Tag: Loan

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.

Insurance Plans India article

 

Spend For Your Kids, And Get Tax Benefits!

Bringing up a child in today’s world is an expensive proposition. Right from the vaccinations, to kindergarten school, various additional classes and of course higher education continues to burn a hole in the parent’s pockets. So all parents will be happy and curious to know that how some expenses made for their children can actually get them tax benefits. Though I am sure this is not a driving force when it comes to doing the best for their children but, it definitely does help if you can save some money while taking care of your children’s needs.  Here is a list of tax deductible expenses made for kids:

  • Tuition Fees:

There would hardly be any parent who would not like their child to be provided with the best education facilities. The tuition fees paid by parents whether it is for a school, college or university is allowed as a deduction under Section 80C (up to Rs. 100000) of the Income Tax Act. This deduction is allowed for two dependent children per parent, so if both the partners are working they can both claim deductions for two children each.

  • Education Loan Interest:

Often higher education needs to be supported with the help of an education loan. Even if one plans well and saves for their child’s higher education, they still may have to supplement the expenditure with a loan or in some cases they may totally be dependent on a loan to fund the higher education of their child. It is important that the guardian has a good credit score if they want to apply for any loan as a good score improves the prospects of getting a loan approved. When takes an education loan, the interest that is paid on the education loan is tax deductible under the Section 80E of the IT Act.

The education loan is provided a for a full time graduate or post-graduate course from a recognized financial institution for pursuing studies in areas of engineering, medicine, management, applied or pure sciences. Taking other loans to finances education may not be a good idea. While personal loan is much more expensive as compared to the education loan, they like gold loans or loan against securities do not have any tax benefits attached to them too!

  • Health Insurance Premium :

Getting health insurance for yourself and your family is important as the cost of medical care is spiraling out of control. It is especially important that children have adequate health insurance cover just like adults. Health insurance bought by an individual for himself/herself, his/her spouse and children are eligible for deduction from the income up to Rs. 25000 annually.

  • Amount Spent on Treatment of Disabilities or Certain Illnesses:

As per Section 80DD of the Income Tax Act, expenses made for medical treatment of dependent children and other relatives too suffering from disabilities are eligible for deduction. The limits for the deductions are Rs. 75,000 for disability of at least 40% and Rs 125,000 for impairment that is more than 80%. Section DDB provides relief on expenditure made for treating specified illnesses for self, dependent family members which include children. The limit for this deduction is Rs. 40,000.

  • Income from Investments Made in a Kid’s Name:

Parents generally plan for their kids secure future by saving for them or making investments in their name. The income that is generated from these investments is added to the parent’s income. Income earned from investments that are in a child’s name can be claimed as a deduction (from the total income) up to an amount of Rs. 1500. This deduction can be claimed for two children.

  • Some Additional Allowances:

A few more allowances are allowed as deductions from the income as per the IT Act. They are hostel allowances of Rs. 300 per child and education allowance of Rs. 100 per child. These deductions are available for maximum two children and these expenditures must be made in India. Medical expenditure made up to Rs. 15000 per year is also allowed as a deduction subject to a limit of Rs. 150,000 annually.

So as we said earlier that parents would not make expenditure on their children based on the tax rebates they get or do not get but these rebates can help you save some money in a world where inflation is constantly on the rise!