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.