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How to get loan successfully

2006-10-30T18:03:00.000+05:30

Sadly, that it's a banks common and misconception housing finance companies (HFCs) are reluctant to furbish loans - housing, personal, car or just about any loan - to professionals; the reason being the absence of a fixed income. While the salaried loan applicant may find obtaining a loan a cakewalk, courtesy his 'fixed income' status, the self-employed loan applicant, sans the proof of 'fixed income', may not be able to walk out of a financial institution with that much neededhome loan.

Often, it's the process of getting all the required documents in order that bogs one down! Let's face it: While the employed loan applicant can easily furbish proof of his income from an employer, a professional cannot. So, unlike the salaried loan applicant, the self-employed loan applicant will naturally not be able to submit certain documents such as the latest salary slip or salary certificate revealing pertinent deductions.

The self-employed applicant is asked to provide certain other relevant information regarding the nature of business, year of establishment, capacity in which the applicant is engaged, the clients, the suppliers, etc. The self-employed loan applicant needs to submit a few documents to determine his repayment and saving capacity at the time of applying for the loan such as the profit and loss statement and the balance sheet for the past three years duly certified by a chartered accountant, Income Tax returns for the past three years, etc.

And, if you're a businessman, the registration certificate under Shop and Establishment Act and Factories Act is a must-have. You also need to provide the registration certificate for deduction of professional tax and the certificate of practice, if applicable.

If it is a partnership firm, a copy of the partnership has to be produced or then, in the case of a company, a copy of the Memorandum of Association and Articles of Association will have to be produced. And then, there are also certain other documents that need to be submitted at the time of applying for the loan such as the net worth statement of the applicant or co-applicant, copies of LIC policy, if any, etc. The loan applicant may also need to provide particulars of family members such as name, age, relation, occupation, income and the likes. Besides, the particulars regarding the guarantors like the proof of income also have to be submitted.

The loan eligibility of the self-employed loan applicant is determined by considering almost the same factors as in the case of his employed counter-part - repayment capacity, savings capacity, sometimes, additional security like life insurance policies, shares or savings certificates. Also, factors such as the income of the spouse or other earning members in the family that could support the income of the professional are important.

The other relevant documents to be submitted for the loan are much the same as in the case of salaried loan applicants. The procedure for availing of the loan is also the same for the salaried as well as the self-employed loan applicants. So, if you are a self-employed loan applicant, you don't really need to go through the rigmarole of applying for loans and then, facing rejection. The key lies in keeping all your documents in order to ensure loan comes through, finally

Importance of Loans in Business Growth

2006-10-29T18:02:00.000+05:30

Establishing and/or growing a business or a professional practice requires funding for premises, equipment, salaries, expenses on overheads, etc. This becomes a constraint for a businessman or professional. Banks come to the rescue with professional loans, which are specifically designed for entrepreneurs.

ELIGIBILITY
Banks offer loans to professionals like doctors /medical practitioners including dentists, chartered accountants, cost accountants, practicing company secretaries, lawyers or solicitors, engineers, architects, surveyors, construction contractors, management consultants, etc. Accredited journalists and cameramen who are freelancers i.e. not employed by a particular newspaper / magazine or even businessmen can avail of this loan. Some banks do not directly offer professional loans but enable the borrower to take a loan as a personal loan. However, in this case, the loan is given to established professionals since this is an unsecured loan. Some banks offer professional loans to both, new entrepreneurs based on qualifications and existing ones with an established track record.

LOAN AMOUNT
The loan amount will depend on the need and the bank’s assessment of the applicant. Usually, banks offer loans ranging from Rs 25,000 to Rs 15 lakh.

INTEREST RATE
Different banks charge different rates of interest, which ranges from approximately 8 to 18 per cent. The rate depends on the applicant’s financials, loan amount, tenure, security, the bank’s prime lending rate, etc.

PROCESSING AND ADMINISTRATIVE CHARGES
Processing charges range from approximately 0.25 per cent to 2 per cent of the loan amount.

TENURE
The tenure of the loan can range from approximately 12 months to 6 years.

SECURITY
Usually for small loans, say up to Rs 25,000, no collateral security is required. However, for larger loan amounts, collateral security in the form of house property or commercial property or in the form of a third party guarantee is required.

