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.