Things You Must Know About Top-Up Loans

Mr. Arora took a home loan with a 15-year tenure at an attractive interest rate. However, after 7 years he realized he felt the need of renovating his house. So, just like most people he thought a personal loan would be a good idea to cover the expenses and started looking for a good deal. Unfortunately, he couldn’t find a personal loan with an affordable interest rate even though he didn’t have a problem of a bad CIBIL score or bad credit history.

With the burden of this loan already on his shoulders, Mr. Arora desperately needed to arrange the funds for his home renovation in a way that it didn’t burn a hole in his pocket. This is when his friend told him about it.

What’s a Top Up Loan?

A top-up loan is a small loan you get on top of your primary loan- mainly a housing loan. The interest rate on a these loan is usually smaller than a full-fledged personal loan. Moreover, you can also enjoy tax benefits with a top-up loan.

The following are some of the things you must know about top-up loans:

  1. Qualification

These loans have their benefits, but just because you are repaying a house loan, it doesn’t mean that you automatically qualify for them. Your lender will inquire about your reason for a it and will make a decision at their discretion.

The following are some of the good reasons:

  • Medical expenses
  • Home renovation
  • Land purchasing
  • Education expenses
  • Business Expansion
  1. Collateral

Since a top-up loan is provided on the basis of a primary loan i.e. a house loan you don’t need to provide security for the same. The bank uses the house as collateral. However, this means that even after you have repaid your loan you have to wait until you have repaid the top up loan as well to get back the rights to your house from your bank.

  1. Interest Rate

The interest rate on a top-up loan is 1% to 2% higher than the housing loan. However, it’s still lower than most personal loans available. You may also get to pay a smaller processing fee.

  1. Tax Benefits

If you are using it for acquire/renew/construct/ or repair a property then you are eligible for tax deductions on the amount paid for the principal amount and the amount paid for the interest on the loan as per Section 80C and Section 24 respectively.

Top-up Loans Conditions

Although the eligibility criteria for a varies from one bank to another, the following are some general conditions:

  • You should be availing a home loan from the bank/ financial institution.
  • Most banks require you to repay the home loan for 6 months to 12 months, or even more before you can apply. They do this to assess your repayment habits. Thus, you should not have a low CIBIL score or bad credit report. If that’s the case, you must take measures to CIBIL score before sending an application.
  • The usual permissible loan amount is calculated on the following basis:

permissible amount= 70% to 80% of the market value of the property- loan balance

So, if your house is worth Rs. 50 lakhs in the market and the pending debt is Rs. 25 lakhs, then you can only get a maximum of Rs. 10- 12 lakhs through it.

  • Many banks limit the tenure according to the outstanding term of your current loan. So, if your loan term ends in 9 years, then the maximum length of top up loan tenure would be 9 years.

If your credit history is good and you don’t need to improve CIBIL score then availing a top-up loan is an excellent option over others such as personal loans, etc. This is because the process of a top up loan is simple and easy. Moreover, you don’t have to offer another property as collateral with them.

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Elements that Decide Approval of Personal Loan for Self-employed

When a self-employed individual applies for a Personal Loan to a bank or NBFC; the lender considers a few factors before approving the finance. The consideration for loan approval depends on the financial eligibility factors including age of the borrower, the reason for the advance and alike. Well, there is no denying the fact that credit score of the individual is one of the most important factors considered by the banks.

Critical Factors that Define Approval of Personal Loan for a Self-employed:

  • Income Tax Returns:

First of all the bank would consider if you have filed your income tax returns on time or not. Lenders are exceedingly particular when it comes to Income Tax Returns (ITR) for a minimum of last three years of individuals approaching for a PL.

  • Existence of the Business:

The time span of a business assures the lender about the reliability and sustainability. Your business duration actually ensures if you can pay back the loan in time. The stability of the business and your source of income is truly essential.

  • Income and Profits:

If you are able to repay without defaulting is the primary concern of the lender. Your disposable earnings as a self-employed professional would help the lender to assess your capacity to repay the loan.

