Saturday, 28 October 2017

What Type Of Home Loan Should One Opt For?

Owning a house provides a great sense of satisfaction. In fact, one of the most important goal of every Indian household is to arrange for finances to buy a perfect dream abode. With rising property prices most middle class Indians rely on home loans to meet this goal. It is an easy finance option that has made the dream of owning a home quite attainable. Over the last decade the demand for home loans has increased many folds. In order to tap this growing opportunity in the market, banks and financial institutions have diversified their portfolio of home loans. There are many different kinds of home loans available to cater to the varying needs and expectations of customers. Some people need loan to buy land, while some need to build the house and some need to purchase a house. Let’s have a look at some of the most common type of home loans and understand what you should choose when.
1.      Land purchase loans- As the name suggests this loan is taken if you wish to buy a plot of land to construct your house. The land may be bought for residential purpose or simply for investment. Banks usually finance 85% of the price of the land. The loan tenure can extend for up to 15 years. Like any other credit, loans for purchase of land are also sanctioned after checking your CIBIL score. Expect a favourable interest rate if you have a high CIBIL score.

2.      Home purchase loans- Home purchase loans are the most commonly available and the most sought after source of financing. They provide funds for purchasing a new residential property or a second hand home from the previous owner. The interest rate can be fixed or floating. You can bargain for a good interest rate and better terms if you have a good CIBIL score. Usually banks offer 80-85% of the property price. But sometimes the bank may even sanction upto 95% of the amount required for people with an excellent CIBIL score.

3.      Home construction loans-If you wish to construct your own house on a plot of land rather than buying a prebuilt home, this loan variant is for you. You will need to make a rough estimate of the amount of funds you need to construct the house and accordingly apply for the same. If the plot of land on which you wish to build the house has been bought within an year, then the cost of land will be included while calculating the total cost of house. If it has been more than a year that you bought the plot, then its cost will not be included in the price. The loan amount may either be disbursed in one go or it may be construction linked, where you receive instalments as the construction progresses. ICICI bank home loan is available for this purpose at attractive rate of interest. Almost all leading banks offer these loans.


4.      House expansion or extension loans- Alterations in the current residence to add an extra room, floor, enclosing a balcony or any other type of expansion requires substantial amount of funds. ICICI bank home loans have another variant called home extension loans where one can arrange for finances for expansion purpose. You can also avail these exclusive loans from HDFC bank, Bank of Baroda and many others. The amount of loan that gets sanctioned depends on a number of factors like income level, repayment capacity, CIBIL score etc.
5.      Home improvement loans- If you need funds to beautify your house, renovate it, carry out major repair works, change flooring or even to paint the house, you can go for home improvement loans.

6.      Balance transfer home loans- If wish to transfer your current home loan to a different bank to get lower rate of interest or better services, you can go for balance transfer home loans.

7.      Home conversion loan-If you have already purchased a house on loan and wish to buy and move into another new house, you can opt for home conversion loan. The existing loan will get transferred for funding the new house.

There is a loan for every purpose. And almost all banks offer these different kinds of loans. Explore the different options you have and pick the best deal that suits your individual requirement.

Wednesday, 18 October 2017

How to Build Credit When You are New to the Credit Card

Building credit is of utmost importance if you are looking for a stable financial life. Approval of car loans, home loans, personal loans; interest rates all depend on how strong your credit profile is. But getting started on this journey is a bit tricky. To have a credit score, you need at least one open account where the creditor has reported your activities of the past 6 months to the credit bureau. Based on this information the bureau will prepare your credit report and determine your credit score. But how do you get approved of credit and display responsible repayment behaviour in the absence of a credit history?
Well, a secured credit card can be your starting point. You do not need a credit check to get approved for a secured card. Here you make a cash deposit that serves as collateral for your credit line. Your credit limit will be determined on the basis of the amount of deposit you made. Since the lender’s risk is completely covered, the credit score is not taken into consideration before the approval. The card issuer reports the borrower’s activities to the bureau and gives him a chance to prove his creditworthiness. But possessing a card will do no good, unless you use it in the right way to build credit. If you are new to credit cards the following tips will help you to achieve your goal of an excellent credit score.
1.      Charge an expense to the card every month
 Just possessing a credit card will do no good to your credit history. You need to charge some small expenses to the card every month in order to keep your card active and demonstrate that you are responsible with the credit. Your credit profile will become strong only when positive credit activities are reported to the bureau. So make a few purchases using the card each month and pay the bill in full and on time.
2.      Keep a check on credit utilization rate
Credit utilization rate plays a significant role in determining one’s credit score. It is calculated by dividing the total balance on your card by the total credit limit. This balance can be a snapshot at any point in time when the lender reports the activity to the bureau. So even if you pay the balance in full each month, you may still have a very high credit utilization rate if you have charged several expenses in a month. A very high balance is a sign of financial instability. It gives an impression that you are desperate for credit and hence lowers your score. It is a good habit to utilize not more than 30% of available credit limit. So know your credit limits and keep a check on how much you charge each month along with the balance that you carry on the card.
3.      Make payments on time
Your payment behaviour contributes to 30% of the credit score. Making on-time payments consistently shows responsible behaviour and works in favour of your credit score. Make sure you never miss a credit card due date. Set auto pays or reminders to ensure that you are up to date with the payments.
4.      Pay the balance in full

