Tag: cibil score

The World Of Gold Loans

India is a country that is in love with the shiny yellow metal; gold. We Indians love to buy gold on various occasions, be it the birth of a child, a wedding or on festivals like Diwali and Akshaya Tritiya. Thus, it is likely that each household will have some amount of this precious metal which can come to their aid in times of need. As the name suggests gold loan is a loan that is given against gold which is used as collateral. Taking gold loan has its own benefits and drawbacks which we discuss here apart from the process involved in getting gold loans.

 

Gold Loans In India:

Almost all leading banks and various other NBFCs provide the option of taking a loan against gold. This is a secured loan that is given against gold ornaments, jewellery and gold coins based on the market value of the gold. The lender maintains some margin and the rest is disbursed as loan to the borrower. Thus if the value of the gold ornaments is Rs. 10,000 and the lender maintains a margin of 20% then the borrower can get Rs. 8000 as loan. Most lenders offer the facility of giving you an instant loan or they provide the loan the same day, which means you can have access to funds immediately when required. Most of the lenders do not charge any pre-payment penalty and processing fee but some may do so, thus one must check these aspects before applying for a loan.

 

Lenders also offer flexibility in repayment options which means one can repay the amount in monthly installments or pay the interest monthly and pay the principal at the end of the term or repay the entire amount at the end of the term. The borrower needs to provide a valid identity and address proof along with the Aadhar Card and the PAN card depending on the lender’s policies. Lenders do not seek to check the applicant’s CIBIL Rating before sanctioning these loans however some may have a minimum age criteria for the applicant.

 

Advantages of a Gold Loan:

Gold loans have some advantages over other sources of funding when someone requires funds for miscellaneous requirements.

  • Processing of gold loans is fast and the borrower can get funds immediately or within hours.
  • The borrower can choose to repay only the interest during the loan tenure and may pay the principal at the end of the term which gives flexibility to the borrower.
  • No income proof or credit check requirement for getting the loan sanctioned. As the gold serves as collateral the lenders are not worried about the safety of their funds.
  • When compared to personal loan interest rate the gold loans are available at much better rates which makes them cheaper than the most popular source of funding when money is required for miscellaneous uses.

 

Disadvantages of Gold Loans:

Every coin has two sides; there are certain disadvantages to taking a gold loan too which we describe here briefly.

  • Gold generally carries a lot if emotional value with it, thus parting with it may not come easy to the owner. There are occasions when one would like to wear their ornaments and if they are lying mortgaged in a bank then it might not be possible to do so.
  • Pledging gold for funds make sense only if the margin of safety that the bank keeps is reasonable else taking the loan may not make economic sense.
  • The flexibility of repaying just interest during the loan tenure may have its drawbacks also as the borrower may find themselves overwhelmed at the end of the term and may find it difficult to repay the principal. In other loans the EMIs have the interest and the principal component, thus there is more discipline approach to repayment.

So hope the above discussion gave you a valuable peek in the world of gold loans!

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Educational Loan: Do’s and Don’ts

Education is given a lot of importance in India. Every year hundreds of thousands of students compete for the seats in the top colleges across the country as well as overseas.

There are many meritorious students that are able to secure seats in some of the best institutes but are unable to arrange the funds for the college fee, etc. This is where education loans can be of great help.

If you are about to apply for a student loan, then make sure you know about the Do’s and Don’ts of the same:

Do Start Looking Without Delay

As soon as you have secured a seat in the college of your choice, start comparing your loan options.

Thanks to the Internet, a large part of your research can be conducted from the comfort of your own home itself. However, you may want to visit some financial institutions in person that offer better options for more info.

Don’t Apply with a Bad Score

A lot of times the student has no credit history, which is why the bank asks their parents to become their loan guarantor or co-borrower. If the loan amount is high, then again, the bank may place the same request before them.

Either way, banks always check the credit score of the student as well as their parents. However, to apply for a loan with a bad CIBIL score can be quite a bad idea. This is because:

  • You won’t be able to get a good interest rate.
  • Your score could drop even further due to loan rejections and multiple hard inquiries, which take place when a bank or another financial institution requests a credit agency for your credit report.

Do Learn About the Eligibility Criteria

Although the actual eligibility criteria for getting a student loan may vary from one bank to another, the differences are usually minor ones.

In most cases, you would need to fulfill the following conditions:

  • You must be a citizen of India
  • You must have secured a seat in the college you are going to study in and applying the loan for
  • The course is a long-term course and is one of the select courses that qualify (usually engineering, medical, business, etc.)