LOAN REPAYMENT
Professional loans are repaid in the form of Equated Monthly Instalments (EMIs) i.e. a fixed amount is repaid each month.

RE-PAYMENT PENALTY
Banks usually charge a pre-payment penalty of approximately between 1 and 4 per cent of the amount prepaid. However, State Bank of India does not charge any pre-payment penalty for money borrowed under the scheme for financing professionals and selfemployed persons.

DOCUMENTS REQUIRED
To apply for a professional loan, one needs to submit identity proof, address proof, income proof (bank statements, income tax returns, profit and loss accounts), project report, quotations of equipment/machinery to be purchased and security documents. Additionally, banks may require other documents based on the applicant’s specific case.

KNOW ABOUT TERMS AND CONDITIONS OF HOME LOANS

2006-10-27T17:57:00.000+05:30

Home Loan is the best option people can opt for their Dream Home. But You should have clarity picture of terms and conditions. Assume that your loan application for Rs 20 lakh got approved. Since you felt that the interest rates would maybe rise in the future, so you opted for the Âfixed interest rate loanÂ. The interest rate applicable was 8.5 per cent per annum. As the property was under-construction, the loan was disbursed in stages over a period of 8 months. In the interim, interest rates rose, and the bank hiked the interest rates applicable on its deposits and loan productsSurprisinglyly, the Equated Monthlinstallmentnt (EMI) amount applicable on his loan too, mirrored a rise. On probing, you was told by the lender that the interest rate applicable on the loan was the rate prevailing at the time of the final loan disbursement (i.e. 9 per cent per annum) and not the interest rate that was prevailing at the time of sanctioning of the loan (i.e. 8.5 per cent per annum)Obviouslyly you, felt cheated. You can avoid being caught in a similar situation if you are aware of your lenderÂs sanction and disbursement norms.

DISBURSEMENT COMES IN VARIOUS FORMS

When it comes to loan disbursement, the stage of completion of the property as well as the reputation of the builder play an important role. Lenders will disburse the entire loan amount only in case of a fully constructed house, which has no pending work on the part of the builder. When you purchase a house which is under-construction, your lender will not disburse the entire loan amount. A partial disbursement will be made wherein the loan amount gets disbursed in stages. For instance, 25-30 per cent of the loan amount will be disbursed initially; the next 30 per cent when there is a significant progress in the construction; and so on. Only in certain rare cases are lenders willing to part with the entire loan amount, even if the property is underconstruction. This is called Âadvance disbursementÂ and occurs only in case the developer enjoys a very good reputation. Therefore, as long as you select a property that is still under-construction, you cannot expect your lender to disburse the entire loan amount at one go.

THE INTEREST RATE DEPENDS ON THE DISBURSEMENT DATE AND NOT THE SANCTION DATE

When your lender extends the Âloan sanction letterÂ to you, it specifies the rate of interest applicable on your loan. However, the interest rate prevailing on the date on which the final disbursement has taken place is the actual interest rate applicable on the loan, irrespective of whether the loan is ÂfixedÂ or ÂfloatingÂ. For instance, at the time of loan sanction, the interest rate applicable on the loan is 9 per cent per annum. The loan is being disbursed to you in stages. By the time you receive the final disbursement, the interest rates have risen by 50 basis points. The interest rate therefore now applicable on your loan would be 9.5 per cent per annum and not 9 per cent per annum as mentioned in the sanction letter.

GENERALLY THE LOAN AMOUNT GETS CREDITED TO YOUR BUILDERÂS/SELLERÂS ACCOUNT

In most cases, the loan amount gets credited directly to the builderÂs account if the property is underconstruction or the sellerÂs account in the case of a re-sale. This step is taken by lenders to safeguard themselves against any frauds that could take place on such loans. However, if you would like the amount to be credited to your account, you need to enter into an agreement with the builder/seller as the case maybe. The agreement states that the builder/seller has no objection to the loan amount being credited to your account. Further, it also states your intention of crediting the sum to the builder/seller as soon as you receive the same from the lender. However, if the property is under-construction, and if the builder does not enjoy a very good reputation, then, you will need to get the property approved by your lender. This can become tiring and cumbersome.

