Friday, 28 July 2017

Credit Repair Guidelines for Better Results

A good credit score is a gateway to your good financial future. However it is sad that many people do not pay attention to their credit scores until they need a loan. By paying attention to your credit rating from the beginning, you could stay credit ready always. Neither would your score tumble down ever nor would you require guidelines to repair the credit report.
Nevertheless let’s find out certain tips to improve credit score and get better results in a record time.
For robust credit health it is important that you understand the basics first. You need to know what builds your score and what hurts it. For, in the backdrop it is your financial moves that determine health of your credit report.
There are five factors that primarily determine your credit score.
1.       One of the most important factors that boost your credit score is certainly the repayment history. The regular repayment of EMIs and credit bills enhances your score by 35 percent. So by ensuring the timely repayments, you take a large step towards a good score.

2.       After repayments, the amount of credit being used affects your score. The percentage of loans raised against the sanctioned limit is called credit utilization ratio. If you use adequate credit utilization ratio, that is 30% or less of the permitted limit, you would boost your score by 30 %.

3.       Next is the age of your credit history helps your score by 15 %. That also means, if you maintain good credit history for years it would also be counted in your favor. However, a single skipped payment or late payment ruins this good history. So you need to ensure the good history every time.

4.       If you raise too many new loans or credit cards simultaneously it can hurt your score by 10 % and you are considered as a credit hungry prospect. This also increases chances for loan rejection. For example if you want to buy a home loan in the future, you should start planning for it many months before. Each loan or card application should be made keeping in view the future loan.

5.       If you use right credit mix of secured and unsecured loans you would help your score by 10%.
Paying attention to these factors your credit score would always stay hale and hearty.

Repairing credit score
Now, in order to improve bad score, pull out your free credit report from the CIBIL.

Study the report and find out if there is any misinformation or error on the report. As you find an error in the report, dispute the error with CIBIL. You can either dispute it online or send a snail mail for the same. Sometimes a simple error such as showing status of a closed account as open account can drastically hurt your report.

As the error is corrected your score would jump to a better place. Next you can ask the creditors to erase a disputed account altogether from your CIBIL report. You can make a settlement and change the status of bad debt.
As discussed above, percentage of credit limit being used affects the score badly. Sometimes the credit limit on the report is lower than the current, you need to get it corrected as soon possible.
If however your credit utilization is more you can consider applying for a couple of credit cards. With good history of repayments adding two cards would help you raise the limit and you could successfully maintain the credit health.
In case you have too many cards, you can choose to close certain high cost cards. Herein you should be careful enough to not close an old credit card with good history.
The purpose of all the financial moves should be to enhance the score. By raising the score, you would also raise your worth. It would not be easy to get loans for bad credit score with broken credit score. You can consider applying for a secured credit card or secured personal loan. With right mix of credit accounts, your creditability as a borrower would rise.

As you successfully repay the loans for next few months you would build a good history. It would enhance the score and would make you ready for bigger loans. Soon you may be ready for a home loan!

Wednesday, 19 July 2017

Home equity to consolidate debt - pros and cons

Has overspending got you into a lot of debt? Are your incomes flowing down on EMIs? Finding it hard to remember all the EMI dates? Many of us at some point of time get stuck in such situation, but what is the fix for this?  Try considering a home equity loan for paying of your debts. An equity loan can help you minimize your EMIs and help you save a lot of money.
What is home equity loan?
If you own a debt free house and you have built up a lot of debts on high interest rates, you can take a loan on your home as equity loan and consolidate all your debts at low or fixed interest rate. For example you have a personal loan of around five lakhs at 18% interest rate and a car loan of around 7 lakhs at 15% interest rate. You can opt for this loan for these amounts at around 9.5-10.5% interest rate with a high tenure and make life easy. There will only be one payment to make every month compared to multiple EMIs.
A lot of balance transfers, personal finance leads to such situation which affects your cibil score so it is advisable to go for this loan with less home loan interest rates available in the market.
We will sight some pros and cons if considering a home equity to consolidate debt;
Pros
Low, fixed interest rates
The interest rates in loans are less as compared to other loans and financial products like personal loans or credit cards. It is always a great option to opt for an equity and pay off all your existing debts as this gives you access to low interest rates. You can save a good amount of money by doing this.
Interest is tax-deductible
A home equity loan has no tax on interest and instead you get tax exemptions. If you are stuck with other loans you are bound to pay tax on the interest as well.
Flexible terms
You can opt for a flexible repayment term which can be good, as compared to other loans which you avail. Like for example if you avail credit card loans the maximum duration to pay it off would be 90 days, in terms of personal loans the maximum term is five years but when you go for this loan you can raise tenure  of the loan by ten to fifteen years. This gives you more time to pay your debts off.
Use the money to consolidate debt
Go for a home equity only for a consolidated debt. Do not try to use this privilege for luxury, if you use it for one of your wants but not the needs this will cost you a lot in near future when you are in an urgent need of money.
Cons
House as collateral
When considering an equity loan, understand that your house will be collateral as compared to the other loans which are available in the market like personal loans or credit card. If you fail to repay your EMIs on time you may lose your home as a result for the same. Many people make this mistake of taking this loan and lose their home when not paid the EMIs on time.

