Getting a business loan for small companies is not easy. Read why

As we have discussed earlier, loans have made many future plans workout today! It is not as difficult as it uses to be earlier but at the same time, the parallel fact is that it is not a cake walk too! Basic small amount of loans are though easier. But a huge amount of loans especially the unsecured once are difficult. There the lender not only checks the credit score and credit report but rest many criteria would be checked! While we would be talking about business loans, let us discuss what kind of business loans are available in the market. SME loans are something that is very popular. They are Small Medium Enterprise loan which is given for the budget of Rs. 1 lakh to Rs. 20 lakhs! Usually, the new startup companies opt for these loans as their initial investments are not that much. There there are little larger company loans than SME. They range from Rs. 20 Lakhs to Rs. 50 Lakhs. These are for big industrial setups or for the companies who want to expand! And then come to the bigger loans for huge organizations, infra projects, big setups and expansion plans which are 50Lakhs and plus. As business loans are unsecured loans, the approval rate is usually much lesser than another kind of loans and especially the once when the collateral is much lesser than the amount approved or is not present only!

When we talk about SME, they are usually start-up. In the current scenario, not all start-ups that starts continues to work. The stakes and risk both are much high for this level companies or enterprises. The chances of small businesses to be successful and work successfully has almost the ratio of 50:50. So, when the entrepreneurs apply for the business loan, there are various checks that are done. First, the business plan and the projection is viewed minutely. From the estimated cost upto the break-even point along with the overheads, profit margins, etc all are studied. Even though small businesses and it’s credits are not very high but still as spoken, the risk is much higher! With the usual ratio of the unsuccessful start-up, any financial lender would definitely not appreciate their money to be blocked or turn to default.

This kind of credits being so difficult to get, many people also opt for personal loans. Now may it be any loan, credit score plays an important role. So as we know CIBIl, Experian, Equifax and CRIF Highmark are the four credit bureaus that are established in India, the commonly known one is CIBIL as it was the first one that gave the score to people. Many people still would refer Personal Loan Without CIBIL Score than saying personal loan without a credit score. A credit score is made or established when a person takes any credit which is in the form of a credit card or a loan and then is repaid. But, a person cannot get a loan or credit if they don’t have a score. So, this becomes a catch 22 situation! So, there are private lenders or NBFCs who offer Personal Loans Without CIBIL score. The interest charged by them is a little higher than the banks, but Atleast you have access to the amount you require and you start building the score and the History.

And once that is done, it is easier to than get loans with banks. However, this always isn’t true! And always won’t work this way. There are normal cases as well where one can apply for a credit card or a personal loan of a minimum amount of say 50,000 Rs and start building the Credit history and then it becomes easier to get credits! But in whichever way, since first of all business loan being an unsecured kind of loan and small businesses are not always promising, the loan applications getting approval is not always possible! So one should always think the alternatives on how can they otherwise plan to start the business of basic business loan is not approved!

High credit score is beneficial for loan approval

If you have heard or read somewhere that your CIBIL score is an all-important factor when it comes to loan approval, you’ve got that right! While scores do vary, remember that a high credit score is crucial when it comes to your financial life because it can be among the top determining factors for loan or credit card approval.

Rajat applied for a personal loan with a low credit score. Owing to this reason, while his loan application was not approved by a prominent bank he did get a loan from a NBFC. However, because of the lower than expected score, the rate of interest that Rajat paid was significantly higher than he would have paid otherwise.

Read on to know why a high credit score is beneficial for loan approval, right here!

What is a credit score?

A credit score is a three-digit number between 300 and 900 that is a representation of your credit report. This is generated by a credit bureau such as CIBIL in India. While there are several factors as to why a loan or credit card application gets rejected, prominent among these is a low credit score, such as one around 600 or 650. Lenders are more likely to look favourably at a person who has a near-perfect score of 750 and above.

Factors that determine the credit score

Let’s take a look at the factors which determine the CIBIL score. Understanding these factors can help you improve your CIBIL score and make sure it is good and stays that way. Remember that there is no quick fix solution to better your score overnight – it takes time and effort to increase and later maintain the score.

• Length of credit history: It’s pretty simple, really. The longer your credit history, it’s more likely that you’ve been handling credit responsibly and well. Of course, this means that your credit card should have been prudently used, and the older the account, the better it is for your score.

• Credit utilisation: Every credit card comes with a predetermined limit that you can utilise. While it may be tempting to use close to or even all of it, the right thing to do is go nowhere even close! Experts recommend that 30 percent or less is the ideal limit that you should use. Any more than this, and a lender can view you as a person who relies heavily on debt to manage their finances. This could lead to your loan application being rejected in the future.

• Types of credit: Don’t just bank upon your credit card to make your credit report look good. Lenders look at the type of credit you have availed of – both secured and unsecured loans – to determine just how well you are able to manage all sorts of debt. A well-balanced mix can go in your favour.

• Timely payment: Remember that when you receive a credit card bill, it is best paid off in a timely manner, and ideally in full, on or before the due date. Your payment history is what makes up a large chunk of your CIBIL report and is viewed very seriously by a bank or financial institution. Any default here can lead to a rejected loan application.

• Opening many new accounts: Every time you apply for fresh credit, your CIBIL report takes a hit owing to the ‘hard enquiry’ that is placed. These are considered to be negative aspects of your score and can pull it down, even if temporarily.

