Financial Updates


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How to get personal loans in India sans hassles

Personal loans are sought-after by millions of Indians. In other words, a borrower can avail of personal loans for any legitimate financial requirement and is not obligated to declare the purpose to his lender. All banks – public sector, private sector and MNC banks across the country offer personal loans to their customers. It is important to note that in most cases, salaried individuals, self-employed professionals such as lawyers, doctors, chartered accountants and so forth, employees of public and private limited companies, MNCs, public sector units, local bodies and self-employed individuals (businessmen) can avail of personal loans in India.

However, there are several factors which are taken into consideration such as the employment history, age, place of current residence, monthly net income, repayment capacity, previous loans and employers among others. Given that personal loans are a highly popular financial instrument, banks offer competitive interest rates. Loan seekers can compare personal loan interest rates across various banks online.

Criteria for getting a personal loan

Loan seekers have to ensure that meet various criteria to acquire a personal loan without any hassles. Some of the important parameters to be considered by loan seekers to get personal loans are listed below:

how-to-choose-PL

  • Age: The minimum and maximum age to avail of personal loans is 21 years and 60 years for Axis Bank and 23 years and 58 years for ICICI bank. In some cases, the age bar may differ depending upon the occupation and professional status of a loan seeker. For instance, the minimum age for self-employed individuals is 28 years whereas for doctors, it may be 25 years.
  • Loan Amount: In most cases, the minimum loan amount which can be availed is Rs.25,000 while the maximum is Rs.15 to 20 lakhs. All the same, customers should get quotes from different banks to get accurate figures
  • Rate of interest: The rate of interest may vary across banks ranging from 15.50% to 24% p.a.
  • Purpose: Personal loans can be acquired for any purpose such as funding vacations, tuition fees, child’s education, wedding and home renovation among many others
  • Minimum net income: ICICI bank requires a salaried individual to have a minimum net income of Rs.17,500 per month to avail of a personal loan while Axis Bank requires a loan seeker to have a monthly net income of Rs.15,000. Most banks offer Rs.15 to 20 lakhs as personal loans to eligible customers.
  • Eligible individuals: Salaried individuals, lawyers, doctors, chartered accountants, architects, engineers, public and private sector employees in addition to self-employed individuals such as businessmen can avail of personal loans in India
  • Security: Many banks do not demand any collateral for a personal loan, subject to conditions. For instance, no guarantors are required to avail of personal loans from ICICI bank
  • Loan approval: Most top banks take 24 to 72 hours to approve a loan request, provided all the required documents are in order and the customer has a clean repayment history and a good credit score
  • Repayment tenures: Many top banks offer a flexible repayment tenure ranging from 1 year to 60 months
  • Repayment methods
    • Standing Instruction (SI): Individuals who already have salary accounts with their banks they are seeking personal loans from can avail of this facility
    • Post-Dated Cheques (PDCs): Individuals can issue EMI cheques (post-dated) regularly
    • Electronic Clearing Service (ECS): Individuals can also make use of this facility wherein EMIs are automatically debited every month from the bank accounts
  • Top-up facility: Many banks such as ICICI bank offer top-up facility on personal loans provided EMIs for a year are paid by customers
  • Balance Transfer facility: Several banks offer the balance transfer facility, subject to specific conditions. For instance, ICICI bank offers the balance transfer facility to customers upon payment of 12 EMIs
  • Documentation: While documentation required to avail of personal loans may vary from bank to bank, the following are some of the common documents requested by most banks
    • Filled-in application form
    • Age proof
    • Photographs
    • Bank statements (three to six months)
    • Proof of income
    • Proof of residence
    • Registration proof qualified professionals such as architects, consultants, company secretaries, chartered accountants and engineers
    • Loan Agreement
    • Post Dated Cheques or request for Standing Instructions


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Why Reverse Mortgage Scheme is Not So Popular in India?

Reverse Mortgage Scheme has been in existence for the past 8 to 9 years. For countries in West, the product is quite a hit, and is definitely a preferred option for retirees. However, in India reverse mortgage products are not yet in the limelight while some are not even aware of an option such as this. People have not been interested in this scheme, despite goodies being rolled out in the second phase. There might be fair reasons why Indians do not like it but first let us understand what the scheme is really about and its basics.