Risk of value drops

This is a bit complicated, as we all know home loans are processed on the market value of the home same goes for a home equity loan. If you avail a this loan for an X amount and due to market fluctuations the property rates go down, you will be paying more than what you have. For example if the value of your property is 50 lakhs and you have taken an equity of 45 lakhs and the market goes down resulting your property’s worth 40 lakhs then you will be paying high interest for a depreciating property.

Lose bankruptcy option


Compared to other loans like personal loans, credit cards which demand no collaterals, if you fail to honor the EMI amount you can file for bankruptcy. In cases of equity loans as your home will be collateral you lose the option for filing bankruptcy.



In conclusion, 

it will be suggested to lower your expenses and try saving money, which can help you in near future in case of emergencies. If you have crossed the line of debt and know there is no chance you can evade this, get a home equity loan only if you have run out of options because it may ease your situation temporarily but is a long commitment. 


Saturday, 15 July 2017

Influencing factors to your LAP tenure, Know them!

Are you planning to apply for a Loan against Property? Before you meet a bank or financial institute for the purpose, it is important to understand about the various factors pertaining to LAP. Like other loans, the funds are advanced keeping a property as mortgage and you are expected to repay via EMIs till the maturity of loan tenure. The rate of interest and duration of loan depend on your credit profile and certain other factors. The maximum permissible loan tenure can be up to 15 years for mortgage loans.

Let’s discuss here some of the elements that a lender considers for finalizing the tenure.
Loan amount
Lenders generally have a tendency to offer a longer tenure to add to the eligibility of the loan. Banks or NBFCs generally offers tenure of 5-15 years on LAP. The higher the loan amount, the higher would be the term of the loan. However you should extend the tenure according to your repayment capabilities. The longer would be the term of loan, the total cost of loan would rise too.
Age
Your age plays a fundamental role in deciding the tenure. Say, if you are in your 30s; you can go for a higher tenure, however, if you are nearing your retirement, you are eligible for a short duration loan. Most of the lenders; banks or NBFCs are hesitant in approving a loan past retirement age.
Age of the property
The age of the property you intend to mortgage is one of the major factors for your application to be sanctioned. Even supposing your building is approved by the government, the age of the building would play a significant role in deciding the tenure of loan. The residual age of the property basically defines the permitted tenure. 
Say, the age of building you are planning to mortgage is 15 years, and the age cap is 30 years, in that case the highest permissible term for your LAP would be 15 years. While if your property is 20 years old the highest term for which you are approved would only be 10 years.
Income
As a borrower it is essential to have a regular and a sustainable source of income. Your net income and costs (expenses) are the most important factors that leave an impact your loan tenure. There are a number of online EMI calculators available that help you assess your income and expenditure to give the best loan opportunity with the most favourable tenure.
EMI
Your EMI (Equated Monthly Instalment) plays an imperative responsibility in deciding the tenure of your LAP. If you are looking for a low EMI, it will result in a longer loan tenure while, if you are comfortable with a higher EMI, you may choose a shorter tenure.
Mortgage interest rates
It is recommended to cautiously analyze and try to reach at the most favourable balance in terms of loan tenure, EMI and rate of interest.
Cibil score
The lender considers your CIBIL score while assessing your credit worthiness and deciding on the permissible loan tenure. So it is important to improve CIBIL score when before planning LAP or any other long term loan.
Is your low credit score bothering you?
A good credit score is essential to get a LAP approval. If you have a bad score, one common worry that is running through your mind is probably how to improve your CIBIL score? Improving credit score for LAP is not something unworkable, but requires time. Don’t run after a company that advertises that they can fix your bad credit score and increase it by 100 to 150 points in just a few months. Beware! It might be a scam.
It takes some time for bad credit fix. Let’s discuss on how to make you eligible for LAP despite the low cibil score.
·         Pull your free CIBIL report and study it to know where you stand.
·         Watch the credit card balances
·         Avoid applying for new loans and credit cards
·         Reduce Loans
·         Avoid applying for new loans and credit cards
·         Seek professional help
·         Request goodwill adjustment on any negative items on your report