  • Nature of the Business:

Some businesses could be unstable or rather seasonal. This definitely won’t give adequate assurance to the bank about your repayment ability every month. The kind of business, therefore, does play a vital role when you apply for a personal loan as a self-employed individual.

  • End use of the fund

You need to declare the purpose of availing the loan. The bank judges if it is your actual need or just self-indulgence.

When you approach a bank as a self-employed individual for personal loan they need to ensure if you are worthy of receiving credit or not. This worthiness depends on how good you are with your finances. If you have serviced loans successfully earlier; it confirms that you would be repaying the loan on time without missing payments. The process that banks and other financial institutions follow to know your credit worthiness is through your CIBIL (Credit Information Bureau Limited) score.

  • Your age:

On age the factor, consideration may differ from lender to lender. A self-employed person should be within 25 to 65 years of age.

  • Right Documents:

Never submit fake documents to the bank when you apply for a personal loan.

Now, while all these factors play a noteworthy role, whether a PL would be approved for a self employed, Cibil score (Credit History) turns out to be the crucial one.

So before applying for the loan it is important that you ensure that you have a good score.

What factors lower CIBIL Score?

  • Too many Personal loans
  • Missing loan installments
  • Coming too close to the limit on credit cards
  • Not paying credit cards back on time
  • Not paying credit cards in full
  • Too many rejected applications for loans/credit cards
  • Settling credit cards

However if you have a low CIBIL score, you need to know how to get Personal loan for Low CIBIL score.

While the CIBIL data says 80 per cent of the loans that get sanctioned have a score higher than 750; nevertheless, the CIBIL score is not the only factor which lenders take into consideration while deciding and approving a Personal loan to a self-employed individual. A mainstream bank may ignore a credit card default in the past if you have a regular good income flow.  Your future financial prospects, demographics, education, socio-economic conditions may help you in getting a PL despite your low CIBIL score.

NBFCs (Non-banking financial Institutions) are relatively flexible with credit scores and the cut-offs as compared to banks. If you have a low credit score, you are advised to approach a NBFC instead of a mainstream bank.

You may choose to approach a Peer-to-peer (P2P) lending website. You may get a personal loan regardless of your low credit score.

If the cause for your low score is a failure to pay, it is suggested to clarify the lender why you had failed to pay. In case it was not an intentional default; lenders at times might excuse. If you have a convincing explanation with evidence say, you had a sudden loss in business or there was a medical emergency for which you couldn’t afford to pay back; put across clearly. If found authentic; the lender might consider.

All in all if you make plan thoughtfully you could easily grab the best deal!

How to enhance your loan eligibility

Every bank follows a credit appraisal process in order to determine a borrower’s loan eligibility. It checks the CIBIL score of an individual, and assesses the CIBIL report, income and other documents to determine whether the borrower is capable of repaying the loan on time or not. By working on the credit profile and improving credit score one can increase the chances of approval.

Here are some ways that can help you increase your loan eligibility.

Longer tenure of loan– Repayment capacity of the borrower is a major factor that banks consider before sanctioning a loan. If the monthly instalment is higher than what the bank thinks you can afford to pay, then your eligibility will be affected. Opting for a longer tenure will reduce your EMI liability and enhance your eligibility. Though a longer tenure will increase your net interest outgo it will at least make you eligible for the loan. 

Additional income-Showcasing that you have a high steady income helps to increase your loan eligibility. Keep a record of the variable perks or performance linked pay that you earn from your job and add them to your income. Mention the other sources of income such as high interest fixed deposits or rental income on the property that you own. Such additional sources of income will enhance your repayment capacity and increase the amount that you are eligible for. You may need to furnish supporting documents as proof of the additional income. So keep them handy.

Step-Up Loans- Step-Up loans are a great way to increase the loan eligibility. For people who are in a profession where there is struggle in the initial years, but surety of a good financial status going forward, this is an easy way to borrow funds. Here an individual pays a lower EMI in the initial years. The EMI progressively increases with the tenure of the loan. Here the eligibility increases as the future income is expected to increase as the borrower establishes himself in his profession.

