Tag: credit report

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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Credit Repair Do’s and Don’ts

A credit score is an important financial measure that determines your ability to borrow money. Missed EMI payments, delays in paying credit card bills, over utilization of credit are some reasons that may cause a fall in the score. If you have a low CIBIL score, and are looking for ways to get your life back on track, you are at the right place. Here we will give a complete guide to what you should do and what you shouldn’t do if you want to fast track your journey to improve CIBIL score.

Do’s

Review your credit report- Check your CIBIL report to identify the reasons of a low score. A careful review will help you assess your credit behaviour. It will serve as an eye opener as to how small things like a delayed payment can have a drastic impact on your credit score. Also look for negative entries on your report that you may not recognize. If you spot any inaccurate information report it immediately as you may be a vicitim of identity theft. Disputing and getting errors corrected will help to increase credit score.

Pay your bills on time- The simplest way in which you can contribute to increase credit score is to ensure timely payment of EMIs and credit card bills. Payment history makes up 35% of your score. Even a single missed or delayed payment can bring down your score drastically. Sign up for payment reminders through email or phone or set up automatic payments to avoid missing payments. If you are already behind on your payments then create a plan to pay back your debts systematically. Keep a check on your spending habits. Trim down your expenses. Talk to your lenders to work out a mutually convenient way of paying down the balance. Take care of accounts that are more than 90 days late. If your account ends up in collections it will be very damaging to your score.

 

  1. Pay the card balance in full- Credit card balances attract a very high rate of interest. It is best to pay the card balance in full each month. People who pay only the minimum amount due, usually end up falling into a debt trap.

 

  1. Keep utilization levels low- Keep your utilization levels to below 30% of available credit limit. It works well to improve CIBIL score. You can set up alerts that notify you when you reach a certain limit.

Don’ts

 

 

  1. Do not close your old credit cards- The length of the credit history or the average age of accounts affects the credit score of an individual. Keeping old cards active contributes to this factor positively. Moreover if you close your credit cards, your total available credit limit on all your cards decreases, thereby increasing your overall utilization ratio. For example if you have 2 cards each with a credit limit of 50,000/- and a card balance of Rs 25,000/- (on 1 card) then your utilization will be 25,000/1,00,000 i.e. 25%. Closing one card will reduce your total available credit limit by 50,000/- Your new utilization level will jump to 25,000/50,000 i.e. 50% thereby causing a hit to your score. Hence if you wish to increase credit score never close your old credit card accounts. Use the card for small purchases and pay off the balance at the end of the month to keep the card active.

 

  1. Do not apply for multiple credit cards in a short span of time- Each time you submit an application for a credit card, a credit enquiry hits your credit report. Multiple hard enquiries in a short span of time display a credit hungry behaviour. This will decrease your credit score.

 

  1. Do not expect a change too soon- There is no quick fix to improve CIBIL score. A strong positive history develops over a period of time with consistent and responsible behaviour. It needs a lot of hard work, patience and dedication to improve your credit position before you can see some positive changes in your score.

 

It isn’t as hard as it may seem in the beginning. Knowledge of the factors that contribute to your credit score, a systematic plan to work on those factors and dedication to bring about change is what it takes to repair your credit.

4 Things to Avoid When Picking a Home Loan

A house loan is unlike any other loan you would take in your life. Not only it’s exceptionally big amount-wise, it also has a term duration as long as 20-30 years, which is a lot. In other words, it’s a big responsibility and you must be careful with the decisions you make for it.

You may have read a lot about all the do’s of the home loans like finding a low home loan interest rate, finding the right financer, etc. but the don’ts are equally important to be aware of.

On that note, the following are the top 4 things to avoid when picking a home loan:

  1. Spending Your Life’s Savings

There are certain events in your life where you have to take bold decisions. However, there is a thin line between being “bold” and being “foolish”.

For instance, after searching for a perfect house for weeks you finally found one that makes the cut. However, it’s way above your original budget. So, to fill in the cash-gap you decide to break open your biggest piggy-bank- your life’s entire savings.

Big. Mistake.

Your life’s savings are meant for emergencies, and they might be the only thing to save you from a rainy day. So, it can be a terrible idea to splurge all your savings on a house. Ironically, you may also end up on a loan defaulter list because if you became cash-strapped down the road, you won’t be able to pay the EMIs and you won’t have any savings to use either.

  1. Not Factoring in the Additional Costs

A lot of people forget about the costs that are added to the cost of the property itself. For instance, the cost of the furniture, lighting fixtures, etc. along can easily hit a six-figure. Then there are maintenance costs which include payments to the security guards, sweepers, gardeners, etc. and membership costs (if you bought a house in a society/locality) for gym, clubs, etc.

Your bank will also impose a few charges of its own such as processing fee, transfer fee, etc.

  1. Settling for the Interest Rate Offered

It would be unwise to accept the first offer made to you by your bank for a loan. You have all the right to negotiate the terms and the home loan interest rate itself.

If you have a top-notch credit history and a decent credit score, then you are a good candidate for a home loan. If you are an old customer of the bank and have always paid your credit card bills on time, maintained good relations with the staff, etc. then it’s even easier to get a better interest rate. All you have to do is let them know upfront that you have a spotless credit profile and you have been a loyal customer to the bank, which is why you should be given a better interest rate.

  1. Applying Without Good Credit

Applying for a home loan when your credit report isn’t quite ready yet, can do harm on multiple levels. For starters, a poor credit score will instantly increase your chances of loan rejection. However, if you have applied at several banks, then it will damage your score even further, thus reducing your odds even more.

It’s important that your work on your credit report first before sending out the loan applications. If there are some serious remarks on your credit report such as a mention on a loan defaulter list, settled accounts, etc. then you must get them removed by talking to your bank or the credit rating bureau. Similarly, if there are any discrepancies in loan repayments, current debt, personal details, etc. then you should get them corrected as well.

Only with a good credit report, you can easily obtain a loan at an affordable interest rate.

So, these were some of the most common yet the most important things that you must avoid when applying for a home loan. In doing so, you are sure to save yourself from a lot of trouble and stress.