Reverse Mortgage and How it Works

Any individual can mortgage his or her residential house or apartment to a financial institution under a reverse mortgage scheme which in turn pays a fixed installment at a defined rate of interest. The first phase of this scheme was called Reverse Mortgage Loans where the pay-outs are generally for up to 5 to 20 years. Once the term is over or early death of the borrower or the legal heir is able to claim the house by repayment of the loan. The fixed term payout was never a very lucrative option also considering there are too many restrictions, the retirees were not too pleased with the product. Finally a few institutions tied up with some life insurance companies and came out with a lifetime annuity within this scheme for the amount of loan availed. Despite of the advantage acceptance was slow as annuity is taxable. For appeasement, the annuity under reverse mortgage was made tax free, later. Hence, the final product remains where the borrower can receive a lifetime annuity that is even payable to the spouse on the death of the first annuitant.

reverse-mortgage-loan

Why People Do Not Like Reverse Mortgage Scheme in India

In India investing in real estate is a very dramatic decision. When a family lives in an apartment or house for 20 to 25 years then it’s a melodramatic situation to see the ownership going away to any financial institution. Also the decision gets more Bollywood when an individual has built the asset through loan. Hence, the house the individual buys in his lifetime is considered to be an asset for next generation. Considering that the children take care of their parents in their old age no parents wish would be a liability on the house and then pass it on to the children. These reasons may sound selfless too many while it is the way of life in the Indian society and hence attribute to the slow acceptance of Reverse Mortgage Scheme in India.

Also if you consider the tax-free lifetime annuity, Reverse Mortgage is a fairly good scheme to rely upon when the financial constraint is too high and there is no recourse. With such an option, the risk of living longer is also taken care of and hence with better pay-outs. The house ownership can always be claimed back by simply paying the loan availed. If an institution sells the house then cash surplus, if any, is then paid back to legal heirs. Despite its shortcomings in an Indian sentiments mind, the scheme in its current form in 2015 does provide a good option for retirees to plan their post-retirement income.


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All about Term Loans

A term loan is generally used to finance diversification, modernization or expansion of projects and is sometimes also called project financing. These loans are provided by banks and other financial institutions and are to be repaid like a regular loan.

Term loan features

Term loan is designed for a particular category of borrowers who want to expand their businesses. Major features of this loan include:

  • These are secured loans offered against the assets being financed by the loan (primary security) as well as other company assets (collateral).
  • Available in tenures ranging from 5 years to 10 years.
  • Restrictive clauses may be included in the loan such as maintenance of minimum base of assets, no additional loans etc.
  • These loans can be converted to equity.

term-loan

Term loan benefits

There are several benefits associated with term loans for borrowers and lenders alike. Some of the major benefits include:

  • Tax benefits applicable on interest repayments.
  • Flexible terms as per negotiations.
  • Equity shareholders don’t get affected due to the debt financing nature of these loans.
  • Cheap financing source for medium term requirements.

Risks associated with term loans

Term loans contain some amount of risk for both borrowers and lenders. These are:

  • Defaults in repayments puts questions on the actual liquidity ensured by the borrower.
  • Financial risk for the company if the assets acquired through term loans fail to perform better than the actual cost of capital paid.
  • If equities are transferred, the lender stands to have a say in the working of the company, adversely affecting the borrower.

All in all, term loans are a great way of getting mid-term financing so that you could grow and sustain your business without worrying about financial requirements. Always read the terms of a loan before applying for the same through any lender.


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Your EMI to Income Ratio: Keep It Low

Did you know that your EMI-to-income ratio is an important factor determining the approval of a new loan you apply for? Generally, if the total EMIs you are paying is more than 50 percent of your monthly income, your loan application may be rejected.

Most importantly, keeping the total amount of your EMIs at a manageable rate prevents you from acquiring new debts.

emi-calculator

Calculate your EMIs Online

Managing EMIs

These days, it is easy to fall into the temptation of taking loans for different purchases. Be it a house, car, two-wheeler, or even a washing machine – Equated Monthly Instalments are available for almost every kind of purchase. So when should you stop?

Lenders may say that your EMI-to-income ratio should not be over 50 percent, but that doesn’t mean you should borrow on till you reach this 50 percent cap. You need to consider your expenses towards credit card bills, household expenditure, income tax, energy bills, family requirements, and savings and investments. Consider how much money you would be able to spare after these regular expenses.

Experts suggest that your EMI should not exceed 25-30 percent of your income. If it is over 50 percent, you are already in a crisis and need to rearrange your finances immediately.