• Negative marks: This could refer to instances such as foreclosed loans, loan defaults or a ‘settled’ or ‘written-off’ status on a previous loan. An account sent to collections – especially if it still remains unpaid – can also impact your score. A negative mark indicates to a lender that you are possibly unable to manage debt adequately and may just ring warning bells when you apply for fresh credit going forward. This can impact your credit score negatively for a long time.

In conclusion

Like we’ve mentioned, you may be able to get a personal loan with a low credit score, but the fact remains that it won’t be on the best possible terms. Further, several aspects of your financial life get impacted by the credit score, which makes it important for you to work on your credit score diligently and ensure it remains high or good.

Your first step is to call for a copy of your credit report from a bureau and ensure that all the information therein is accurate and pertains only to your loan and card accounts. Any errors must be immediately reported to the concerned bureau before it pulls down your credit score.

Now that you know what goes into your score and how a high score is beneficial for you, get started on improving your credit score today!

Learn Paperless application process to select loans and Credit Cards

We are increasingly gearing towards a paperless world; letters and fliers were replaced by emails, currency notes by digital payment options and credit cards, applications forms by online applications process and so on. Most financial institutions have been instrumental in making this transition as it is not only environmentally good but also saves a lot of cost, time spent in mailing across forms and letters and of course is more user friendly. So it is inevitable that the next step is paperless application for loans and cards.

Why go paperless for loans?

Though we discussed a few aspects above but going paperless is the way forward. Any who has applied for a loan is aware of the complicated forms that need to be filled with those small crosses marked where the applicant needs to sign. Most of us whether filling forms for credit cards or loans, don’t bother to go through the details and just fill out the main aspects and sign at the marked places.

In the past once you decided to get a loan or a credit card you would approach the financial institution of your choice and complete the formalities. Suppose you missed out a document or were not satisfied with the services or product on offer you would have to repeat the entire process at another bank. This severely limited the applicant’s choice and also made the process time consuming.

Now you can complete the process sitting at home, at your convenience after comparing features of products being offered by different FIs. So sitting at home you can choose the loan with the lowest interest and card with best features. What’s more there is no need to make multiple visits to the bank due to a missed document or signature. The applicant does not have to wait at the bank or take a day off to complete the process.

How does paperless loan application process work?

As the name suggests a paperless loan or a credit card is a loan or a card which is approved without the need to fill out physical paper forms; the rest of the process essentially remains same. The applicant still needs to submit the required documents, meet the eligibility criteria and have a healthy credit score.

Whether it is loan or a credit card the applicant will fill the online form. This could be done at the site of one of the aggregators who will connect you to one of the FIs based on your requirements and choice or it could also be done directly on the official website of the FI that you have zeroed on. Once the form is filled you need to scan and upload the required documents. The documents are then scrutinized by the bank and the FI ensures they are as per their requirement. As we said earlier the process for loan approval remains the same, the bank will sanction the loan or the card if the documents submitted are in order, the required KYC guidelines have to be fulfilled, bank statements, IT returns etc as required have to be submitted. The age, income and credit health requirements have to be complied with.

Having said that, it is important that you read and understand all terms and conditions related to the product before applying for the loan or the card. Just because there are no lengthy forms and brochures to go through, it does not mean that you can skip the fine print.

Some paperless credit cards available in India are SBI Simply Click card, HDFC Bank Regalia Card, AXIS Buzz Credit Card, ICICI Bank Coral Contactless Credit Card, Kotak Delight Credit Card and so on. Banks like ICICI, HDFC, IndusInd and FIs like Fullertone and India Infoline offer paperless personal loans. If you are looking for a paperless car loan then you can get one from HDFC or TVS Credit

Paperless or otherwise make sure you understand fully well the details and the fine print about your loan and credit cards.

Apprehensive About Getting That Education Loan? Read This

It’s not easy to get a seat in the best colleges and universities across the globe. Even if you are able to get admission, the education costs can be too high. This is why many people take student loans at affordable costs.

If you have never taken an education loan before, then it’s natural for you to have doubts and concerns. However, you needn’t worry as hundreds of thousands of students take loans every year. All you need is an understanding of how student loans work and what are some of the things that you should know about. These are:

Credit Score

Most types of loans are approved on the basis of the applicant’s credit rating, and it’s no different with education loans. However, the problem is that most of the students barely have any credit history which is why they don’t have a CIBIL score either. So, the banks ask their parents or guardians to become co-applicants. In this way, the banks can consider the credit score of the parents instead. Plus, they get the option to hold the parents liable for the loan’s repayment in case the student defaults.

Remember, the credit score plays a huge role in a student loan. So, make sure that your parents have a high score. In case it’s below 750, which means that it’s low, then they can take appropriate steps for improvement.

Other Factors

The credit score is the biggest factor that’s considered by the lenders for loans. However, they check other details as well. For instance, if you are applying for a course that can promise a well-paying job, then it’s easier to get a loan. In other words, if you have secured a seat in a medical college or an engineering institute, then you can get a loan easily compared to other courses like BBA, BCA, etc.

Of course, your academic performance can also come in the way of loan approval. This is because if you haven’t done well in school, then the lender may wonder if you will be able to get good grades in college to get a job.

Down Payment and Repayment

In most cases, you will not be able to cover 100% of the expenses for your college education with a loan. If you are studying in India, then you will have to pay around 5% of the tuition fees from your own pocket. Similarly, if you are studying abroad, then you will have to pay 15% of the tuition fees yourself.

