Friday, 18 May 2018

What Are The Documents Needed For Gold Loan?

If you are looking for a fast and easy way to secure funds to meet your immediate financial needs gold loan is the answer. It is a loan that that requires you to pledge your gold ornaments with the lender in exchange of funds. Many people rely on gold loan for immediate short term needs like children’s education, marriage etc. It enables them to mobilize their assets that are lying idle in the locker to secure funds at a low rate of interest.
Some of the benefits of gold loan over other kind of loans are as follows:
·         A secured loan where the gold ornaments serve as collateral reduces the risk of the lender. The lender can always sell the gold and realize the dues in case of non-payment by the borrower. Hence the gold loan interest rate is much lower than other kinds of loans. For most personal loans the interest varies between 15-25%. But gold loan interest rate ranges between 12-16%.

·         Most banks do not check your income level. So even if you are unemployed you can rely on gold loan to meet your cash requirements. For most other kind of loans, your income level is assessed to judge your repaying capacity. But in case of gold loan where the customer has pledged his valuable asset, the lender is not worried about the repayment ability.

·         Credit scores play an important role in most loans approval process, but not in case of gold loan. Since the loan is fully secure with the collateral, the lender is not at all worried about losing his money. Hence he does not bother to check the financial history of the borrower. So even if you have a low CIBIL score, you can use gold loan to meet your cash requirements.

·         Most banks like ICICI bank, HDFC, SBI, Manappuram Finance, Muthoot Finance offer these loans. Most of these financial institutions do not charge a prepayment penalty.

·         The loan amount can be used for any type of expense. So it gives you the flexibility of use.

·         Easy documentation, less processing time and fast disbursal of funds makes this loan very attractive.

Let’s see what documents are needed to get a gold loan
Unlike other kind of loans, where the paper work is an important part of approval process, gold loans sanctioning doesn’t require you to submit many documents. All the bank needs are simple KYC documents for Identity proof and Address proof along with 2 passport size photographs. Yes, it is as simple as that. For identity proof one can submit copies of passport, driving license, Voter Id card, ration card, Aadhaar Card, ration card etc. For an address proof you can show you electricity or telephone bill or any other utility bill. Besides this you need to submit a signed application form and a signature proof. The bank will verify the purity of the gold and give you an approval. It’s an easy and hassle free process and you get quick approval.
Things to consider before taking a gold loan
·         These loans have a shorter tenure. Be sure of your repayment capacity else you risk losing your valuable asset. A little delay in payment may result in charging extra interest. But non-payment of dues, even after a formal notice is sent to you may lead to the lender auctioning the gold to recover the due amount.

·         The repayment patterns will affect your credit score as well. Make on time payments to ensure a spotless credit profile.

·         The amount of loan that you can get sanctioned is usually 80% of the value of gold pledged.

·         Gold loan interest rate varies from lender to lender. Compare the different offers of banks and private lenders to strike the best deal.

Thursday, 10 May 2018

How Can You Raise 50 Points in 3 Months?

A good credit score can do wonders in your life. It gives you financial freedom like no other. Imagine, with a good credit score you have all the financial products at your disposal; you can opt for one in no time. The lenders and bankers always favor people who have good credit score.
On the other hand, if you have a bad credit score, you are in for a financial mess. It will be hard for you to get a financial product in the market. So what is good credit score?

A good cibil score
There are a lot of credit bureaus available in Indian market but maximum number of lenders relies on CIBIL for credit verification. The credit rating ranges from 300 to 900 points. If you have a score above 800, your report is termed to be excellent. Similarly, if your score lies in the 700-300, you will have to work to improve credit score.
Imagine you are planning to buy your dream house. You’ve been saving to buy this property from a very long time; you are also relying on opting for a home loan. Just to be on a safer side, you check your credit report and find that your cibil score is low. Suddenly you sit shell-shocked and the dream to get the house starts fading away. You try finding answers on how can I improve my cibil score in short span of time so that you can apply for a loan with ease.
We will sight you ways on how you can raise at least 50 points in advance, before applying for a loan.

