Thursday, 24 November 2016

Things That You Must Consider Before Taking a Home Loan

Having your own house gives you a strong sense of security; there are no two ways about it. However, real estate isn't cheap. If anything, it costs more than ever today. This is why many people have to take a home loan to meet the financial requirements of a home purchase. However, home loans have many moving parts, that you must become familiar with before signing any papers.
Here are some things you should know before taking a SBI home loan, IBDI home loan, or any other bank's loan:
Credit Score
If you are going for a conventional approach, then having a high credit score or CIBIL score is a must for any kind of home loan. Almost every bank you will apply the loan at, will check your CIBIL score when considering the application. Thus, make sure you check your credit score first, before you start applying. If your score is less than 750, then it is better than you spend some time to improve CIBIIL score.  Once your score is in decent shape, you can secure a higher chance of loan approval.
Types of Interest Rates
Not many people know about this, but there are two types of interest rates, which are- fixed rate, and floating rate. In a fixed rate, your EMIs remain the same throughout the tenure of your home loan. However, in a floating rate, your EMIs may change during the tenure, if the bank changes the interest rate in future. Both types of rates have their own advantages  and disadvantages:
·         Fixed Rate: This option is secure and stable. Since your EMI is fixed throughout the tenure, you can manage your finances easily. However, if your bank reduces the interest rate in future, then you won't be benefitted from it.
·         Floating Rate: Floating rate is risky, but it comes with a big advantage. If the bank lowers the interest rate in future, then your EMIs will also become smaller. The opposite situation brings a risk. That is, if the interest rate increases, then your EMI's will also become bigger.
When you apply for a loan, make sure you ask your bank about the type of interest rate that is associated with it. Choose your option wise, as both have their own set of upsides and downsides.
Extra Charges
It is important to know about the extra charges that may have to pay for taking a home loan. Depending on your situation, the cumulative charges can be a lot. Some of the common extra charges include administrative fee, service fee, processing fee, etc. Some of these could be directly proportional to the loan amount.
Make sure you get detailed information on the extra charges, and add it to the loan amount, so that you can make your final decision wisely.
Types of Home Loans
Depending on your requirements you can take the most suitable form of home loan, for the options are many. Here are some of the most common types of home loans:
·         Home Construction Loan: In this type of loan, you have to get an estimate of the home you want to construct, and then apply for the loan with the same amount. The lender will take the value under consideration, and approve or reject on the basis of the same.
·         Home Purchase Loan: In this you directly apply for a pre-constructed home. Since you already have the actual price in order, you don't have to do a lot of calculations, and merely apply for the loan at a bank.
·         Home Conversion Loan: If you already have bought a home through a loan, but now wish to buy a new home, then you can have the loan transferred to the latter. You don't have to repay the previous loan this way.

Taking a home loan is a big responsibility. Thus, you should do all your homework, and do as much research as possible, before finally zeroing in on one. Also, make sure you compare all kinds of viable loans, and choose the best one.

Wednesday, 16 November 2016

How Can I Get Best Deal on a Personal Loan?

In a perfect world no would need to borrow money for anything. However, truth is we don't live in one.  Majority of us would need to get a personal loan in life, at some point or the other.  Fortunately, banks and NBFCs have made it quite easy and simple to apply for a loan. Not only that, they often roll out exciting offers, such as low interest rates, flexible repayment options, etc. to attract their customers. You can even go for P2P (Peer to Peer) loaning options, that allow you to apply for a loan on the Internet, and get funds within a day or two. However, when so many options are available, it certainly begs the question- "how do you get the best deal on a personal loan?".