It is important to keep in mind that if you have a bad credit score that doesn’t mean you’re a defaulter. This could happen because you are an unorganised person. By simply following the above rules you can take a first smart step to improve your score and avail the desired loan.

Tuesday, 4 July 2017

Things one must consider before getting a personal loan

What is a personal loan? Unlike other loans like home loans or car loans there is some collateral like your home or a car this is one type of unsecured loan where no collateral is needed to avail. Personal loans comes handy when times of emergencies like medical expenses or education purposes, etc. you can access personal loan within a day or a few days depending on from which bank you are opting the loan from. The interest rates are quite high as compared to various loans available in the market and also the charges related to it, but are personal loans the right way to meet your urgent needs?
Here are some points to consider before going for a personal loan,
Consider family and friends
 In an urgent need of money do not opt for personal loan directly; try speaking to friends and relatives and try availing money from them. This will give you spare time to repay them without a deadline on your head and no interest. If for some reasons you are not able to pay the amount to the person you borrowed the money from, they will understand your current situation and spare you more time but banks won’t.  For banks monthly repayments are mandatory and if you don’t make your payments on time will lead to a personal loan bad cibil score.
Ask you bank if you have access to overdraft facilities
Overdraft is an option given by banks depending on your transactions and relations with the bank. If you are seeking a small amount try contacting your bank and if you are credit worthy they will provide you overdraft which can be repaid with a nominal interest rate.
Consider alternate cheaper loans
There are other loans as well which offer you cheaper interest rates and low processing fees. Loans like gold loans, used car loans which take the same amount of time to get processed; that is a day or two but has fewer hassles in terms of repayment. Like you can walk in with your gold in an HDFC bank and they will understand your needs consider your gold and give you on the spot loan.
Take what you need
Once considering family and friends and if there is no way of getting the money, try and understand the amount you need as a personal loan and not what your bank is offering considering your eligibility. If you need one lakh rupees try getting the same amount as loan but do not over borrow, as personal loan comes with high interest rate and less tenure for repayment.

Try negotiating for interest rates
There are different banks which offer personal loans, and in this competitive time there is different interest rate with different banks. When opting for loan try negotiating on the interest rate, either go for a flat rate of interest or reducing balance interest. This will help you save a good amount of money.
Understand the “all” in costs
After negotiating the interest terms try understanding the other costs as well like processing fees, foreclosure charges and late payment fees. Processing fees ranges from 1-2 % depending from which bank you are taking the loan from, it’s a flat rate which is deducted from the sanctioned amount. For some banks there are high foreclosure charges, if you are trying to close on the loan early some banks will charge you a lot. If you fail to pay your EMI on time it has bad consequences, there is late payment fees and then your cibil rating will also go for a toss. So, try comparing your options before you finalize on which bank you are opting the loan from.
Read loan agreement
Before you sign the agreement read the loan agreement carefully so that you don’t have any sudden surprises in future. Ask the bank relationship manager to send you a soft copy of the agreement so that you read it with ease before signing the agreement.
Check on you Cibil score
Before you apply for a personal loan check your cibil score. A low cibil score would either reject your application for loan or you may get the loan on higher interest rates. It’s always suggested to keep up with your monthly EMIs to avoid such situations.

Consider all options before taking a personal loan! it is only viable if you are in a desperate need of money, try not to take a loan for fancy things.