Borrow wisely

Debt is not always a bad thing. It helps you stay focused and consistent. However, too much of anything is bad. If you are in the habit of taking a loan for everything, you are sure to get into financial trouble.

  • It is advisable to match your debts to your income. If you are spending more than what you earn or expect to earn in the near future, then you are on the way to financial doom.
  • Borrow money only for essential things – vehicle, house, furniture, household appliances – and not for fun or expendable items. For example, avoid taking personal loan for a vacation to Bhutan. Do not borrow money from a friend to throw a grand party after purchasing a new bike.
  • It is not a good idea to take loans in order to invest. If your investments are in the stock market, it will be unpredictable; if you are investing in a long-term plan, you will have to repay your loan before the investment gives results.

Deciding tenure of loans

The basic principle of loans is the longer the repayment tenure, the more money you’ll end up paying in total.

  • If you do not have many debts and can afford a higher EMI, choose that over a longer repayment term. For example, if you have to choose between paying Rs. 67,000 for 10 years or Rs. 45,000 for 30 years, the earlier one is advisable if you can afford it. In the above example, for 10 years you’ll end up paying around Rs. 80 lakh, while for 30 years you’ll be shelling out over Rs. 1.60 crore.
  • If you get a windfall or bonus while you are on loan, try to make partial payments of the principal amount, or foreclose the loan. This will help reduce the total money you pay to the lender.

Keeping your expenses within your income plans is a best practice of money management. Accumulating EMIs without considering regular expenses, savings and emergency funds is not advisable. Repay your loans regularly to prevent accumulation of debt.


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Builders are keeping buyer’s debt free

Getting a home loan from a lender is a lengthy process and you will take a long time to repay them as well. The builders have taken notice of the problems that the buyer is facing in getting a loan and paying interest on it over a prolonged time. The buyers think twice before buying an apartment as the job security is also uncertain. Builders are now offering different payment options for apartments under construction and for the ready to possess flats.

Some builders are also offering no Pre EMI clause till the property is possessed. The buyers will have to pay 10 percent towards booking the property. The rest of the 80 percent of the property value can be paid on possession of the property. All the EMIs on the housing loan is paid by the builder and the buyer will pay EMI after possessing the house. This helps the buyer to manage for funds and also not owe a bank any money and that he can also have a good record in his credit report.

A leading builder from Chennai has provided an option to the buyer where he has to pay 40 percent in three months and take possession of the property and the balance will have to be paid in 15 months. This has managed to increase the sales of commercial properties.

Palms residences are offering the buyer ready possession. The buyer does not have to take a home loan to pay for the property, he can pay a small percentage of the total cost and the balance can be paid over time in the manner you would’ve had to pay for the home loan. Here instead of paying the EMI towards home loans, the buyer will be paying EMI to the builder without having to face the burden of interest.

The builders have come up with these offers as they have noticed a dip in the realty market and they have found out that the reason why there are no buyers. They found out that most buyers do not want to be in debt for a long time but they also do not mind building their assets. There is no need for the buyer to deal with the banks nowadays and that they can deal with the builder directly and instead of introducing a third party to ensure the payment of the property is being made, the builder is directly dealing with the buyer. The buyer is benefited as he gets an asset and has to pay low or no interest.

The interest can be calculated using the home loan EMI calculators that are easily available online. All you need to do is fill in the details of the property value, the tenure if the builder has set any and the interest rate, if applicable. You will get the detail of the EMI amount going towards paying for the property. Based on the amount that is comfortable for you to pay, you can negotiate the terms with the builder. You can fulfill your dream of owning a house with the help of the builders itself and you need not have to approach the bank.


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How Changes in Repo Rates Affect Finance For Public

As of August, 2015 Reserve Bank of India, has made a series of noticeable changes in Repo rates, reducing it consistently within the mentioned span of 8 months. The ramifications that are salient of the steps taken by the RBI will affect every industry and further the public life as well as the assets. The upshots may be consequential in the sectors such as real estate with a dominant effect on home loan purchases.

What is Repo Rate?

It is simply the rate at which the RBI lends the money to the banks. The relation is is considered proportional, and reduced repo rates are able to assist banks to receive the money at lower rates and the other way round as well. This however has strong implication on the ordinary consumers i.e. the general public. This term also implicates the interest rates that are levied to the borrowers by the banks. Therefore, the term also means the loan interest rate that the consumers are being charged when borrowing from the banks.

