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2006-10-21
Secure Loan: Tips and Advantages .
Vivek'S son got admission into a very good school. But there was small problem - the school wanted a deposit of Rs 25,000, along with the other regular dues, to confirm the admission.The entire school dues came to around Rs 32,000 and Anand did not have this amount handy in his savings account. At the same time, he did want his son to lose out on the opportunity of getting admission into a prestigious school, due to a lack of funds. He was trying to figure out how to overcome this temporary financial crunch when his friend sunil, an insurance agent, came to the rescue. Sunil advised Vivek to take a loan against his life insurance policy. This helped him to pay for the admission.

So, what does insurance mean to the common man? Insurance, these days, is not restricted to securing lives and providing some financial relief to a family, after the death of the policyholder. It is not just a means of getting tax benefits, either. It has gained prominence as an investment vehicle and is a ready security, against which, a short-term loan can be availed.

Against which insurance policies can one take a loan?
You can take a loan only against whole life policies and endowment policies.You cannot take a loan against any general insurance policy, like - fire, marine, theft, etc. and neither can you avail of a loan against any retirement solutions.
After what period can a loan be taken on an insurance policy?
After completion of 3 years i.e. premium should have been paid for three years in order for the policy to become eligible as security for a loan.

How much can you borrow against an insurance policy?
You can avail of a loan of up to 90 per cent of the surrender value / cash value of your policy.

What is surrender value? How is it calculated?
Surrender value / cash value is the encashable amount of the policy, before its maturity date. It is calculated as 30 per cent of the sum of all premiums paid till date, without including the first premium.

What if the policyholder is a minor? Can the applicant take a loan on the policy?
Yes, an applicant can take a loan on the policy of a minor, since he is the one who is paying the premiums.

What is the rate of interest charged on the loan?
The rate of interest is decided by the insurance company, but is generally the same as the one prevailing in the market for loans.

By when must the loan to be repaid?
The insurance company decides the term of the loan, by taking into consideration the maturity date of the policy, the amount of the loan, etc. Before the policy matures, you are expected to repay the entire loan along with the interest.

What happens if it cannot be repaid before maturity?
At maturity, if the loan remains unpaid, then from the maturity value of the policy, the outstanding amount, as well as the interest due, thereon, will be deducted and the balance will be given to the policyholder.

What happens if the policyholder dies before the loan is repaid?
In case the policyholder dies, before the loan is repaid, the nominee will get the benefits of the policy, after deducting the outstanding amount of the loan and the interest due, thereon.

Can the loan be repaid in instalments?
Yes, this loan is like any other and will have to repaid in Equated Monthly Instalments (EMIs).The insurance company will determine the EMIs based on the loan amount, the maturity date of the policy, the rate of interest, the tenure of the loan, etc.

For what purposes can a person take a loan on an insurance policy?
You can take a loan on an insurance policy to help you overcome a very short-term financial crisis e.g. deposits / donations for admissions of children to school, down-payments for vehicles, consumer durables, paying initial booking amounts for home loans, etc.
Do all the benefits of the policy still exist during the term of the loan?
Yes, the policy cover as well as the benefits exist during the term of the loan.These are two different contracts - the first is an insurance policy and the second is a loan.
posted by Joby @ 5:31 PM   0 comments
Home Loan: Dream Home Owned By You
If you are looking for finance to help you buy your house, then the world of banking makes available to you numerous options that enable you to do so. A home loan has two basic connotations. It is a loan taken to buy a house or a loan taken by keeping your home as a security to pay an outstanding debt.
A home loan in America is commonly referred to as mortgage. It generally refers to debt, which is secured by the mortgage. Taking a home loan presents some calculated risks. When you pledge your property as security, then you stand to lose it if you cannot repay the loan. This is unimaginable risk. But at the other end of the spectrum, these loans are generally low risk for the lenders. Money lending organizations give borrowers an amount, only if they know that the concerned person has sufficient financial ability to pay back the borrowed amount.

In many countries, people fund the purchase of their homes with the help of mortgages. The market for home loans has developed significantly in countries, when there is an increasing demand for home ownership. This scenario is largely prevalent in countries like the United States, Great Britain and Spain. Though the legal jargons and terminologies are different in each country, the whole concept of home loans and the home loans process remains the same.
There are two integral components of a home loan namely, the creditor and the debtor. Creditors include banks, financial institutions, insurers and other such organization that provide loans for the purposes of buying real estate. Creditors have a legal right to the debt that has been secured by the mortgage taken by borrowers. The debtor is the borrower. He must confirm to, and meet all the loan conditions laid down by the creditor. Debtors include individuals and businesses who want to purchase property. Taking home loans is a complicated business and there are various other participants that are involved in the process.

These might include the likes of lawyers, solicitors, and conveyancers. At times, debtors, approach professionals like mortgage brokers, and financial advisers, who refer them to the best creditor who can satisfy their home loan requirements. The various types of home loans include package loans, hard money loans, and term loans, amongst others.

The banks and various other money lending organizations take into consideration various factors before approving your home loan. The most important evaluation factor is the inherrent capacity to repay the loan. This in turn is decided by taking cognizance of various points like income, employment, qualification, assets, liability, stability, and the number of years spent at the present residence, and of course the savings history.

It is only after going into this information in some detail that you get the much anticipated nod from your lender. Taking a home loan primarily requires a good credit history. But, more and more options are increasingly becoming available to those who dream of taking a home but have a poor credit history. So do analyze your needs, evaluate your options, and then go for the home loan that can best suit your requirements.

Article Source: http://EzineArticles.com/?expert=Keith_S._Gill
posted by Joby @ 3:34 PM   1 comments
 
 
 
 
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