Check for errors
This is the most basic when it comes to raising points. There are high possibilities, the lender or the credit bureau must have committed a mistake which resulted to your score’s depreciation. Get a free cibil report online and check for any errors. If you have problems understanding technicalities of how the score is calculated, take professional help. Once you have a picture on what went wrong with your report, try getting in touch with the lender and report it. If the mistake is from the bureau’s side, you can raise dispute against the transaction and get it amended. The dispute process will take a lot of time because of the slow process, so the early you know, the faster you can act on the same.

Stop making unwanted purchases
Try purchasing everything for cash. This way you will be utilizing your own money, rather than using a credit card. This practice can help you control your unwanted urge to spend on unwanted things and can lead to a debt free life. This way you will be out of the low cibil score category in no time.

 Opt for automatic payments
There are a lot of banks and credit card vendors who offer this service for free. Go for automatic payments, this will help you make planned expenses and your credit line will be utilized well. Just make the final due payment on time for all the automatic payments you have opted for, you will see a sudden spike in your score in no time.

Keep your old accounts open
Once realized that you need to control your expenses, many of us try closing the account. Do not close your accounts; old open accounts contribute to your credit score passively, it will help you build a good score in long run. 

Get a consumer loan
This is the easiest way to appreciate your credit score in no time. Just go to a consumer durable appliances store and buy a product on loan. It can be a television, a latest mobile, etc. The store will offer you loan options upfront, the EMI will not dig a huge hole in your pocket. Pay these EMIs on time and you will see a hike on your score.
Getting your credit score up is a lengthy process. If you press all the right buttons at the right time, you can achieve your set goal in no time. Make all your payments on time and you will get your score up eventually, which can help you get any loan.

Friday, 27 April 2018

Does Credit Monitoring Hurt The Score?

A credit score has become an important financial number that affects several aspects of one’s life. It is not just helpful for people who are looking to take loans in near future. Everyone must improve credit score as you never know when an emergency situation strikes and you are in need of funds. More and more people are waking up to the importance of keeping their credit in good standing. Checking one’s credit report is an important step in achieving this goal. There are several benefits of monitoring your score and report. It helps one understand the current financial position before applying for a loan or credit card. Checking the score gives you a fair idea of your chances of approval and whether you will be eligible for discounted rates. Monitoring one’s credit also helps uncover fraudulent activities or mistakes or errors in reporting. But many people fear that monitoring the score will itself hurt the score. Is it true?
Not at all! It is a big myth that checking the score is bad for one’s credit. Let’s see how.
Enquiries made regarding your credit do affect your credit score to some extent. 10% of your score is based on the number of enquiries made. But these include only hard enquiries. When you apply for new credit, the checks made by the lenders to see if you qualify for credit are recorded in the history as hard enquiries. A number of such “hard pulls” indicate signs of financial trouble and hence damage your score. Checking your own score is recorded as a soft enquiry. They are not related to your search for new credit. Hence, these are not shared with the lenders and they are not included during credit score calculations.

Hence you can check your score on a regular basis is a sign of good credit management. It will help you in the long run. You can get a free credit report from all the credit bureaus once every year. Make the most of this opportunity to see whether your history is in good standing. If you wish to check more often than this, you can order your report online by paying a fee. You can also subscribe to credit monitoring services. Requests made by them on your behalf will be treated the same way as you make the enquiries. A credit monitoring company keeps checking your credit report on a regular basis. Since these checks are not done for the purpose of applying for a loan, these are considered as soft pulls. Whenever there is a change in the score, the company will alert you. It investigates into any unexplained changes that might occur. These regular updates are also useful if one is trying to increase credit score.

If you do not have sufficient time to monitor the credit yourself, or if you find these numbers too confusing, it is always better to consult a credit monitoring company. After all a good credit score will help you get approved for loans at discounted rates. You will become eligible for the best credit cards. All this will help in saving thousands of rupees in the long run. With a bad credit you will only be eligible for loans for low CIBIL score that charge exceptionally high interest rates.