How Repo Rates Will Affect Real Estate Industry

Online EMI Calculator

EMI Calculations easy with Online EMI Calculator

It is important to note that even if banks are able to draw money at lower rates from RBI,  it is not compulsory for banks to offer lower rates to the customers. The new reality customers’ fate is based entirely on rate cuts, which again are not completely under the control of the banks. For consumers it is beneficial if the base rate to take a home loan is reduced. Also if the EMI is directly proportional to base rate, banks would have to slash the interest cap on their home loan products to actually offer assistance to the realty sector that is clogged. It is expected of banks to form a nexus so as to control the base rate for home loan products to a percentage that is fixed. It may or may not be profitable for the new consumers. Only banks and the strategies  that they use will lead to the outcomes. There is a also a apparent possibility of banks discontinuing offering  waivers on processing fees as well as other freebies  in an effort of counteraction  reduction in the base rates. A lot of financial experts believe that the BSFI sector will require to play a core role when it comes to moving the market for property ahead.

People who have existing home loan to their name, might find relief in these rate cuts.

It is apparent that the reduction of rates will impact consumers who have floating loan rates directly and will have to recompute the EMIs with the help of the EMI Calculator. Customers who have long-term loan tenures can expect good relieve.

For availing reduced EMIs, customers would need to contact banks or the financial institution following the revision the terms and conditions of the loan, after they recalculated their EMIs with the help of the EMI calculator online.

The slashed repo rate may have a momentum affecting the real estate industry. It is expected to churn affordable housing as well as enhance sales through the lower home loan interest and henceforth the reduced EMIs. The rate cuts may enable real estate pricing stocks to considerably drop within a range that can be considered as affordable housing.

The recent rate cut by RBI is also such a measure that has multiple implications to the rising economy of the country. Real Estate being a cardinal aspect in the economic landscape, will be incurred a massive drive through these amendments.


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Why we need to consider Loan EMI Calculator ?

When you are taking a loan, the first thing that is to be considered is the amount that you pay towards the EMI. EMI or equated monthly instalment is a fixed payment that the borrower has to pay to the lender to pay off the loan interest and principal. A person has a fixed monthly income that is if he is salaried and if he is self-employed there may be a slight variations in the income. But, the lender decides the borrowers EMI based on the borrower’s repayment capacity. The lenders then break-up the loan repayment in instalments where the interest rate of the loan are amortized over the loan term that the borrower has chosen. The repayment schedule is known as EMI. The EMI value depends on the loan amount, interest rate charged and the loan tenure.

The formula to determine the EMI is complex and to make it easy for you, there are several online Loan EMI Calculator that one can use. While taking a loan, you must know if you can afford the EMI. There are various factors that affect the EMI. Income being the major factor affecting the amount of EMI that you can afford. Banks will restrict the EMI to 40 percent of your gross monthly income. This is to make sure that you can run your house with ease and meet emergency requirements. Even if you are sure that you will be getting a raise, it is not advisable for you to take a bigger EMI option. Choose an EMI that will let you save at least 15 percent as monthly savings. You also need to keep in mind the expenses that you might

Online Loan EMI Calculator

Loan EMI Calculator for EMI Calculations

incur in the future. It could be maintenance expenses, children’s educational expenses, medical expenses, inflation etc. Have emergency funds in place so that you will not have to be burdened in the future if you have opted for a floating interest rate.

Your present lifestyle is also a major aspect to consider. If there is no way you can cut back on the extra expenses, then it is best to take a loan where you have to pay lower EMI. Sometimes it becomes hard to change your lifestyle and you don’t know how to. If you are ready to spend less on outside food, entertainment, vacations etc. then you can commit to a higher EMI.

You need to think a lot and make a lot of financial changes in your life before taking a loan. You will be paying a substantial amount out of your monthly income towards the loan. You need to consider various factors such as change in your lifestyle, income stability, future expenses and retirement plans.

Loan EMI calculators will help you plan your expenses and will help you to take an informed decision. You will have to fill in details of the loan amount, interest rate, tenure and processing fee. You will get a detailed information on how much EMI that you have to pay the lender to pay off the loan. It will give you a break up of how much of the EMI amount is going towards the principal and the interest. Loan EMI calculator will help you plan for your future expenses and you can be prepared to pay off all the EMIs without any stress as you would’ve already known how much money you have to keep aside each month.