit score easily.
The key to a balanced credit utilization is understanding how it works. Let’s say you have two credit cards with each having a credit limit of Rs. 1 lakh. If you are using one of these on a primary basis and spending on average Rs. 50,000 per month then the credit utilization on that card is 50%, which is quite high. On the other hand, if your credit utilization on the second card is about Rs. 10,000 then the credit utilization on that one is just 10%. In this situation, what you can do is use both cards for a maximum spending of Rs. 30,000 each. This way, the credit utilization is only 30% on each card, which is perfectly within limits and will help improve your CIBIL score.
4. Avoiding Minimum Payments
A large number of people end up with a poor CIBIL score because they are unaware about the bad effects of minimum credit card payments.
Banks want more and more people to apply for credit cards. To convince them they advertise the option of “minimum payments” which are basically partial payments that you can make and still continue enjoying the benefits of your credit cards.
While it’s true that you are not fined for not paying credit card bills in full if you are making minimum payments, the remaining balance is still collected as debt. This debt has to be paid off eventually and is actually bad for your credit score. So, if you want to repair credit score, you must start avoiding minimum payments.

Improving CIBIL score doesn’t have to be hard. If you are careful with your actions and check your free CIBIL score every once in a while then you can make remarkable progress in just a few months. However, if you have your reservations for the same, then you can also consult a professional.

Thursday, 3 August 2017

My home my way- Get your desired home renovation loan

Do you want to add a room to your house, or change the interiors to keep up with the latest trends and designs? Is there a structural repair in the house that requires immediate attention?  Renovating a house is a costly affair. Sometimes our plans for remodelling take a backseat because of lack of funds. But with home renovation loans all your dreams can turn into reality. There are many banks and NBFCs that offer you financial assistance and help you cover for these expenses. So you no longer need to constrain your plans because of budget issues.
Kind of loans you can avail for home renovation
Home loan top up- Some lenders offer renovation loans under the banner of home loans. If you have an existing home loan and you have been paying your EMIs regularly, then you can become eligible for a top up loan. Your payback period will be extended and you will have to pay a higher EMI on your home loan. It is a good option if you have availed a home loan at a lower interest rate.
Home renovation loan – These loans have become popular in recent times. To get an approval one must ensure that one has a healthy credit profile, good employment history and a stable monthly salary.
Personal loan- You can also avail an unsecured personal loan to cover for the renovation expenses. You can even use these funds to buy furniture and electronics for your house. This option usually turns out to be much cheaper than the EMI option with the retailers or purchase through credit cards. But these loans can be obtained only if you have a good CIBIL rating.
Preparing for a home renovation loan
Estimate the cost of renovation- To determine the amount of loan required, one needs an estimate of the total cost of renovation. You can get an estimate from multiple contractors to arrive at an average and then make an allowance of 15-20% of the amount to meet any unexpected costs that may arise in the future. Also take into consideration your capacity to pay the monthly EMIs. You may either reduce the loan amount to fit your budget or increase the tenure of the loan if you cannot afford the specific EMI.
Check your credit score- Your CIBIL rating plays a major role in determining whether you will be approved for a loan or not. So check your CIBIL score and report before applying for a loan. If you notice any discrepancy or fraudulent transactions then you need to take steps to get the errors corrected.
Benefits and features of home renovation loan
Easy application- The process of applying for a home renovation loan is quite straightforward provided you have all the documents, low debt-to income ratio and an excellent CIBIL score. The documents required for the loan generally include KYC documents, income proof, property documents, employment proof and details of the work that you need to carry out.
Loan amount- The loan amount for which you are eligible depends on several factors like age, educational qualification, income, savings, potential to meet the new obligation, assets and liabilities and credit history. If you wish to get approved for a higher amount you may consider getting a co-applicant.
Interest rate- Home renovation loan interest rates vary from bank to bank. It is not necessary that the bank with which you have a relationship will give you best deals on interest rates. In order to avail the best interest rates one needs to have an excellent credit score. A rating of 750 and above will give an assurance to the lenders that you are a responsible borrower who makes repayments diligently. Since the risk of lending money to you will be very less, lenders will be ready to offer you lower interest rate and better terms and conditions.
Loans for Bad credit
You know that a good CIBIL rating is necessary for getting a loan approval. But what if you have a bad credit history? Is there a way you can qualify? Surely there is. A co-signer with a good credit standing can help you get an approval. You can also use your home as collateral to provide assurance to the lender that his investment is safe. Home equity line of credit can make you eligible for a higher loan amount even if your CIBIL rating is not very impressive. You can also try approaching online lenders who provide loans for bad credit but charge a high interest rate.
So do not hesitate anymore to undertake that extensive d├ęcor and furniture re-design that you have always wished for. Increase the value of your home and satisfy all your passions, hopes and dreams with a home renovation loan.