Don’t Settle for the Interest Rate You are Getting

Unless you have no other option but to get a loan with a bad CIBIL score, you will have plenty of options to choose from. However, apart from various other factors, the interest rate should greatly affect your decision.

Most student loans come at an interest rate of 9.5% and can go as high as 15% or 17%. If you have a good credit score, then you can negotiate with the lender to offer a better rate. Otherwise, if you are lucky, you can avail a good rate around the festive seasons when several banks offer attractive schemes for loans, etc.

Do Enquire About Additional Charges

In a rush to arrange for the funds for the college fees or simply because of impulsiveness, a large number of students forget to inquire about many important things regarding education loans.

For instance, many banks impose a variety of charges such as processing fees, service charges, etc. In addition to these, there is the concept of prepayment charges, which is the fine you have to pay if you decide to repay the full debt before the actual completion of the term.

It’s really important to ask your bank about these things, especially the prepayment charges. Naturally, it’s best if you can find a loan in which you don’t have to pay the same.

 

Apart from these do’s and don’ts there are many other aspects to learn about student loans.

For instance, most banks can finance as much as 100% of the student loan depending on the amount. However, for bigger loans, which are usually above Rs. 7.5 lakhs, they ask for collateral.

The loan term is also usually between 4 to 7 years. However, you may get your lender to extend it if you have valid reasons.

By educating yourself and doing your homework in advance, not you can greatly improve your chances of getting a loan approved, you can do it at a good interest rate as well.

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6 Important Things You Should Know Before Taking a Home Loan

Home loans have become inseparable parts of home deals today. For an individual the decision to buy a dream home depends on their eligibility to get a loan. Probably this is why people begin to plan for home loans much in advance.

To understand how home loans work, you should first understand that these are basic loans which all the popular banks offer for long run. Home loan is nothing but a monetary assistance offered by a bank or financial institutions to make a purchase of residential property. The purchased home usually stands as security until you pay back the entire loan amount with interest. Thus loans are secured loans and banks are always keen to offer home loans.

The basic requirement to get a home loan may differ from lender to lender. Usually to get a loan, you should have a fixed, dependable source of income. You may be employed and self-employed, it doesn’t hurt your stakes. You need to have a good financial history and banking transactions for at least 6 months. The age should be between 21 and 60 years of age for employed or between 21 and 65 years, for self-employed.

Let’s outline 6 important things you should know before taking a home loan.

How much you want to borrow?
First things first you must clearly know how much you want to draw from the bank. These days you can avail home loan up to 90% value of the property, however decision to borrow the amount should not be dependent on bank’s will only. The banks assess the loan amount by calculating your net income, i.e after deducting your current credit outstanding and day to day expenses from your income. Based on the net income they would calculate how much you could spare as loan EMI. As a rule of thumb, banks generally limit the loan installments at around 40 to 50% of the borrower’s salary.

Type of loan
There are two types of these loans based on the interest rate. One is fixed rate of interest and the other is floating rate of interest. When A person is taking fixed rate loan,it  usually charges a fixed rate across the whole tenure. Interest is constant for the full period of the loan. On the other hand, the interest on the floating rate changes with the market rates. For example, when the market rates rise, the interest rate on the these loan goes up and when the market rates fall the interest rate on the home loan goes down. The fixed rate home loans are generally higher than current floating rates.

Tenure of loan
Major lenders offers maximum 30 year tenure for home loans. EMI is lower when the tenure is longer. Being fat loans, people with limited resources opt for 25 to 30 year loan. However, it is advisable to take a loan for the shortest tenure if you can afford. Suppose, in a 10-year loan tenure, the interest paid is 57% of the borrowed amount. This can go up to 128% if the tenure is 20 years. So, always keep the tenure as short as possible.

Tax benefits
You can avail tax benefits with this loans and you should clearly know about the benefits in advance. You and the co applier both can get income tax deduction up to 2 lakhs for home interest. The property however need to be self-occupied to avail the benefits.

Loan defaulter
All those who have not repaid their loans will find their names enlisted in Loan Defaulter List. The default can happen when you do not pay EMI. So, the borrower must be careful about the add-on charges and penalties. It is not just the interest that you pay, there can be additional charges such as administrative and service charges or processing fees. Once blacklisted as a loan defaulter, it would take many years to restore the credit score.

Prepayment penalty
Before you sign the deal ask the lender if there is any prepayment charges. By prepaying the loan you close the account earlier than anticipated and reduce the cost of loan. Many banks charge a penalty on prepayment of home loan, so if you intent to prepay, look for the loan that allows you to prepay without a charge.
Following these six points you could be rest assured of finding a good home loan deal.