Prepay-existing loans- If you are considering taking a home loan, then prepaying your outstanding loans like a car loan or a personal loan, is a good way to enhance your eligibility. The EMI that you are already paying on the existing loans reduces your monthly repayment capacity and impacts the home loan amount that you may be eligible for. For example if your monthly income is Rs 1 lakh, the bank may consider your repayment capability as Rs 50,000 as EMI. But if you already have a personal loan where the EMI is Rs 20,000 this will be deducted from the amount that you can afford. So to arrive at the eligible amount, the bank will consider your affordability as Rs 30,000. Hence it is advisable to prepay these loans before making a home loan commitment.

Co-borrower-The assessment of the repayment capacity of the borrower largely depends on his income.  The EMI is generally half the take home salary. But if it falls short of the required limit you can bring in a co-applicant. If your spouse is earning, then it is a good idea to make a joint application. Pooling two incomes together enhances the loan eligibility amount to a great extent. This also means that the liability of repaying rests on both the applicants.

 Work on your CIBIL score- CIBIL score is an important factor that determines loan eligibility. Hence you should make all efforts to improve credit score. Check your CIBIL report and score regularly. If you notice an errors then dispute them immediately. Pay your monthly instalments and credit card bills on time. Use your credit card wisely. By keeping the utilization levels below 30% of available credit limit you will ensure that you improve credit score.

When you work on the important aspects (like income and credit score) that the bank evaluates in order to make an assessment, you can surely enhance your loan eligibility.

 

Should you take a personal loan when facing cash crunch?

The popularity of personal loans has soared high in recent times. In the age of instant approvals and quick disbursements personal loans have become a fast track solution for financial problems. Medical emergency in the family, child’s higher education, paying off high interest debts, funding a vacation, home improvements—these are just a few situations where small personal loans come in handy and provide quick and easy access to funds.

However, you need to be cautious while taking this loan. The temptation of quick and easy availability is so high that people often get caught in debt traps and face a crisis situation later. In order to stay financially safe be doubly sure whether you really need the loan and handle it properly once you take it.

Lenders who give unsecured personal loans offset their risk by pricing them much higher than the loans that are backed by collaterals. An extremely high rate of interest makes this form of credit quite expensive. Keep in mind the following rules before going for an easy personal loan.

 Consider your finances and borrow only the amount that you can repay

Small personal loans have short repayment tenure so large monthly EMIs can strain your budget. Your monthly outgo towards all your loans should not exceed 50% of your monthly income.  If a large part of your income goes into EMIs then your other critical financial goals like child’s education or saving for retirement will get affected. Banks always want you to borrow large amounts, but you should borrow only the amount that you can easily repay.

Do not borrow to splurge

You may have all the reasons to take a break and go on a long holiday, your wife may ask for a diamond ring on the silver jubilee anniversary , your teenage daughter may want a designer wardrobe, luxury watches and high end bags; but remember you should wait till you save enough for these expenses. If you borrow to pay for these expenses you will keep paying the EMIs long after the thrill and excitement to splurge has faded away. Remember to live within your means and borrow only if you really need the funds. After all, unsecured  personal loan only provides instant access to funds. It is not free money. It has to be repaid along with interest.

Do not borrow to invest

The golden rule for investing is to never borrow money to invest. The interest that you get on safe investments like fixed deposits will not match with the interest you pay on loan. Equity investments that do offer high returns are risky and volatile. If stock market declines you will not only suffer losses but will be tied up with an EMI obligation as well.

Consider other cheaper alternatives

Since unsecured personal loans are expensive it is always better to explore other cheaper alternatives first in case of cash crunch. Taking loan against assets like gold or fixed deposit may turn out to be a much cheaper option.

 

There are some situations where taking a personal loan is a wise decision

 

Repay a high interest loan

 

If you have a high outstanding credit card balance with an exorbitant interest rate of 28% it is prudent to take a small personal loan at 18% to repay it and reduce your interest outgo substantially.

 

Consolidating debts

 

In case handling several loans and credit card repayments is becoming unmanageable, small personal loan can be used to consolidate all your payments. Though it is only a transfer of debt pile and does not reduce your overall debt, still concentrating on a single loan payment is much easier.