Identity theft cases have become quite common. Any negative information on fraudulent accounts opened in your name can bring a sharp dip in your score. A credit monitoring company can also help uncover mistakes and fraudulent activities. If it identifies any errors it will even report it to the bureau on your behalf. The bureau will verify the error and correct it if it did a mistake. So monitor your credit without any worries, and stay on top of your financial goals.

Friday, 20 April 2018

Gold Loan Interest Rates Depends On Credit Score?

Ankita is a housewife who plans to start her own business and for that she is planning on taking a loan. She is faced with a hurdle; she has no credit history since she has no credit cards or loans in her name. She was disappointed but her banker friend suggested that she consider taking a Gold Loan. Ankita heeded to the advice offered to her friend and was able to kick start her business venture.
What are Gold Loans?
A gold loan is a loan that is sanctioned against gold as collateral. Thus the applicant can pledge jewelry; ornaments or gold in any other form and the lender will sanction a loan based on the value of the loan offered as collateral and also the loan to value ratio which has been fixed by the RBI and at 75%. Thus the applicant can get a loan up to 75% of the gold that is given as collateral. Getting a gold loan is fairly easy as documentation for it is simple; disbursal is fairly fast; some lenders may lay down minimum income criteria while others may not. Thus these loans are often simple and quick to procure when compared to other loans and can offer financial assistance in the time of a crisis.
Gold loans and Credit Score: How are they Related?
Often people with no credit history or low credit score prefer to seek a gold loan. Many lenders may agree to sanction a loan to the applicant without seeking their credit report or even if they have a low CIBIL Score.  The reason for this is that liquidating gold (in case the borrower defaults) is much simpler that trying to sell a car or a home in case of a car loan default or home loan default by the borrower. Thus the lender is assured of the safety of their funds and may be willing to lend to those who have no credit score or a low score too!
Often gold loan thus is a choice for those without a credit history or no credit history. Generally interest on loans (mostly) are affected by the credit history, lenders may be willing to offer loans at lower rates to those who have a good credit score as the lender in this case assumes a lower risk and for those who have a low score the interest rates on loans may go up but this is not the case when it comes to gold loans. As stated above most lenders do not even seek the credit report when an applicant applies for a gold loan, which is usually the first step in most other loans. If the lender finds the credit health of the applicant satisfactory then only they go to the next step when scrutinizing applications for home, auto, personal loans and so on.
Interest on gold loans is of course dependent on the market conditions, the lender’s policy and one more factor, the LTV ratio. Though the RBI fixes the upper limit for the LTV ratio lenders can choose to offer loans at a lower ratio too. So when the loan is offered at a lower ratio then the lender may be willing to extend the loan at a lower interest rate as compared to when the LTV ratio is higher. So if the value of the gold offered is Rs. 50,000 then loan value can go up to Rs. 37,500 but if the applicant needs or agrees for a loans of a lower amount, say Rs. 30,000 the lender may be willing to offer a loan at concessional rate. Thus unlike in the case of other loans, gold loan rates or their sanction is not dependent on the credit score but the LTV ratio may impact the interest rate.

Wednesday, 11 April 2018

On What All Properties Can I Get Lap?

LAP or Loan Against Property as the name suggests is a loan sanctioned against property and this makes it a secured loan. While most banks offer LAP, the eligibility conditions and also the product features may vary from one to another. LAPs can often be used as an alternative to personal loan when in need of funds as the interest rates for these loans is much lower than that of personal loan. Approval is quick and documentation required is minimal; however the crucial question that arises is what are the properties against which these loans can be secured?

On What Properties Can You Get LAP?
To put it broadly a loan against property is available for a self occupied residential properties, any plot of land or a commercial property. An important requirement for this loan requires that the applicant (owners) have full control over the property without any restrictions what so ever. In case of joint ownership, all owners have to be co-applicants for the loan which means all owners have to be on board for the idea of taking a loan against that said property.

Most lenders do mention the property type against which they might be willing to give a loan. As per the SBI website the loan is available for “non-encumbered, non-agricultural and SERFAESI compliant residential house/flat in the name of borrowers/guarantors. However, loan under this scheme will not be made available on mortgage of an open plot, commercial/industrial property and under construction property”.  This is a fairly broad definition which reveals that SBI does not offer loans against agricultural land or open loans or under construction property.

