Thursday, 15 November 2018

Don’t ignore 5 things while using Credit Cards

Credit cards are a blessing in today’s time as they help in managing our finances in a much better way. But one needs to manage this tool carefully in order to prevent sinking into a deb trap. Good credit behaviour and avoiding mistakes is necessary to ensure that the credit card helps us in improving our credit score. A good score goes a long way in establishing our credibility. It makes it easy for us to borrow money in future. Here are 5 things that one must not ignore while using the credit cards.
Don’t carry a balance on the card
The card issuer requires you to pay only minimum monthly balance on the card bill every month. It is usually only 5% of the bill amount. But one should not resort to this practice. The longer you take to clear you dues, the more interest you will have to pay on it. Since the credit card interest rates are very high, carrying a balance will soon put you in a debt trap. The interest amount will keep piling up and soon become more than the actual principal amount. If you simultaneously make new purchases the next month then things will get out of control. Hence one should charge only those expenses to the card that one is able to pay at the end of the month. Do not buy items that you won’t buy normally if you had only cash to spend. It is always better to plan out a budget and stick to it, so that you don’t tend to overspend using your credit card.
Don’t miss your payment
Staying current on your payments is of utmost important if you wish to maintain a good CIBIL score. Payment history accounts for 35% of the credit score. Missing payments not only attracts a late payment fee but is also responsible for a low CIBIL score. The late payment record stays on your report for seven years. If you tend to forget the due dates, then the best way to stay on top of payments is to either use Google Calendar or just use automatic payments. If you are unable to pay the entire balance, it is better to pay at least the minimum due amount, than skipping the payment entirely. If you find yourself in a financial crisis then do not ignore your bills completely. The interest will keep piling up and soon become unmanageable. It is better to talk to the credit card issuer to renegotiate the terms. You may try to negotiate a deal and come out with a payment plan that would allow you to pay your dues.
Don’t over utilize your credit limit
Paying the credit card balances in full each month does not guarantee a good CIBIL score. 30% of the score is also based on the credit utilization factor. It is calculated by dividing the amount of credit utilized with the total available credit limit. One must not exceed 20% to 30% of the limit in order to keep the credit score in good shape. A person who is in a habit of maxing out credit cards every month will have a very high credit utilization ratio.

Don’t close old credit cards
The longer the credit history, the better it is for your score. Old credit cards help in increasing the average age of your accounts and hence help in improving your score. So do not close your old credit card even if you are not using them anymore. The credit limit available on these cards help in improving your credit utilization ratio.
Don’t ignore your credit card statements
One must carefully review the credit card statements every month to check and verify the transactions. Any charges that you do not recognize should be dealt with immediately. A monthly review helps in uncovering identity theft cases. Apart from this, the card holders must also review the credit report regularly to see how their credit card usage behaviour is affecting their credit score.
If you take care of the above 5 things, you will be on the right path to ensure that your credit card usage affects your score positively.

Monday, 5 November 2018

How to deal with increase in home loan interest rates?

A home loan is a long term financial commitment as its tenure extends from 10 to 25 years. There are a lot of external factors like inflation, crude oil prices, rupee value and global economic condition that affect the rate of interests. If you have a home loan in your portfolio and if you have chosen a floating interest rate then these external factors will have an indirect effect on your personal finances.
If RBI decides to hike the rates and the bank with which you have a loan decides to pass on the hike to its existing customers then you need to devise a strategy to deal with this change. There are several ways in which you can deal with the impact of rise in the interest rates.
Increase the EMI amount- Home loans EMIs usually take up a substantial percentage of a family budget. A hike in the interest rate will change the total cost of the loan. Instead of extending the loan tenure if you can accommodate an extra amount in the budget (without affecting your other financial goals), then it is a good decision to increase the EMI amount that you pay every month. Sometimes it is much better to increase the EMI amount than to invest your savings. If the rate of interest you are paying on home loan is higher than what you would get as return on investing the savings, then increasing the EMI amount is a better option.
Increase the tenure- There may be situations where you do not feel that you can budget an extra amount of EMI. In those cases increasing the tenure of the loan, while keeping the EMI amount same can be the only option. However, if you do so, the cost of the loan in the form of interest outgo increases.
Balance transfer- Another way of dealing with the situation is to shift to a different lender who is charging a lower rate of interest. Tell your existing lender about your intentions. Most banks do not wish to lose their old customers, and try to accommodate their requirements in order to retain them in this cut throat competition. If you have paid attention to the factors that affect CIBIL score calculation, then you will have a high credit score. Use this weapon and try to negotiate with them so as to avoid the hassle involved in switching to another bank. If you do plan to switch you must first compare the cost involved with the savings that you will derive, to understand whether it is wise to do so or not.
Partial prepayment of loan – If one has some surplus funds or if one is expecting a bonus in the near future, then those can be used to make a partial pre-payment of home loan. If there is no prepayment penalty, it is a good way to bring down the principal outstanding amount. If the borrower keeps the EMI amount same, then prepayments will help him in servicing the loan faster than the agreed upon tenure. It will also reduce the overall cost of the loan. Prepayments however should not be done at the cost of saving for emergencies. One must not sacrifice the corpus created to meet short term goals, otherwise one would need to take loans at a high rate of interest in order to meet them.
Switch to fixed rate home loan- A fixed interest rate definitely provides more stability to your financial life. If adjustments to floating interest changes are difficult for you to handle, you may think of switching to a fixed rate home loan. You can explore this option depending upon the outstanding loan amount and remaining tenure of loan that you have. But remember fixed rate is usually higher than the current floating rate, so you will need to do a cost benefit analysis to decide whether it is really in your interest to make a switch. If you are close to final repayment date, then it may not be justified to make the switch.
Before deciding on a particular strategy analyse every aspect of your financial portfolio. You should adopt the measure that best suits your budget and financial situation. Remember, you do not want to get into additional debts at a higher rate of interest, just to save on interest cost of home loan.