 

Medical emergency

 

If you need money instantly in case of an emergency hospitalization you can rely on personal loans. Fast approvals and quick disbursement of the loan amount will help in arranging for funds in a much shorter time. An online comparison of personal loan interest rates can help in identifying the cheapest option available.

 

Defaulting on the loan can have serious consequences. Late payments or missed EMIs impact your credit report and mess up your CIBIL score. It may also hinder your chances of getting loans in future. So be a disciplined borrower and make sure you make your repayments on time.

 

Personal loans are easily available today. It is a good option if you are looking at consolidating your debt or paying off a high interest loan. But for spending on luxury items it is always better to save first, than pay a high interest on it. Being thoughtful about your own decisions and actions will save you from entering a debt trap.

What is P2P Lending? Why is it Trending?

For many decades banks were the only financial institutions that offered home loans, student loans, etc.  on a commercial basis. Then gradually NBFSs (Non Banking Finance Companies) such as Fullerton Credit, Muthoot Finance, Bajaj Finserv. etc emerged. However, as cases of loan defaulting started to become more and more frequent, and the interest rates went high, people began to look for alternative solutions that could be easy on the pocket, and also easily accessible. This was accomplished by P2P lending, which is catching up quickly in India.

What is P2P lending?

P2P lending stands for Peer 2 (to) Peer lending. It is the ultimate urbanisation of loaning and financing, as it offers an easily accessible, fast, and simple solutions for all your loaning needs.

To get a P2P loan you can choose any P2P marketplace that is available on the Internet, check if you meet the eligibility criteria, upload a few necessary documents, and if your application goes through you can get the money within 24-48 hours, typically.

What are the Advantages of P2P Lending?

P2P has numerous advantages over traditional loaning options, which is the reason why it is quickly becoming the most preferred choice for loan seekers.

Here are some of the best advantages of P2P lending:

Accessibility: One of the biggest problems we had with traditional loans was accessibility. To get a loan a person had to go to a bank in person, and submit an application for the same. If there was a holiday then the person would even need to wait till the banks opened. P2P lending has solved the problem successfully by allowing users to apply for loans on the Internet. No matter where you are, and what time is it, you can easily apply for a loan from your laptop or a smart phone.

Faster Release of Funds: With a P2P loan you can get your loan amount within a day or two after verification of your documents. This was much needed, as banks, and even NBFCs, take a much longer time for funds disbursal, that too if your loan gets approved.

Easier Obtainment- To get a loan from a bank or NBFC you have to have a good CIBIL score, and a decent, if not impressive, credit history. This is why a number of people who didn’t meet these requirements have to struggle and spend a long time applying for a loan in multiple banks. But this was a thing of yesterday. Today, you can get a P2P loan even if your credit score is below average. P2P lenders are more forgiving than banks, and you have a far greater chances of securing a loan from them than any traditional lender.

Flexibility- P2P lending also offers you a lot of flexibility in terms of loan repayment. You are free to shape the payment structure for your loan, and choose the duration, and the number of instalments. Usually you also get attractive interest rates, which are way lower than standard rates offered by banks.

How is P2P Lending Changing the Banking Industry in India?

Even though P2P has been existing, and rather popular, in first world countries such as UK and USA, it is still quite new to India. However, it is trending fast, and it is estimated that by the year 2020 the entire P2P lending industry would be at Rs. 30,000 crores.

Considering the significance and value of P2P lending RBI has already extended its support towards it by releasing draft regulation guidelines that will ensure that both the borrowers and the lenders can be benefitted as much as possible.

What Does it Mean For You?

Not only P2P lending is here to stay, it is quite possible that it will dwarf the traditional loaning options banks have been offering so far. As more and more lenders are emerging you can expect competitive interest rates, and attractive schemes.

If you want to enjoy flexibility in loan repayment, best interest rates, quick access to funds, and faster loan approval then P2P lending is a really good option. You can easily compare various lenders online and settle for one that is most suitable for your requirements.