In every education loan, the student is offered a moratorium period after they graduate which ranges from 6 to 12 months. This is a grace period during which you don’t have to pay the EMIs and you can focus on finding the best job in the industry. However, you still have the option to start paying the EMIs in this period. In case you do, you can enjoy certain benefits, one of which is a discount on the interest rate.

Interest Rate and Term Length

When comparing your loan options, the most important thing that you need to consider is the interest rate. This is because the higher is the interest rate, the higher is the total amount that you end up paying to the bank. Usually, the rate varies from 9.5% to 13%. However, you can get lower rates if your parents’ CIBIL score is good.

Apart from the interest rate, the term length should be considered as well. You have two options basically- you can either increase the term length and make the EMIs smaller, or you can shorten the term length and pay higher EMIs. In the first option, there is limited financial burden on your shoulders as the small EMIs are easily manageable. However, the total interest paid will be high. Similarly, in the second option, the financial burden is high and you have to keep your expenses under control to pay the EMIs. However, you can get rid of the loan sooner and pay less on the interest overall.

So, there you have it- some of the most important things about education loans that you must know. There is nothing wrong with getting one. However, be sure to do your homework and shop around until you find the perfect deal. Good luck!

What is a moratorium period for education loans?

With education playing an important role in everyone’s life it is important to stay in pace with the rising education market standards. About a decade ago, a person with a normal degree would be considered as a par educated person. The cost of education at that time also was not that high. But in today’s situation there are MBAs, Engineering courses, etc. not only that, if you are not an MBA from IIM or not an engineer from IIT, you are not considered as a post graduate. If you are looking to get an admission in such reputed collages, you will have to work hard with your academics and get through to various entrance examinations.

Let’s assume that you cleared your exams and got through to a reputed institution, the next step which you need to do is to pay the fees of the same. Now there are two options here, either you ask your family and friends for help or you apply for an education loans. An education loan can be a savior in such situations and can supplement your cause to get higher studies. But is it that easy to get an education loan? You just show up to the bank with an application and the bank processes the loan? What about the moratorium period and how is it important for you in the loan run?

Today, we will understand how important it is to adhere to the moratorium period and how it will benefit you in the long run.

First of all, let us just understand what is moratorium period?

There are two types of interests associated to an education loan. They are simple and compound interest. The interest rates depends on the loan amount availed. In many cases, the lender starts charging you simple interest for the loan amount availed to pay the installment of fees to the collage. In such a case, you are not contributing any amount to your principle component; you are just paying the interest of it. The student can opt for not paying this simple interest, until he/she does not get a job and immediately after getting a job, they can start making payments of their loan.

The space which the lender gives you to start the payment, between your course and your job is called moratorium period.

Benefits of moratorium period

There used to be a time, where the banks used to compel students to pay simple interest while they were studying their course. They had to take up part time jobs and pay their interests. This would make the student’s life difficult and often lack focus on their studies. This has not been the case in recent years, the banks providing this space helps you in many ways. You can completely focus on your studies without having a sword on your neck of repayment and you can take another year of space after you complete your course to find a suitable job and start repaying your EMIs.

In other words, students have the power to choose from their own jobs and they have a year extra to start making the payment on time. Though it is suggested that you make interest payments from day one, which will help you with the cibil score.

You will have to be careful with the repayments of this loan as with your cibil score, you can also hamper your co-borrowers score if the payments are not made on time.

Getting an education loan is really important if you are planning to pursue higher education. What is really important is that you make all your payments on time so that you do not hamper your financial career out of it.

Learn how the process of getting a car loan works

There used to be time where buying was a dream. You see a car in your colony and you go like one day the same car will be at my door step. Remember the time when someone used to get a car and the whole colony used to celebrate the car hood. These days, you can get a car new or used just like snapping your fingers. The market has opened so much that the customer is king and the king can buy any car they want with easy convenience. There are car companies and car loan lenders throwing themselves towards the customers to buy their cars with easy finance options. Some car companies have their own financial institutions which will help you buy a car on loan with attractive car loan interest rate.

Are you planning to buy your own car? Are you looking for a heads up on how the car buying process goes? Then you are at the right place! We will explain you step by step process of getting a car loan and the terms associated to the same to make your car buying process easy.

Selection of the car

With a wide range of variety available in the market, people often get confused on which car model suits their needs. For some it’s all about luxury and for some it’s more for family and utility. You will have to select which car model you would like to go for and then start hunting for loan options. In some cases, the car brand will have their financing options and you may get a loan without a proper cibil check.

Eligibility

When you apply for a loan, you should make sure that the income you show to the bank is sufficient to buy the car. Not only the income, will you have to make sure that your cibil score is up to the mark for an easy loan process. Then you will have to find the best loan option available in the market which will help you save money in the interest rates.

Documents required

Make sure that all the documents required are intact and ready before you apply for a loan. The main documents are your ID proof, residential proof, income proofs and your income tax returns. The lender will evaluate your file and see if you are eligible for a loan.

Loan amount

Once the documents are verified and the lender decides on processing your loan, you will be notified on the loan amount as in how much the loan is getting sanctioned. Once you know the amount, you will have to make the down payment accordingly.

Understanding the terms and conditions

Car loan is all about making small commitments towards repaying the loan. Once the loan is sanctioned, you will be handed out a booklet of terms and conditions associated to the loan and the charges. Read and understand those charges and penalties. If you have doubts, get back to the lender and ask for clarifications before signing it. This will help you to be up to the mark with the ongoing car loan.