Saturday, 20 October 2018

4 quick tips to manage your personal loan EMI better

Not all financial needs can be met through savings. Personal loans help people survive tough times and help in getting the funds that they need to meet their immediate cash requirements. You can depend on these loans for your child’s education, marriage, medical expenses or any other purpose. But taking a loan puts a responsibility on the borrower, that he needs to repay the loan amount through fixed monthly instalments. The borrower needs to make sure that he makes the payment on time. Failing to do so will not only attract penalties but also affect ones credit score negatively. Here are some tips that will help people manage the personal loans EMI in a better way.

Pre research

If you spend a little time in researching and comparing the various options of personal loans that are available to you, then this effort can go a long way in helping you manage your EMIs. Check and compare the personal loan interest rates offered by various banks, NBFCs as well as private lenders. Do not just go with the first personal loan offer that you receive. Even the bank with which you have a prior relationship may not offer you the best deal. So do your due diligence and find out the best available loan offer. You need not go physically to each bank to talk to the officials. Use the Internet to compare the different options that you have, and select the one that suits your needs. Since the interest rate is directly proportional to the EMI amount, a lower interest rate translates into a smaller EMI amount. So be a smart borrower and choose your option wisely. If you manage to get the loan at a comparatively lower rate, the EMI burden on the income will be less.

Pay attention to credit score

This tip also requires efforts prior to taking the loan. As you have seen above, managing EMI becomes easier when the interest rate charged on the loan is low. A good CIBIL score helps you achieve just that. A CIBIL score reflects how well a person has handled his past debt obligations. A high score reduces the risk that the lenders face while lending money. It helps in winning their trust that the borrower will repay the loan responsibly. But if you have a low CIBIL score, do not get disheartened. You may still get approved for the loan. There are many lenders who offer personal loan for low CIBIL score. But then before you take such a loan, you must be sure about your repayment capacity. A high interest rate translates into high EMI amounts. If you are not able to stick to your payment schedule your score will take a further hit.

Use a Personal Loan EMI Calculator

Using a mortgage calculator really comes in handy when you have to manage different aspects of EMI. It helps you decide whether you can repay the loan amount easily. So use a personal Loan EMI calculator to see how much monthly payment you will need to make, given a specific loan amount, interest rate and tenure. Change the loan period and see how it affects the EMI amount. One needs to choose an option that suits one’s pocket. Make sure that the total debt obligation that you need to handle in a month (EMIs of past loans + the EMI on new personal loan) does not exceed 50% of your salary. If it does, then you may have to increase the tenure of the loan to reduce the EMI burden on each month.

Contingency fund

One cannot underestimate the importance of rainy day funds when it comes to managing EMIs effectively. In case of any unplanned situation like a loss of job, or medical emergency these funds give one some breathing space. One does not need to worry about delays in EMIs. Usually, you must have enough savings that can service 3-4 months of EMIs. But these funds can be built up only when one takes care of his spending patterns. Make a budget and stick to it. Slowly build up reserves so that you don’t have to worry about any missed payments.

There is nothing wrong in taking a personal loan to fulfil one’s cash requirements. But it is important to make sure that one repays the loan diligently. Following the above tips will help you manage the EMIs well and follow a disciplined life.

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.

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.