There are a lot of things that you can do to ensure you get the best possible deal on a personal loan. Some of these include:
Comparison
There is a lot of competition in the banking sector today. Banks are vying against each other in the bid to attract customers towards personal loans. Thus, you can notice a considerable difference in the interest rates offered by different banks. The terms and conditions may also vary greatly. Thus, if you want to secure the best possible deal on a personal loan, it is important that you perform a through comparison among all the viable banks. 
Establishing the Upper Hand
You can only expect a good deal when you can prove that you have high creditworthiness. The easier you will make it for a bank to trust you, the easier it is to get a good deal. If you are going after a traditional bank for the loan, then your credit score will play a significant role in the process. Thus, by working on your score beforehand you can have the upper hand when negotiating rates with a bank. With a promising credit report you can take advantage of leverage, and convince the bank to offer lower rates.
Grabbing Seasonal Offers
If it is possible, you can wait for a festive season before applying for a personal loan. This is because a lot of banks release attractive seasonal offers. In fact, thanks to the tough market, banks have begun to implement all kinds of marketing techniques to increase the no. of sanctioned loans per quarter. If you can just wait for the right time, and thus the right offer, you may get the best deal on a personal loan.
Checking Out Online Lenders
Online lenders are giving tough competition to the traditional banks and NBFCs today. Whether it is about interest rates, tenure flexibility, or the entire process of obtaining the loan itself, they are able to excel in everything. Thus, you can check out if you quality for an online loan, and compare it with the traditional counterparts. Since there are plenty of online lenders that have emerged lately, you can compare them too.
Understanding The Method of Interest Calculation
If a bank or NBFC is offering you a personal loan at a really low interest rate, then make sure you go through the full details before signing up for it impulsively. Sometimes, to trick customers banks offer low interest rates, but these are flat rates, which don't consider gradual reduction of principal amount, and the interest amount.
What you should ideally seek in a personal loan is a diminishing rate, rather than a flat rate. With a diminishing rate, your interest amount gets smaller and smaller as you pay your EMIs. This is because the interest is calculated on the outstanding balance, which gets smaller with time. 
A loan is a huge financial responsibility, and since it stays with you for many years, it helps to get the best deal possible. In fact, the same goes for a home loan, higher education loan, used car loan, or any other kind of loan. Thankfully, with the help of Internet you can do enough research to find a loan that fits your budget, and your financial situation. At any rate, having a good CIBIL score always helps when dealing with a lender. So, make sure you have a good one before you get on board.


  

Wednesday, 9 November 2016

How to get the best deal on your personal loan

Loans are the need of modern life. There are so many expenses you can source from different types of loans. Personal loans are however one of the fastest disbursed loans wherein you also get flexibility to use credit for different purposes. Unlike auto loan, education loan or home loan, the purpose of personal loan is not defined. With minimum documentation, these small scale unsecured loans are easy bets in the times of financial emergencies.

However it is imperative that you know how to make best use of the different types of personal loans and find the best deal as per your requirement. Here are some quick tips to follow before you apply for a personal loan.
1.       Be it a foreign vacation with the family, education of your kid, medical emergency, renovation of your office/ home or a luxurious shopping spree for an upcoming celebration in your life, a good score would help you get a personal loan of choice.  However it is imperative that you do your homework well and compare personal loans offered by different banks.

Thus as a thumb of rule, compare different deals before you finalise one. Comparing not only helps you find the cheapest deal but evaluating different banks’ offers also educates you. This will help you compare the interest rates and total cost of the loan, and you would be able to make a learned choice at the best price.

2.       While comparing the personal loans interest rates, check out all the expenses. The cost of loan includes, monthly installment, bank’s processing fee, documentation charges and pre closure charges. So do not just stick to interest rate when comparing two offers.

3.       Next point in consideration should be an article for pre-closure of the loan. Some banks charge if you opt for pre closure of loan. So, if you wish to close the loan in the middle of the term you should clearly study this article and find the deal that doesn’t add cost to loan if you pre close it.

4.       There are many factors that can help you get a better loan deal. Take for example, you already have a loan account with ABC Bank and you are regular in your payments. The ABC bank may offer you a good deal as you are a steady customer. So if you use a credit card or have a loan from a bank, try to negotiate your request from the same bank. A bank is also interested in retaining its diligent, old customers.

5.       Not to mention, one of the most important factors that help you get the best loan deal is your credit score. A good score increases your credit worthiness and reduces bank’s risk metric. Thus with a good score you naturally become an eligible customer of a bank for lending money. According to CIBIL, 80 per cent of people with 750 or more score can access bank products as per their choice.

6.       A bank always prefer to lend to those who can repay the loan. So your job details, employer’s or company’s reputation, your personal assets such as a house, car or other assets besides your cibil score also add to your eligibility for a personal loan.

7.       Your interest rate would also depend on the number of years you want a loan for. Usually a long term loan has less steeper interest rate.