Why You Must Collect NOC (no objection certificate) After Paying a Loan

Getting a loan has become a lot easier today. People have become more careful towards their CIBL score, and credit report, which is why they are able to get their loan applications approved without any problems. So, whether you want to buy your dream car or dream house, now is as good a time as any. However, you may know a lot about how to get a personal loan or a home loan, but are you aware of the correct loan closure formalities? When you have paid back a loan in full, it is important to carry out the proper closing procedure, of which collecting an NOC is an integral part.

What is NOC for Loan Closure?

An NOC or No Objection Certificate is a legal document that can be used by you as a legal proof that you have paid all your outstanding dues to the lender successfully. An NOC carries your name, address, account number, and other relevant details. It also certifies that the lending institution (whether it is the bank of NBFC) no longer has any legal rights or claims over your collateral.

Why You Must Collect NOC Once You Have Paid a Loan

There are many reasons to collect your NOC from your lending institution, as it can have a huge impact on your financial health. Here are some pointers on the same that you need to consider:

  • An NOC is essential for CIBIL to verify that you have successful repaid a loan. Failing to provide the certificate can lead to CIBIL score damage, as your credit report will continue to mark the loan as unpaid. This loss of credit score can limit your creditworthiness, and make getting a loan in the future difficult.
  • If you decide to not collect the NOC from your lending institute then they may not record the closing of the loan in their files. Thus, after several years you may suddenly receive a letter from the institution asking you to pay the loan, which you have actually paid. This misunderstanding can lead to an unwanted headache, and wastage of time.
  • Some banks are quite stringent with their procedures, and simply handling the misunderstanding may not be enough with them. They can take a legal action against you, and if you don’t have an NOC then there can be grim consequences.

Thus, there is no denying that collection of NOC is really important once you have repaid a loan. But how do you go about it? Here are some tips that can help you:

  • When you have made the final payment for your loan, you can write a formal letter to your lender asking them to return all your documents that they have kept with them, necessary bank statements, etc. along with a NOC.
  • Some banks and other financial institutions allow their customers to download their NOC document online. All you have to do is login to your account, select the document, and download it on your system.
  • If you have taken a car loan then you will need an NOC as well as an RTO form (aka Form 35). You will need to submit them to your Regional Transport Office, as well to your insurance provider.
  • If you have taken a home loan on a registered real estate property then you will need to go to your local Registrar of Properties office along with a representative from your lending institute to get the lien removed. Only then you can get the NOC.

No matter what kind of loan you have got, once you have repaid it you must get an NOC for the same. This is an important step of the loan procedure, and serves as a formal closure. Ignoring the same can lead to a lot of troubles, one of which is CIBIL score damage. Once this has happened it can take a lot of time and energy to improve credit score. It can also cause the financial institution to put your name on the loan defaulters list. Thus, make sure you ask your lender to provide an NOC as soon as you have made the last loan payment.

 

 

 

Can I Get a Loan to Repay The Debt on my Delinquent Accounts?

So, you have been falling behind with your bills for a while, and now you have a huge debt to deal with. You don’t have enough savings, and don’t want to turn to friends and family for help. You don’t know what to do now. Then one day, as you are having lunch with your colleague, they tell you about taking a personal for the repayment of debt. It sounds good to you, but you ask yourself- “Is this a really good idea?”

The situation above is more common than you think. When your back is against the wall, as debt is increasing with each passing day, you are ready to try everything possible to deal with the situation, with a personal loan being one of them. However, you must know that it has both upsides, and downsides. And it is worth being aware about them before you make the final decision.

The Upsides

1) Low Interest rate

One of the best advantages of taking a personal loan for paying off credit card debt, or any other kind of debt, is that you have to pay a lower interest rate. Personal loans generally have a lower interest rate, in comparison the interest rate on the credit cards. This means you can save a lot of money this way. Also, since many online lenders have started offering personal loans, you can get one approved easily, and quickly.

2) Easy Finance Management

Debt consolidation can make debt management a lot easier, since you just have to make one major payment every month, instead of several smaller payments. If you have more than a few credit cards, then this move can be highly beneficial for you.