Hypothecation

Once everything is set and ready on the lender’s end, the lender will hypothecate your car. This gives power to the lender to seize you vehicle if you fail to make the payments on time. Not only this, the lender has the power to report your failed transactions and get your cibil score down. You can check the same by opting for a free cibil report.

Take delivery

After a long run procedure, you deserve the car of your dreams. Take it for a drive and enjoy the fragrance of a new car.

Buying a car is very simple and easy these days. All you need to do is set your mind on a car model which will help you save money and also enjoy the ownership of the vehicle.

5 Questions About Money You Should Ask Before Marrying

Getting married is easily one of the biggest events in your life. However, the idea of spending the rest of your entire life with someone can be both exciting and terrifying.

While there are all kinds of commitments that you have to make when you tie the knot, there are certain aspects of your finances that demand that you perform a reality check as well. On that note, the following are the top 5 questions about money that you must ask before you get hitched:

Q1. How Much Money Do You Make?

For many people, their income is a personal matter and they don’t feel like sharing this information with others. However, when it comes to marriage, then you have to share your personal life with another person which is why there is no shame in asking your partner about their average monthly income.

While you shouldn’t choose a partner on the basis of their income alone, you still need to know about your partner’s income so that you can make your decisions accordingly.

Q2. What’s Your Cibil Score?

Studies have shown that people who have comparable credit score are more likely to have a good married life than those who don’t.

Believe it or not, your credit score can tell a lot about your personality. For instance, someone who has a good score is likely to be a responsible person who takes care of their finances properly. On the other hand, someone who has a poor score can easily be a person who maxes out their credit cards and has a massive debt on their shoulders.

It’s a good idea to ask your partner’s cibil score as it can give you some insight into their personality. You can also compare their score with yours to get some idea of your overall compatibility with them after marriage.

Q3. Do You Have Any Debt?

If you use credit cards, then chances are that you have some debt to repay. In fact, it’s not uncommon for people to owe money to a bank or NBFC. However, when the debt becomes so big that it starts to affect your life on many levels, then it’s certainly a cause for concern. This is why it’s important to ask your partner whether they have any debt. If they do have some, then you should also ask how much is it. You can also ask about their spending habits or how often they use credit cards as this can also tell you a lot about their personality.

Q4. Have You Defaulted on a Loan?

It isn’t right to judge someone on the basis of their financial history. However, if your partner is a defaulter and has their name on a loan defaulter list, then it’s certainly something to think about.

When someone is unable to repay a loan, then the bank sends them a notice as a reminder. However, if they don’t start paying the EMIs even after a certain period has passed, then the lender may tag them as a defaulter. This is a serious offense and may even invite legal action. So, if you are to spend your life with someone then it’s important to know why their name was added to a loan defaulter list.

Q5. How do You Plan to Pay the Bills?

When you get married, then you share your financial obligations with other. For instance, there are utility bills, accommodation rent, traveling expenses, etc. that have to manage. So, it’s important to discuss how you want to split the bills and who pays for what. You also want to inquire about any expectations your partner may have. When both individuals are on the same page, then there is little room for miscommunication and that paves the way for a happy married life.

Marriage Can Only Work if You Do

You don’t have to overcomplicate your marriage. However, that doesn’t mean that you should avoid taking responsibility altogether. So, try to be as open and transparent as possible with your partner which includes your personal matters as well as financial. The more you learn about your partner, the easier it becomes to make the marriage work. Good luck!

Paying off Student Loan Too Challenging? Read Tips

It’s not easy to build a good career. While studying hard to get a seat in a top university is certainly an important part of the process, you also have to arrange the money for tuition fees, accommodation, and food (if the institute is not in your hometown), etc.

A large number of students who can’t afford higher education take loans. However, repaying an education loan can be quite challenging at times. If you yourself are troubled by this problem, then you have come to the right place.

The following are some of the best tips on repaying student loans:

Avail Tax Benefits

If you are not saving money when you are paying taxes and have a student loan, then that’s the money you are wasting. Section 80E of the Income Tax Act allows you to claim the interest paid on education loan as a deduction. However, there are certain conditions involved, which are:

• You can’t avail the tax benefits if you belong to the HUF category.
• Only those individuals who are paying interest on the education loan can enjoy the tax benefits.
• You can’t deduct the principal amount of the EMIs from your taxable income

Create a Budget

Always remember that a loan is a big financial responsibility. You can’t afford to be careless as it can lead to massive debt and even loan default which is a serious offense. So, until your loan has been repaid in full, you should try to lower your expenses and do away with luxuries that you can easily live without.

One of the most effective things that you can do to save money is creating a budget. It’s quite easy to do if you use an app. However, it can be of great help as you can track all your expenses to identify the areas where you can easily save money. You can even set up alerts when you are about to reach your expenditure threshold for a particular month.

Start Paying More

If you want to get rid of your debt as soon as possible and save money at the same time, then you should consider increasing the EMI amount gradually. This is because when the loan’s term is longer, then you end up paying more money in the form of interest. While increasing the EMI cost has its challenges, it’s a smart move that can help you in the long run. Plus, increase the EMIs by 5% to 10% every few months or so is viable and quite reasonable.

Note: Some banks charge a fine for prepayment (when you repay a loan sooner). So, make sure that you ask your bank about the same before deciding anything.

Set up Automatic Payments

If you use credit cards and also repaying another loan already, then it’s possible for you to forget about your student loan payment dates at times. However, this can incur a fine and may even lead to a low cibil score. To prevent his from happening, you can set up automatic payment by connecting your bank account with the loan account. This way, when it’s time to pay another EMI, your bank can deduct the appropriate amount from your account on its own.