A FEW LENDERS INSIST ON A GUARANTEE

Prior to disbursement, a few lenders also require you to arrange for a Âpersonal guaranteeÂ from a person that is not a co-borrower, as long as he or she is financially sound. This is done to ensure smooth repayment of your loan. Before your loan is sanctioned, find out from your lender whether they have any such condition that needs to be met for you to obtain a guarantee on time and prevent any delays in your disbursement.

COSTS BORNE BY YOU BEFORE DISBURSEMENT

Before you get the disbursement money from your lender, you will need to cough up all the expenses involved in acquiring the home such as certain legal expenses, stamp duty charges, home search services, etc. Apart from these, you will also need to pay processing fees to your lender. Generally all these expenses are calculated as a percentage of your total loan amount. If, due to any reasons, the lender refuses to sanction your loan, you are not entitled to receive a refund of these expenses from your lender.

CONCLUSION

To ensure a hassle-free sanction and subsequent disbursement of your home loan, you must study your loan documents carefully. This will ensure that you do not feel ÂcheatedÂ by the lender.

Students Experience with Education loans

2006-10-26T17:54:00.000+05:30

Do you want an education loan but are procrastinating because you don’t know where to start and how difficult it is to get the loan? Here are the loan parameters and experiences of students who have taken an education loan...

A number of students who have availed of education loans were interviewed to air their experiences of obtaining the loan. Most of them have one common grievance - very steep interest rates. They earnestly request banks to reduce rates and make education loans more affordable to the masses.

A student who does not desire to be named is the perfect example of an education loan shaping the future of little girls. She was the daughter of the sweeper of the bank and hence could secure a loan for further studies in the field of Chartered Accountancy and today the bank employees proudly disclose that she has repaid her entire loan. Higher education now enables her to economically improve her situation.

According to a student who had education loans, “ An education loan has been a boon to my desire to become an engineer. Due to lack of money, my future would have been ruined had it not been for the education loan. This was one self-respecting way by which I could borrow money to continue my studies as well as it also saved my parents from the wrath of having to beg for help from relatives. It is all due to my sister’s initiative to make enquiries about education loans and the bank that sanctioned the loan that today I have realized my dreams of becoming an engineer.

Comparion of Flexi & Fixed Home Loans

2006-10-25T17:50:00.000+05:30

Making decisions in uncertain times, is difficult. Home loan seekers face this dilemma of having to choose between fixed and floating rates in the changing interest rate scenario. With the new option of a loan with a combination of fixed and floating rates, the borrower is freed of this troublesome situation.

The changing interest scenario is putting home loan seekers in a new dilemma. The gap between fixed rates and floating rates has started widening and might widen further. For those still undecided about which type of home loan to opt for: fixed or floating, there is a new option available in the form of a combi deal.

THE HIKE
Interest rates have been moving north. One of the first to react to this trend was HDFC, which hiked the fixed home loan rates in July by 25 basis points. Several other lenders followed suit. Floating rates have been left unchanged for now. For some home loan providers, the fixed and floating rates are at par now and for some, the fixed rate loan is 25 to 75 basis points more expensive than a floating rate loan. Floating rate options thus appear more attractive. However, what if the floating rates also start moving north?

THE MIXED OPTION
Some housing finance companies these days have on offer home loans with a combination of fixed and floating rates. In other words, a part of the loan is on a fixed rate while on the rest of the amount a variable (floating) rate of interest is charged. For instance, if one is taking a Rs.10 lakh loan, then Rs.5 lakhs would be at a fixed rate and Rs.5 lakhs would be at a floating rate. Some home loan providers also allow you to decide the quantum under each type of rate. The bank treats it like two different loans with two different rates of interest.There are variants under this mixed type of loan (combodeal) but the funda is simple; a borrower gets to make use of benefits under both types and reduce future risks as well.

HDFC and ICICI Bank offer this combo-deal type of a home loan product and allow their customers to customize the ratio between fixed and floating interest rates. For borrowers, this arrangement is useful since they can decide the quantum under both fixed and floating types as per their risk appetite and accordingly hedge their risks on both sides. The fixed rate to some extent allows one to determine the degree of liability since it is pre-determined. This mixed option is best suited for risk-averse borrowers who want to shy away from taking too much risk on interest rate fluctuations.

The disadvantage of this hybrid variant is that only the amount of interest on the fixed rate is known. If the interest rates take a free fall, one would gain from lower interest outgo, but lose when interest rates rise. The scenario is dependent on the bigger picture i.e. the economic scenario of the country.