3) Credit Score Improvement

Taking a personal loan can also help you build a better CIBIL score. If you make the payments on time, then it can increase your creditworthiness, and show the future lenders that you are  responsible credit user.

If the outstanding balance has increased a lot, and you are on the verge of making it to the loan defaulter list, then you can prevent so by taking a personal loan for its repayment. A loan flor low CIBIL defaulters is extremely hard to come by, which is why you should avoid defaulting at all costs.

A personal loan for debt repayment is indeed a good idea, but it has its downsides.

The Downsides

1) Continued Usage of Credit Cards

A personal loan can only help you if you minimize your credit card usage. If you have to use your credit cards even after taking a loan, then you will only add more debt, which is counter-productive. Thus, when you take a loan you should be committed to never carrying credit card balances again.

2) Higher Monthly Payments

It may not always be possible to get a personal loan that has a lower interest rate than your credit cards. In such a case taking a loan will increase your monthly payments.

Despite the potential downsides, a personal loan is generally the best way to deal with huge outstanding balance. However, if this is not an option that can work for you, or if you seek alternatives, there are a few that you can consider:

  • Credit Card Balance Conversion To EMI- The majority of banks allow their credit card users to convert their credit card loan to an EMI loan. Popular tenures for the same include 3, 6,12, 24 months. The interest rate could be anywhere between 12% to 18%.
  • Credit Card Balance Transfer: If the rate of interest on credit card balance is lower in some other bank, then you can your current outstanding balance transferred to it. In most cases you will need to pay a certain fee, but if the pending amount is a lot, then the fee will be worth the transfer.

Delaying loan payments, or credit card bill repayments can often lead of the loss of CIBIL score, and damage on CIBIL report.  The only way to improve credit score, is to choose the best way for repayment, and ensure that the payments are always made on time. The tips given above can be quite helpful in that enterprise.

 

 

 

 

No credit score? Should you be worried?

Not having a credit score can be a bit of a Catch 22 situation, as having a credit score will help you qualify for credit, but at the same time for someone with no credit to begin with, how does an individual get a score? This is especially difficult for a first-time applicant for a loan or credit card as the lender needs to establish their creditworthiness. What thenl is the solution? Where should an individual start?

Globally, credit information companies or bureaus are trying to break this hold to establish credit scores by using alternate information such as rent payment details and information from public records to help establish credit history. As on date in India, we do not have a similar practice, and having a credit history is the only way to pull up credit scores.

Why is a credit score important?

A credit score is a numeric representation of your creditworthiness and is the first piece of information a lender will view when you apply for a fresh line of credit, be it a bank or any other financial institution. The score helps them determine whether you are likely to default on a loan, or whether the loan will go ‘bad’. Typically ranging between 300 and 900, a healthy or good score can help you obtain a loan when you really require one. Often, it can be the differentiator between an application being approved or rejected. While a loan for low credit score is not impossible to get, it could mean a compromise in the loan terms and conditions, especially with regards to the rate of interest being offered. A good score is most likely to result in the most competitive rates.

Help! I don’t have a credit score! What do I do?

Even if you don’t have a credit score to begin with as of now, do not worry. Let’s take a look at the options open to you, in order to start building your credit score.

Secured credit card – This is a sound way to get started on building your credit history, and banks are willing to offer this product to their existing customers. The card is linked to a fixed deposit that you maintain with the bank, and if need be, dues are recovered by liquidating the deposit. Of course, if you are looking to establish credit history, make sure that all payments go out on time, with no delay and ideally in full. When done over a period of time, it indicates healthy credit behaviour, that the person is able to handle credit responsibly. This will help your score, and over time even increase credit score.

Become an authorised user – If you are finding it difficult to avail of a card in your name, consider becoming an authorised user jointly with someone (typically immediate family) who already has a credit card. The repayment behaviour will help you put together your own score, as the primary cardholder’s good payment history will appear on your credit report. If you do choose this option, make sure you monitor your credit report at regular intervals to ensure correct reporting is taking place.