Refinance

If you think that your current interest rate too high or the repayment terms too harsh, then you can consider the option of refinancing. In this, you can repay your loan with another loan that offers a better interest rate and/or additional perks. If your financial records are good and you don’t have a low cibil score, then it’s possible that your own bank may refinance the loan so that you can repay the debt easily. All you have to do is talk to your bank and explain your situation.

Conclusion

For the sake of your career and your life, you have to make several sacrifices. When you are repaying a student loan, remember that it’s only a short-term hassle that can lead to massive financial gains in the long-term. So, try to be patient and save money whenever possible. Until the loan has been paid, nothing else should be your priority as far as your financial activities are concerned.

Costs associated with buying a home in addition to its price

One of the major things we want to achieve in life is buying a home we always wanted to. Something that we have visualizing for a very long time. A home, it’s bedrooms, the color, the decor, the furniture, the windows and what not about it. And that’s not even wrong as they say “A person who stops dreaming, stops living”. And hence one should always dream of that “The House” they want to build. Now, looking at the parallel fact, and the inflation, it is not a really an easy task to built or buy a house you always thought of. Over the years, things have become really expensive and hence taking a loan sometimes acts as a great option because you can live your dream of 10 years or 20 years down the line today! If suppose, we take an example of someone aged 30, with a decent income, still buying a flat for a self-made person with only his/her money may be difficult and hence if they apply for loan, which may have tenure of say 15 or 20 years and with a downpayment of 30% - 40% of the house price, which they must have saved, it’s the perfect option one can opt for!

Nothing comes for free and effortless is as they say! When buying a home, maybe with all payment done or with a Home Loan, it is not always just the cost of the home that you pay and you are done. There are more costs to just buying a home at addition to it’s price! Let us look at the other costs that almost everyone has to shade in order to get that security and freedom of having their own house.

1. Parking Space

If you are someone, who wants the parking space along with the home you bought for yourself, parking spaces cost a bomb! If you buy a home in the city and proper new constructions, it may go up to 10 lakhs just for that one four wheeler parking space allocated to you.

2. Interior Costs

A home when bought, will just those four walls, and sometimes done with basic kitchen platform and bathrooms. You will have interests to decor the house with the color of your choice, sofas, wardrobes, windows, curtains, furniture, electronics and much more. This is one of the high costs associated while buying a home.

3. Registration Fees

With buying a house for yourself, along with the what it costs is the registration fee. What is basically a registration fee? Stamp duty is usually 7% - 9% of the total cost of the house to transfer it to your name along with 1% - 2% of stamp duty to get the name on that nameplate!

4. Processing fees

When the home is taken on loan, along with the interest paid, the down payment etc, there are processing fees that banks charge when applied for a home loan. It varies from 0.5% to 2% or sometimes even more at various banks and the amount taken as the loan. Once the loan is sanctioned, this cost is added in the first EMI that is charged. Also, the cibil score has some role to play here. Loans For Low CIBIL Score may have to pay slightly more of the processing fees as compared to a loan taken by a person with a good score as it is a security that banks need in order to rest assured if the money landed is in better shape.

5. Other costs

With all these essential costs that you would have to conquer, the brokerage fees if you have sealed the deal via a broker, moving cost of movers and packers, the location where you have chosen the house, are few of the factors that add up to your actual cost!

But, all of these, there is this immense sense of achievement that you must have felt while buying a home you can say your paradise and would spend the rest of your life at!

Planning for a Car Loan? Here is top 5 FAQ’s you must read

One day you just open your newspaper and there it is! Your dream car is available at a cheaper price. Out of mere excitement, you go to your spouse and parents, tell them about this advert and that being your lucky day, they agree to buy this car for the family. You are on seventh heaven, going gaga over it and dress up immediately to head towards the car dealership. You start from your place out of pure excitement and reach the dealership; you meet the sales guy and start with understanding the car, its models and its features. Apparently this is how it works. You decide on a model and you start for the main thing, the price. The price is higher than you expected, your dreams start to shatter slowly and you are n stage of a mental break down that you will be losing on your dream car because the car budget is overshooting.

You come back home with a sad face and your family starts inquiring what exactly happened and you tell them the reason. Suddenly your spouse pops up a great suggestion, which you think can be worked out for fulfilling your car dream. She suggests if there are any pre-approved car loans towards your account and if you can apply for one? You immediately start inquiring and see that you have a pre-approved loan ready for you which you can avail with an excellent car loan interest rate.

Do you think this is the only thing which is important to consider while taking a vehicle loan? There are a lot of key factors which are to be considered while applying for a loan to purchase a car.

Today, we will sight you the top five FAQs which you should consider while making a car purchase,

How do I get an Auto loan?

Today, customer is the king. Right from selecting the car model you want to avail the loan, everything is like a cake walk for you. There are ample numbers of options available for you, if you decide on which car you want to purchase. There are lenders who have this gun called pre-approved loans which is ready to aim and fire at your will for a car purchase.

How much loan can I get?

Well it really depends on which car model you going for and what are your incomes and gains. If your income is good and the car model you are going for is moderate, you can even get 100% funding on your vehicle. With the current market trends and scenario depending on your income, you can easily expect up to 85% funding on your on road car price.

Do I need to give collateral to get this loan?

