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.