Both ICICI and HDFC bank list that the loan can be secured for residential as well as commercial property owned by the applicant. Getting a loan against vacant land can be a challenge as most lenders may not see it as an economically viable option in case of default. A vacant land will not be easy to rent or dispose of in case it is required by the bank to do so. Small or local lenders may agree to do so but it will depend on each lender’s policy. However most lenders would be willing to offer a construction loan if the applicant requires that to build a house on a piece of land owned by him. Eligibility criterion for these (construction) loans, although similar to home loan eligibility criterion varies from lender to lender.
Lender may differ on their policies regarding what is acceptable to them as collateral for a LAP  thus one should check with the individual lender or visit their website before looking at applying for the loan.
Loan Against Property Eligibility Criteria:
Like any loan there are eligibility conditions for getting a LAP sanctioned. Though these may vary from one lender to another but some basic conditions remain same.  So if you want a LAP you should fulfill the following conditions (generally), rest can be checked at the lender’s website.
Ø  Salaried employees who are permanent employees and professionals like architects, doctors, CAs, engineers etc can apply for it.
Ø  Self employed people can also apply for these loans as long as they pay regular income tax.
Ø  A good credit rating is also a must for the loan to be sanctioned, low CIBIL score could be an impediment in getting the loan sanctioned.
Ø  Some lenders may have minimum income eligibility criteria while others may assess the income, current debt and expenditure levels to assess if the borrower will be able to repay the dues.
Ø  Value of property is an important criterion when deciding about LAP.
If you have a property and you are in need of some quick funds then borrowing against it an option worth exploring however one should avoid taking a loan against a property that the live in or the one which is occupied by their family. If this is the only property owned then other options of borrowing should be explored.

Thursday, 5 April 2018

How Much Will A 5 Lakh Car Loan Actually Cost U?

Automobile sales have seen a rapid growth in the past decade. A personal car is the first thing that the young generation of today want as soon as they land a job. Most of the car buyers finance their purchase through a bank loan. While entering into an agreement what most people are concerned about is the monthly instalment. But EMI is not the only thing one should be bothered about. One should take into account the total cost of financing a car and compare it across multiple banks before taking a final decision. Find out the rate of interest charged by the bank and their processing charges. Also determine whether you can arrange for the down payment, since most banks give 85-90% of the car value. If you think you can prepay the loan, find out if the bank levies any prepayment charges. A dealer may offer you ad-ons like extended warranty, insurance, theft protection etc. which may further increase the amount that you need to borrow.
Your EMI amount goes towards the payment of 2 components- Principal and Interest. Principal is the actual loan amount that you borrow i.e the car value minus the down payment. Interest is the amount that the lender charges for taking the risk of lending you money. In the initial part of the tenure, the interest component forms a major portion of the EMI.
The cost of the loan depends majorly on the interest rate. This APR varies from individual to individual depending on several factors like CIBIL score, total tenure and whether the vehicle is old or new. A high CIBIL score and shorter loan tenure will help you get better interest rates. The interest rate on loans for new cars is usually less than those for old cars. If you have a low CIBIL score, your APR on the car loan would be higher and that would translate into a higher EMI amount.
You can use the auto loan calculators available online to estimate your monthly payments that you need to pay towards repayment of the car loan. You will need to provide information relating to the loan amount, interest rate, tenure, processing fee etc. and the calculator will give you a breakup of the payments. You can key in different loan tenures to see how it affects the EMI. Usually a longer tern will lower your monthly outgo, but it will increase the total cost of your loan.
Let’s take an example of an HDFC car loan. The factors that affect the HDFC car loan eligibility include income level, tenure, CIBIL score and prior relationship with the bank. Your CIBIL score plays a crucial role as it helps in determining the HDFC Car loan interest rate.  A high score is an indication of low risk for the banks and helps in getting discounted rates. HDFC offers upto 100% of car loan value for a tenure ranging between 1 to 7 years. One can use the EMI calculator to get an estimate of the EMI. Say the amount is Rs 5 lakh, and the HDFC Car loan interest rate is 9.25% for a new car. One can fill in these details and find out the EMI amount for different tenures.