No, you do not have to keep additional collateral to avail an auto loan. The vehicle you are purchasing is considered to be collateral itself. If you fail to make your payments on time, the lender will take your car and can sell it at auction.

Do I need a co-borrower to avail this loan?

If you have adequate income to show for the car loan you are going for, no co-borrower is needed.

Is my Credit score important?

This is one of the deciding factors when it comes to availing any type of loan. Before you apply for one, get your free credit score and understand where you stand as far as credit worthiness goes. You can still get a car loan with a low cibil score, the interest rate and the processing fees will be higher than expected.

The idea of owning a car is quite exciting; you need to understand a few basics of owning a car and the terms associated to it. This understanding will make your life easy and relaxed.

Why you should stop from maxing out all of your credit cards?

Abhishek has two credit cards which he uses frequently; almost all his transactions are done on credit cards. His cards are always maxed out but he manages to always pay his dues on time. Since he has always paid on time and never faltered on his payments Abhishek assumed that this could never be a problem, till he required a loan which was rejected due to a low score.

Do you also like Abhishek feel that as long as you are paying your dues on time, how much of the card limit you utilize is not important? If yes then you need to reconsider your spending pattern and go through the discussion below.

Impact of credit card usage on credit rating:

All credit cards have a sanctioned limit; this is the limit till which you can use your card without having to pay your old dues. As long as the car holder spends within the sanctioned limit and pay his dues on time he/she does not have to pay any extra charges to the card company. This prompts the card holder to assume that since the card company is not collecting any extra charges or fines, the proportion of card limit they use has no relevance whatsoever. While this may be true from the perspective of card issuer; card usage impacts the credit rating of the user.

Let’s see how Abhishek uses his cards. He has two cards, the first with a limit of Rs. 100,000 and the second with a limit of Rs. 75,000. His average usage on the first card is around Rs. 80,000 to 85,000 and on the second card around Rs. 60,000 to 65,0000. This means that he uses almost 80% to 85% of his sanctioned limit on each card and his overall card usage of both cards combined is also 80% to 85%.

Credit score is a statistical tool that helps in assessing the creditworthiness of an individual. These scores are calculated based on five parameters which are as follows; repayment history, card utilization, loan tenure, credit mix and credit enquiries.

As is evident from the chart alongside credit utilization has a big impact on the overall score calculation. In fact it is the second most important factor in the overall score calculation after repayment history which has a 35% weightage in the overall score calculation.

So when someone overuses their credit card regularly and has a tendency to max on the cards then it could lead to a low CIBIL score even if they do manage to pay on time. Credit rating companies look at card utilization ratio in order to assess credit discipline and also judge the risk level associated with an individual.

High credit utilization is an indicator of overdependence on credit; it also means that there is higher risk of default associated with the person in case he/she losses the running source of income. High credit utilization also indicates poor financial planning. Ideally the credit utilization should be less than 35% to ensure a good credit score.

How to deal with overuse of credit card?

In case your cards are also maxed out then it is time to evaluate your card usage and figure out a way to reduce the card utilization ratio. The most obvious way to deal with a situation like this is to reduce your card usage and use other options for financial transactions. You may find it difficult to do so for two three cycles as you will need to pay the dues which can reduce your liquidity.

Another option is to get a bigger card limit if you are eligible for it. A bigger card limit will reduce the credit utilization ratio without the need to reduce the card usage. One can also opt for another card so that the overall card limit increases and the card usage is spread across all cards.

However it is important to remember that a new card and increased card limit should not be an excuse to increase the card usage further as it could lead you to a situation where you fall into a debt trap or find it difficult to repay your dues at the end of the cycle.

Home loan with higher tenure with low EMI OR lower tenure with a high EMI?

You can certainly be sure about a lot of things in life and plan things according to the same. But, there are lot many factors which are not under your control and you tend to skip it or not bother about it, these are the two sides of the coin which regulates your life. On the contrary, there are some things which are always on the grey side and you are always confused about them. There are times you seek help from your loved ones or seek help professionally to solve such issues or at least get a fair idea on what should be done.

Same goes with a home loan. It starts being complicated right from the start when you think of applying for one. the very first thing you are supposed to do is to find a lender who will match your loan needs with the best possible options out there, like for example ICICI home loan gives you the best home loan deal in the market. The next thing you need to do is to check your credit history, if you are eligible for a loan and if yes, how much? You are not done here, then you go through the bank procedures day in day out to get your loan sanctioned and get it disbursed to the developer’s account. If by any chance, there is a problem in the bank’s procedure in the future, you will have to deal with it on your own and if you run out of luck you will have to go through the same procedure again to avail the loan.

After you get the loan sanctioned and you are paying all your dues on time and you receive a good bonus from your company as a gift to you as performance. You take suggestions from your family member and ask them what the funds should be used for? They suggest you to make partial payment towards your loan account and you agree to their suggestion. You check your free cibil report and see you are good to go. The next question which pops up in your mind is that, should I keep the high tenure and lower the EMI by paying the money or propose a lower tenure and keep the EMI high.

If you are on the same page, we are here to help!

Well, it all depends on your power and ability to make the payment of home loan. When you apply for a loan, you must have done all the planning for a long period and would have thought of sticking to it. Home loan is a long commitment and every decision you make towards it can either save you a lot of money or else take you to the grounds with you. If you can manage high EMIs with a low tenure the obviously you will be saving on a lot of interest money and if you are keeping low EMI for high tenure you will have some savings for yourself but you will be paying a lot to the bank as interest. It is simple math and you should consider all the possibilities when it comes to taking this kind of decision towards a home loan. As a slight mistake can not only cost you good money but will also cost you mental peace and you can see your credit score going down.