Though you need to use your card to build credit you need not carry any balance on the card to do so. In fact paying the balance in full when the monthly statement arrives is the best practice. So live within your means and purchase only what you can afford to pay back in full. If you do proper budgeting and follow this golden rule, you can build credit without actually taking on any debt and paying interest charges.
5.      Check your credit report
Get your free credit report every year to check for any suspicious activity. Ensure that the information recorded in the credit report is correct. If you find any errors and discrepancies you can report it to the bureau and get it corrected.

Credit cards are a good way of building credit without actually taking on any debt. But you can get into a lot of trouble if it is not managed properly. Be sure to stick to your budget and not go overboard in spending just because you have available credit limit. Be responsible with the payments as it is the foundation for building good credit.

Saturday, 7 October 2017

Does Getting a Divorce Hurt Credit score?

Divorce touches your life in more than one way. While it mostly brings a lot of emotional stress and trauma to the couple involved, it certainly affects financial aspects of their life. Before seeking split of relationship, the couple should thus also consider financial implications of the decision on their credit score and credit worth.
Although divorce is not something that is stated on your credit report, but a legal separation from your spouse also divides household income, assets and liabilities. Thus a relationship split is likely to affect your credit score in a very significant manner.
Let’s understand how getting a divorce hurts your credit score and worth.
When your ex fails to pay out the bills
Many couples fail to follow divorce decree as far as financial obligations are concerned. Being a couple, it is likely that you two hold several joint credit accounts, and failure of meeting any of the open accounts by anyone of you would hurt the other person’s credit history and credit score as well. It would drop the credit score to be precise and it would become difficult to borrow loan with bad CIBIL score.
Later on even if you make the missed payment, that too would make a footprint in both the CIBIL reports.
Following a divorce, it is thus recommended to keep a strict vigil on the timely payment, even if the divorce decree makes the other person responsible for the payment. As long as the account is open, there is a risk of missed payment on time. In order to keep the last minute surprises away, you should take responsibility of timely payouts. You can set a monthly reminder on your mobile and contact your ex to politely ask them for the timely payment of the dues.
Irrespective of the issues between the two of you, the point of the matter is these accounts have your name attached and if they are not met on time, your rating will suffer.
In case your ex refuses to pay out an instalment, you can consider making the payment. You can always claim the refund later on in the court.
When you find yourself struggling for payments
Divorce cases could sometimes turn dirty and may involve a lot of expenses. If you were not the bread earner or support lesser salary than your previous lifestyle, you could be feeling stretched out after paying hefty bills to attorney for court proceedings.

In such pressing times, you may find it difficult to pay on time. In order to stay on track, many splurge credit card use, but that would eventually hurt your credit score too. For, rolling over balance on card could be a very costly mistake. It attracts very high interest rate.

Also, to keep your score robust you should not use more than 30 % of limit every month.

In face of lowered income source and additional expenses, you need to make a practical budget plan that helps you save enough every month. In the meantime, keep looking for additional ways to add to your income.

3. Try to find out an amicable solution to financial disorder in your life.
Although it could be easier said than done, you should try to have a peaceful interaction with your ex. The sooner you two figure out solution to your credit issues, the better it would be for you two. Do not forget to remove each other from joint accounts wherever possible. Many a times, the change in bank account details is not reported to Credit Bureau. So after you divide the accounts, report the changes to the credit agency. This will ensure that any mistreatment of accounts by your partner would not make an impact on your credit report.
Let’s check out some quick budget tips that will help you stay afloat.
1. Being on budget is not living miserably but precisely it suggests to cut down the less important expenses and save wherever possible. You need to first of all make list of all the expenses and income sources. Study the list and mark the expenses you can do without. This would be your first step to save for improving your credit situation.
2. Also, analyze if there are better avenues to general more income. This is meant to channelize your efforts in the right direction.

3. Make lists for shopping in advance. This will help you spend only on the required items.
4. Never make impulsive buying decision. Rather read reviews and reconsider several times before bringing a new gadget or device home.

5. Bring in simple lifestyle changes such as cutting down coffee, alcohol, cigarettes and other addictions. Use public transport more often. You can use bicycle or walk down to the nearer places. This will save you enough money and bring the good health at the same time.

All in all, leading a life after Divorce could be difficult in the beginning. But with right efforts you can build a good credit health within a couple of years.