2 years
3 years
5 years
7 years
EMI on 5 lakhs @9.25%
Rs 22,900
Rs 15,958
Rs 10,440
Rs 8,108
Total amount you pay to the bank
Rs 5,49,600
Rs 5,74,488
Rs 6,26,400
Rs 6,81,072
Total interest payment
Rs 49,600
Rs 74,488
Rs 1,26,400
Rs 1,81,072

The EMI amount is more if you choose a shorter duration. As the loan tenure increases the EMI amount decreases. But with a longer tenure you end up paying a higher interest amount. For a 5 lakh loan you pay Rs 49,600 as interest over a span of 2 years. But with a loan tenure of 7 years the total interest cost comes to Rs 1,81,072. So choose a loan tenure wisely. You will need to strike a balance between EMI affordability and interest expenses.

Saturday, 31 March 2018

Personal Loan VS Educational Loan

As the cost of education rises, it becomes difficult to fund higher studies from one’s own pocket. That is why taking loans to pay for the college fee is becoming quite common. The two most common financial options that one has are personal loans and education loans. There are different parameters based on which one can decide which option best suits one’s situation. If you too are seeking a loan for higher studies, this article will help you compare these two choices and help you make a sound financial decision.
An education loan is favoured because of the following reasons.
1.      Moratorium period
This period is referred to the time during the loan period when the borrower is not required to pay the instalments. In case of education loan there is a provision of moratorium period. The repayment begins 1 year after the completion of course or 6 months after one gets a job whichever is earlier. The interest during the moratorium period is also calculated on simple interest basis and added to the principal outstanding. You do have an option of paying the interest while you are studying if you have the resources to do so. But in case of personal loan there is no waiting period. The payment of regular EMIs begin as soon as the funds are disbursed. This essentially means that someone needs to shoulder the burden of repayments (on the borrower’s behalf) till the time one is studying and is without a job. In case your parents or relatives are not in a position to do this, personal loan no longer remains a choice. An education loan is better from this aspect, as it allows sufficient period to a person to settle in a job before the burden of EMI starts.
2.      Interest rate
An important factor that is taken into consideration while choosing among different loan options is the cost of borrowing. Since education loans have a specific purpose of providing a financial backing to students, they usually have a lower interest rate than the personal loans. Axis bank personal loan interest rate varies from 15-24% whereas education loan interest rate is between 10 to 13%. The processing fee is also lower in case of education loan. Hence it makes financial sense to go with this option.
3.      Loan tenure
Personal loans are usually offered for a period of maximum 5 years. Whereas education loan tenure goes up to 10 years. A longer tenure means that one can have lower EMI amounts which can be easy on one’s pocket.
4.      Loan amount

It is easy to get a personal loan of 4-5 lakhs, but if the education cost is much more than that, then personal loans sometimes not even remain an option. Maximum amount of axis bank personal loan is Rs 15 lakhs. One can get an education loan of Rs 50,000 to 1 crores depending on the kind of course one has enrolled for. Longer tenure of education loans helps in making the EMIs affordable even if the loan amount is high.

5.      Tax benefits

Personal loans do not offer any tax benefits. Interest payment on education loan qualifies for tax deduction under Section 80E of Income tax act. This benefit can be claimed after the loan repayment starts and for a period of 8 years. Such benefits reduce the total cost of taking loans.

But education loan comes with its own set of disadvantages. There are a lot of formalities during processing, and it takes a long time before the funds get disbursed. Banks have stringent eligibility requirements. They ensure that the applicant’s name is not in the loan defaulters list. They check the CIBIL score of the individual to analyse his past credit behaviour. With personal loans one can get funds instantly. If you meet the requirements one can get the loan within 3 days. There is no restriction on how the money is spent.

Weigh the pros and cons of both these options and consider which factors are more important to you considering your personal situation. In case your family can support the EMI payments till the time you study and the loan amount isn’t too high you can consider personal loan. However from the point of view of interest rates, tax benefits and loan tenure an education loan is a better choice.