Long term loans always come with a lot of burden with it. Do a proper analysis, have few backup plans before you proceed further. If you dive into the long term loan pool and run out of money oxygen, you will hardly get any money support to survive.

Can I apply for a personal loan if I have home loan?

We are bounded to have many type of loans in our lifetime. At starting phase of our life, to avail a bike you will have to opt for a bike loan and when the time proceed our need takes a different level and if we are planning to buy a car we take a car loan. Similarly your spouse asks you for an expensive mobile to be gifted, you will take a take a consumer durable loan which will help you to buy that phone. We are bounded around loans and no matter how many plans you make thinking you will not avail a loan in your lifetime, you will have to avail one.

Let’s take an example here, you are a good earner and on the basis of the same, you apply for a home loan and your purchase a home property. Seven months down the line when you are paying all your dues on time and when you think that life is sorted this way, a house emergency arrives and it demands a good amount of funds. You seek help from family and friends and learn that it is end of the year and they cannot help you. You then think of applying for a loan and the best option which lies in front of you is to avail a personal loan. Now you are in a fix, will you be provided a personal loan because you already have a home loan running? You start your research and find that you have ample number of personal loan options available in the market and axis personal loan is the best out of them. You are in two state minds if you should apply for one or not.

If you have the same question in your mind, you are at the right place.

The answer to this question is a yes! You can apply for a personal loan while having a home loan running already. There are a lot of criteria’s attached to it and if you fulfill all those criteria, you can definitely avail a loan with ease.

The criteria’s are as follows,

Income to debt ratio

Even if you have a home loan running, the EMI ratio should be less than your income and savings. For example, if you apply for a personal loan where your income is 50,000 rupees and your existing home loan EMI is 20,000 then the loan lender will consider giving you a loan on the basis of 30,000 only, he will not consider the other 20,000 which is the home loan emi.

Job stability

One of the main criteria when applying for any loan is that you must be in the same company at least for a year or two depending on what amount of loan your are availing. If you do not have a stable job and you are a job hopper, the bank will consider you instable and will not sanction you a loan.

Credit score

This can be the decider if you are eligible to get a loan or not. No matter how good you are on papers with high salary, stable job etc, if you have a low cibil score, you can kiss goodbye to your chances of getting a loan. This is the most important criteria of getting a loan and you should know your cibil score before applying for a loan so that you don’t have any surprises in the future.

You can definitely avail a loan with existing pool of loans and credit cards, but you will have to be very sure before availing one because multiple loans can lead you to bankruptcy and financial depression.

Is it advisable to take credit cards for your regular use?

We have always been told that credit cards are bad. Imagine you getting out of a collage and joined your first job, the company provides you a salary account with a reputed bank, which comes with its own privileges. Understanding your incomes and gains, the bank offers you a credit card with good limit. Now you are in a fix, if you should get the credit card or not as it’s always been a negative topic of our lives. We have often heard that these cards will ruin your life and they are not safe at all. Are you in the same situation as the above story?

As every coin has two sides, the same goes with everything you do in life. You will know the same when you are in the urge of getting a card. Credit card can help you in many ways and also can ruin your financial status if not adhered properly. Getting any line of credit is never a problem, but how you adhere is what defines you and your financial well being.

Talking about these cards, we will sight you some good things and also bad things of how a credit card can help you and also take you down if not adhered properly,

Good

Source of emergency funds

This can be the ultimate tool when you are in desperate need of funds and you have nowhere to go. It can help you sort quick funds without any hassles and can get you out of quick trouble. This does not mean you will keep swiping your card every now and then in case of emergencies. It is always suggested to have some funds with you in savings so that it can help you, when in need.

Rewards

That’s right! You can reward points to spend money. Who does that? Credit card companies have different norms when it comes to providing reward points. It depends from lender to lender and from type of card you hold. For every spent you make, you get reward points which you can later redeem to buy gifts from their website or even sometimes they give you option to en cash it. This way you save a lot of money while you are spending through the card.

Short term loans

Depending on your payment patterns, the card lender always opens prospect to small loans and keep it pre-approved for you. These are just pre-approved offers which you can avail in times of urgent situations and you short with cash. This loan amount does not block your credit limit, it is a different account all together and the EMIs are added towards your statement which you need to pay on the credit card due date. This is the privilege you get only if you pay all your dues on time.

Build credit history

It can be the best tool o build or rebuild your credit history. Credit card payments contribute more to your cibil score than any other loan as this is one type of an unsecured loan. If you happened to be in a low cibil score bracket, this can be a savior for you and can help you build your credit score in no time. Having a good credit history can not only help you get a quick loan in the future, but also can help you get through to many life problems.

Owning a credit card has its pros and cons, but if you know what the cons are, you can easily manage your card and can live a good financial plan. As we all know, we should understand the terms first when we are getting into something. The same principle goes in this and you can get the best out of these cards.

7 things that impact your loan against property eligibility

There are few loans that have the specific purpose at an end user level. A home loan is taken for buying a house, a car loan or an auto loan for buying a vehicle, education loan for studies, business loan for business purpose. But loans like personal loan or loan against property, do not have a specific purpose for the end user. They may use the amount received from a loan into any of the use they wish to. When we talk about loan against property, it is a type of loan which is a secured loan and could be taken by keeping a property as security to the lender.