Make small purchases – If you’ve held a card in the past and did in fact have an established credit line, you can look at ‘reviving’ it by making a small purchase on the card, which will immediately pull you back into getting a credit score. Remember, credit bureaus use algorithms to develop a score, and one of the requirements is a usage pattern which will come in only once you use a card. Hence to start off the process, make a purchase, but also make sure that you pay off the dues as soon as the card statement comes in. This information once reported to the bureaus will help you begin establishing a credit history.

In conclusion

Once you have credit, be judicious in its usage. Timely payments go a long way in making sure that your history remains good, as does the length of accounts you have open. Hence retain good ‘old’ debt if possible, as keeping an account that is for example a decade old will boost your credit score. To make sure that you do not fall into a debt trap – and this is very important for first-time users – do not sign up for more cards than you can manage. Further, do not spend more than you can comfortably repay, in order to set up what you had intended in the first place – a good, strong credit history that over time will work for you.

Once you have started building a credit score do keep in mind that it requires financial discipline in order to maintain a score and subsequently even boost it. Over a period of time it can be done, and in the long run will prove essential to help you stay financially fit.

 

Smart things women should do while investing in a house

With more women in the workplace today, they account for over 20 percent of homebuyers as they take steps in the right direction to not only make a good, sound investment but also to provide a permanent roof over their own and their families’ heads. Further, it is also tempting to finally do away with the hassles of renting a property and paying rent month on month, instead of which an EMI can give you the security of owning your own home at the end of the loan tenure.

Let’s read on to know what you should take into account when investing in a house, and ensuring that it is by far the best decision you may have ever taken when it comes to investing your heard-earned money.

Make a list

The first thing to do is to list down what it is you’re looking for in a house. For instance –

  • What are your lifestyle needs and choices?
  • Do you really require a third bedroom or will two suffice?
  • What other things do you need to consider, such as proximity to schools/ colleges/ hospital?
  • What would be the approximate resale value, should you have to relocate?
  • Are there any amenities that are absolutely non-negotiable, for example a gated community with a children’s play area?

These are just a few of the questions you need to ask yourself, before you narrow down on the options open to you.

Calculate your expenses

Unfortunately, the reality is that resources are ultimately limited, and hence while it is tempting to think big, it is prudent to aim for something that will not take up a large chunk of your monthly budget. Sit down, put together the amount of income you earn (either singly or jointly with a spouse) and the monthly commitments you already have. Based on this, determine the amount you can afford to spend on an EMI, without compromising much, if at all, on your current lifestyle. Remember your home owing process needs to be a joy and not a burden!

Know the other costs involved

Factor in other associated purchase costs such as property registration, stamp duty etc. Do keep in mind that you will also need to set aside funds towards maintenance charges, general repairs and renovation etc. There are also municipal taxes that are required to be paid annually, as well as contingencies that require urgent attention such as a leakage or plumbing that needs an overhaul. While owning a home seems easy, there are often unforeseen expenses involved too, so it is best to be buffered for those.

Consider availing of a loan

Most of us do require the assistance of a housing finance company or bank when it comes to making this all-important purchase. Hence, it becomes imperative to compare home loans before you decide which loan provider to go with. A loan is a practical solution for home buying as the amounts involved in property sale and purchase are high, and you may not be able to (or choose not to) spend out of pocket for the entire sum.

Do also check for preferential rates, as low as 9.5 percent that are extended to women by a large number of housing finance companies.

Borrow what you can repay

While a bank or housing finance company may offer you more than you really require to buy your house, depending upon your eligibility, do not be tempted to increase your EMI obligation simply because the money is available. Remember at the end of the month, it is you who are responsible to make good on the loan, hence think carefully before you seal the deal. Also, it would be advisable to plan ahead – keep in mind expenses related to education, marriage etc., all which tend to take up a fair amount of money.

Know your credit history

If you choose to avail of a home loan, the first thing a lender will verify is your CIBIL report. In addition to getting your finances in order therefore, knowing where you stand on the credit eligibility front is equally important. For your application to go through as well as to be offered a rate at the most competitive terms, remember that a good credit score will work in your favour. It is important to keep track of your score on a regular basis, and more so before you apply for a loan. Should managing your score seem difficult, you can always avail of professional help from a credit health management company to work towards improve credit score.