8.       As personal loans are unsecured loans, you would find that popular banks such as SBI, PNB, HDFC and alike, often offer the best deals. They are usually the first ones to announce the RBI’s repo cut on interest rates. They often offer good festival offers too. So festival time indeed could be the time to get the new credit line.

9.       If in case you lack a credit history or are just employed, you should apply for a credit card and get a secured loan. This would help you build a good history within six months and later on you can try other avenues of credit.

10.   Last but not the least, apply for personal loan only in case of emergency. For, there are other credit options that are cheaper. A secured loan is always cheaper because of collateral or security. But an unsecured loan is most risky offer by a bank. So without having an extra ordinary reputation, interest rate of personal loan is ought to be more than education, auto, or home loan.


Knowing these points I hope you are more confident about getting the best personal loan deal.

Thursday, 3 November 2016

How to Understand Car Interest Rates

A long-term car loan that comes with a low interest rate can make buying your favorite car affordable and easy. However, is it wise to just go with any kind of loan? To choose the best auto loan you must know how car interest rates work.
Here are 3 of the most important factors that you must take into account when choosing a car loan-
1) Car loan interest rate- If you will compare different auto loans that are available in the market you will be surprised to see the difference in their interest rates and conditions. For instance, the SBI car loan floating interest rate is 9.65% - 9.70%, of United Bank of India is 10.00% - 10.50%, and of Corporation bank is 10.20% - 10.70%. As you can see there is a good different between them all. Even though the difference is a small percent it can make a big difference in the long term.  According to most finance experts a car salesman can either give you a great deal on your car or an excellent financing. It is rare to get a deal that lets you enjoy the best of both worlds. So, unless you compare car loan interest rates that are available you can’t find the best deal.
2) Getting the Best Deal- Thanks to the high competition and the drive for closing-deals that car dealers have you are often offered incentives from the financer when you apply for an auto loan. However, they can choose to shape the deal the way they want and you have to understand what kind of system works best for you. For instance, if the manufacturer is providing discounts your dealer may instead offer you  lower EMIs. Say, you take a Rs 4-lakh loan at 12% interest rate for 5 years. The EMI will cost Rs 8,810. If the discount provided by the manufacturer is Rs. 25,000 your dealer could reduce it from the loan amount itself, making your EMIs as low as Rs. Rs. 8,200. Or, instead he can decide to tell you that he can give you a lower interest rate of 9%. Comparing the two a lower interest rate is a lot better in the long run.
3) Math of Car Loan Interest Rate
A car loan interest rate is calculated neither on “simple” interest rate system nor on “compound” interest rate system. Instead the interest is calculated on the outstanding amount that changes every month as you continue to pay EMIs that reduce the principal.
To help you understand how the calculations are done here is a schedule that is based on a car loan of Rs. 100,000 for 12 months at a car loan interest rate of 12%-
EMI Number
EMI Amount
Interest
Principal Paid
Principal Outstanding
1.
Rs.8885
Rs.1000
Rs.7885
Rs.92115
2.
Rs.8885
Rs.921
Rs.7964
Rs.84151
3.
Rs.8885
Rs.842
Rs.8043
Rs.76108
4.
Rs.8885
Rs.761
Rs.8124
Rs.67984
5.
Rs.8885
Rs.680
Rs.8205
Rs.59779
6.
Rs.8885
Rs.598
Rs.8287
Rs.51492
7.
Rs.8885
Rs.515
Rs.8370
Rs.43122
8.
Rs.8885
Rs.431
Rs.8454
Rs.34668
9.
Rs.8885
Rs.347
Rs.8538
Rs.26130
10.
Rs.8885
Rs.261
Rs.8624
Rs.17507
11.
Rs.8885
Rs.175
Rs.8710
Rs.8797
12.
Rs.8885
Rs.88
Rs.8797
Rs.0

If your bank is a private bank then the car loan interest rate is reduced on a monthly basis, and if your bank is a nationalized bank then in most cases it reduces on a daily basis.

Choosing a car loan often comes with a trade off. Having small monthly EMIs can be an excellent option if you are on a tight budget but it also means you will be paying a lot extra in the form of interest. On the other hand you can save a lot of money on the interest by paying higher EMIs but it can force you to cut down on your expenses. It all comes down to your own requirements and conditions. At any rate, make sure you compare different car loans before you zero in on one.