The only difference between personal loans and Loan against property is that personal loan is a type of unsecured loan and LAP (Loan Against Property) is a type of secured loan. So what is the basic difference between secured and unsecured loan? As the name states, a secured loan is the one where the borrower will keep some security against the amount borrowed and in an unsecured loan, there are no such things kept against the amount that is taken. Also, it is easier to get a secured loan as in case of default the lender can compensate the money by selling off the security which is kept. However, one can not just get that by mere keeping the security and let us now look at the factors that impact the eligibility.

1. Credit score

A credit score as we all know is a three-digit number ranging from 300-900 where 300 is considered the lowest and 900 is highest. Made from five parameters, it shows that how responsible one is when it comes to credits they have taken. May it be any loan, secured, unsecured, Credit score is always checked while approving the loan as it is one of the major factors for any lender to check the creditworthiness of the borrower. When in such a case if the score is low, one may try for a personal loan for low cibil score in order to get an instant loan.

2. Documents of the property

While applying for LAP, the documents of the property are studied carefully.

• The property should be on the borrower’s name. Only then can the loan be approved.

• If the property is on forefather’s name, there must be proper power of atony which gives all the rights to the borrower to take any decision on that.

• The property should have no legal issues. That is if there is any dispute over the property, then, in that case, the loan is not sanctioned.

3. Source of income

If suppose, the property that is kept as the security in LAP against the money borrowed has the monthly repayment cycle of say 25,000 and the borrower has the income of 30,000 or maybe even less then in that case the loan is not sanctioned. The reason is, the borrower should be easily able to make the repayment of the loan taken after deducting the usual expenses he/she may have from their salary or the amount they earn.

4. Loan tenure

Strange fact, but even loan tenure of the loan applied for also plays an important role in getting loan sanctioned. If the loan is applied for more then 10 years in usual cases, it becomes difficult to get it approved. However, the purpose of applying a loan is also checked in such cases.

5. Employment status

Many times, an individual is not steady at one particular job. Do they keep on switching because of whatever reason and that gives a sense of instability to the lender as would they be consistent enough in repaying the loan amount?

6. Insurance on property

The insurance taken over the property also plays an important role. If in case something happens to the property, then in such cases the valuation may go down. But if the insurance is taken, then it could be recovered.

7. Age

Age is always a factor while applying for any loan. May it be a personal loan or home loan or car loan of loan against property. The average lifespan of any individual person is checked against the number of years they may work and the continuing source of income. Then the loan tenure is checked and approved it all are in sync.

Except for the above mentioned seven eligibility criteria, rejection of previous loans, bad credit history, type of land are few other criteria that are checked while the borrower is applying for LAP. One has to understand that just because this is a secured loan does not mean it will be approved in minutes. Ans always, when the credit history is weak or the score is low, one must try and apply for a personal loan for low cibil score.

Frequent changing of jobs can affect your loan approval

Jobs always give a financial security and that’s the most required these days. Unlike ancient time where things worked with the barter system, today it is the money that is exchanged in terms of goods and services. It takes a lot find a decent job where one can adjust themselves, work and get settled. Sometimes this journey is very comfortable and sometimes it is full of a roller coaster. Not everything ever is as perfect as one wants it to be and hence working in the same organization for forever is not very common and in some cases not even advisable.

Many people change their jobs after a certain period of time depending on their individual needs. However, changing jobs too frequently also has its repercussion and effects. One may have to change a job for better perspective, good salary hike, newness or to get better comfort than in current organization. But, changing them too frequently also gives an idea about instability. When talking about loans and credits, before the approval of the loan, the employment status is always checked. The earning obviously is checked in both the cases if a borrower is a salaried individual or a self-employed individual as that is the indication of how much loan amount is to be sanctioned in order for the borrower to pay that loan easily.

There are few loans that are approved only when an employee is working in the current organization for more than one and a half or two years. The frequent change gives the loan approvers an idea that that must be a pattern that one follows. What if the job where they are working currently would not be a longer duration one, and he/she may switch and will not be able to pay the EMIs on time? It becomes a risky decision for the lender. Also, the cibil score will get affected if the borrower is unable to pay the EMIs of the loans and credit card bills on time. This would lead the score to go down and the report gets affected.

There are a few examples where an individual has genuine reasons for the switch of their jobs. But, they can’t be as fast as changing it every six-eight months or each year for a very long period of time. Once in a few years and some in a couple of years would not be very bad as it may happen that an employee is not very comfortable in the process and hence planning to change. But yes, if that is in all the jobs, then it gave an impression about the person not being stable and responsible enough to adjust.

Cibil score calculation may not directly has these criteria that a changing job directly affects it. But when one applies for a loan, the background is checked by the underwriters. Underwriters are the people who check the eligibility of the borrower or the applicant who has applied for a loan. For a few loans where the loan amount is higher, a reference check is done. To the people staying in the neighborhood, the HR of the organization where the individual works and sometimes maybe in a previous organization if the applicant has recently switched a job. In any of the cases, the inquiry definitely goes to the employer and if one frequently changes the job then, in that case, it gives a negative impact. With the reference check, the underwriters also take a personal discussion with the applicant to understand a few aspects when they can see frequent job changes or bad cibil score.

With all this, the bottom line is that one must be bey sure of the decisions they take. Today may not be a day where they want to apply for a loan, but tomorrow there can be a possibility that they have to. If not taken care today, it may affect it tomorrow!