In conclusion

Buy your new home with confidence and join the increasing number of women investing in property. Look around and consider the type of home loan that best suits you, as well as the home loans rates.

This year then, make your dream home a reality!

Hurdles you can face while applying for an education loan

Fulfilling dreams of a higher education is probably one of the biggest achievements for any aspiring student. With the escalating cost of education both in India and overseas, most students have no choice but to avail of a loan if they are to pursue the programme of their choice at the university or college they prefer. Even while a rising number of students are now availing of finance to comfortably fund their education, doubts and ambiguities still run rife with regards to the education loan procedure, the products available, repayment and even to understand what aspect gets funded under an education loan – whether just the tuition or also living expenses and any other related costs.

Let’s take a look at the hurdles that students still continue to face when applying for an education loan with some lenders. One of the first things that are of concern is the limitation on loan amounts with public sector undertaking (PSU) banks. For instance, a master’s degree from reputed university abroad costs upwards of Rs. 50.0 lakhs, and funding it can be a concern when the maximum cap on the loan amount is Rs. 20.0 lakhs.

Another parameter that students need to factor in is the margin money, which is essentially the difference between the required amount and what the bank agrees to sanction. Typically, most banks ask for margin money amounting to 15 percent of the total cost.

Documentation woes also plague students, as the process calls for a laundry list of documents to be submitted. Not only is this tedious but in some cases, it involves running from pillar to post to obtain the required documents. It can also necessitate into multiple visits to the concerned bank in order to submit these documents (often piecemeal) and have the loan application processed only subsequently.

Further, while banks may have an extensive network, not all branches may sell education loans. Hence, it proves to be difficult to avail of a loan if a student is located in a city wherein a branch that processes education loans is not available. On a related note, it is likely that a student is originally from City A, but has relocated to City B to pursue higher studies. If the loan requires collateral which is located in City C, chances are that a PSU bank is likely to decline the loan application, as they require the student as well as the collateral to be in the same city.

How do you overcome these hurdles?

With the advent of non-banking finance companies (NBFCs) in the education loan sector since the past few years, the playing field has opened up and students have a lot more options than they did even a decade ago, when it was primarily PSUs that disbursed education loans. Consequently, the process has become simpler and more streamlined. Not only do students have more options by which they can compare education loans but the competition has meant ramped up customer service levels as well as innovative products. Before you narrow down on a lender to finance your dreams of a higher education, shop around. Evaluate the various lenders in the market and see what it is that they each have to offer by way of products and services. For instance, in addition to the loan, some lenders offer a bundle of value-added services that include calling cards for overseas students, insurance and deals on foreign exchange services.

Check whether the cost of education includes even your travel expenses and accommodation. These days, lenders structure a loan such that these aspects are covered and even expenses such as having to purchase a laptop to use for studies, for example. These are some of the value added services that make availing of an education loan attractive.

When it comes to documentation, the requirements are simplified by some lenders and a one-time exercise is all that it takes in order to submit a loan application. This sometimes gets further simplified if the education institution that you are planning to enrol at has a tie-up with a financer.

When you compare education loans, do keep in mind that the interest rate is one of the factors that you need to evaluate. In addition, facets of the loan such as repayment options, ease of transaction processing and flexibility in terms of online access and repayment of the loan directly from overseas also make a vast difference. Hence even if the rate of interest is marginally higher, you may consider availing of a loan from an NBFC just for the sheer convenience and flexibility they offer.

Education loan and CIBIL rating

As with other loan products, your credit score counts even when applying for an education loan. For a student with no credit against their name, the credit score of the co-borrower is what is taken into account. Hence, to ensure a lender is aware of your creditworthiness you need to maintain a healthy credit score. An education loan is a product that no parent would want to compromise on, given that it is directly related to their child’s future. Hence to be able to get the loan when you really do require one, ensure that your credit score is treated on par with your physical fitness.