FLEXIBILITY WITH TIME AS THE REFERENCE
In some cases the mix of floating and fixed is dependent on the time period i.e. the initial few years are on a fixed basis and the balance period is on a floating basis. This loan-type is being offered by ABN Amro (called the Super Saver Package) where one pays at a highlydiscounted rate of 6.5 percent for the first two years and then pays for the remaining tenure at the then prevailing rate of interest. The ‘Super Saver Package’ has been introduced based on customer research that revealed that one of the biggest concerns of the home loan customer today was his/her ability to manage the strain on monthly finances in the initial stages of the loan period given the expenses involved in setting up a new home. In response to this need, the ‘Super Saver Package’ is designed to help customers manage their financing requirements during the crucial first two-year period of the loan tenure. During this period, the rate of interest is significantly lower than the applicable floating rate of interest, thereby generating substantial savings for the customer.

This product is also designed to induce fence sitters in the market today to make a decision and exploit the savings potential it offers. The scheme also comes with a first-year free property insurance that insures the customer’s home against fire and natural calamities like earthquakes and lightning.

Tax benefits on home loans

2006-10-24T17:48:00.000+05:30

Home loans offer tax benefits. However, there are a number of joint-ownership situations where some confusion prevails about the availability of these tax benefits. Here are some clarifications ...

If I take a home loan, do I get any tax exemption on interest paid on the loan?
Interest paid on a home loan is tax deductible under section 24 as an expense under the income head ‘Income from House Property’.

Whom can I take a home loan from to be eligible for the tax exemption?
You can take a loan from a housing finance company, a bank or any person to be eligible for tax deduction on interest.

How much tax deduction is available for interest paid for a home loan?
If you have taken a home loan after 1 April 1999 and your home acquisition or construction is completed within 3 years from the end of the financial year in which you took the loan, interest on the loan up to Rs.1.5 lakhs is available for tax deduction. In other cases, the tax deduction for interest paid on the home loan will be restricted to Rs.30,000.

Do I get any tax benefit for principal amount of home loan repaid?
Principal amount repaid on a home loan is eligible for tax rebate under section 88 up to Rs.20,000. The actual amount of tax rebate depends on your overall income level.
My wife and I own a property in joint names. We have purchased the property by taking a home loan. The EMIs are paid from my wife’s account.

Can I avail of the tax benefit under section 24 and 88 on interest paid and principal repaid, respectively?
In case of joint ownership of property, each co-owner shall be charged with his share of income from house property and each one can also claim the tax benefits available to the extent of his share. The EMIs are paid from your wife’s account. To the extent of your share, such contribution is a gift to you from your wife. You would be eligible to claim the tax benefit under sections 24 on interest paid and under section 88 for the principal repaid to the extent of your share in the property.

My wife and I own a property in joint names. We have purchased the property by taking a home loan. My adult son is paying the EMIs on our behalf. Can I avail of tax benefits under section 24 and 88 on interest paid and principal repaid?
You shall get the tax benefits under section 24 and 88 to the extent of your share in property.
To get the rebate under section 88, it is not necessary that the payment shall be made out of one’s income chargeable to tax. Even if your son is paying the EMIs, you shall get the relief under section 88 in respect of principal repaid in the EMI.

So far as deduction towards payment of interest under section 24 is concerned, both you and your wife shall get benefit of deduction under section 24 if your shares are definite and ascertainable.

I have purchased a property in joint names of my adult son and my wife. The property was purchased by taking a home loan. I am paying the EMIs towards repayment of the loan and payment of interest. Can my son claim tax deduction for interest paid and principal repaid? Can I claim the tax deduction? Can we both claim the tax deduction for the same amount?
You are paying the EMIs. To the extent of your son’s share in the property, EMI shall be a gift to him, which shall be exempt in his hand. He shall be eligible to get tax benefit under section 24 for interest payment and section 88 for repayment of principle. You will get the tax benefit to the extent of your share. Thus both you and your son can claim the tax benefit to the extent of your respective shares.

How to Topup your Existing Loans

2006-10-23T17:44:00.000+05:30

Top up loans are a type of discounted secured' personal loan given for a longer duration to existing home loan borrowers

Suppose if you already had an existing home loan outstanding of Rs.3 lakhs and was looking at raising another Rs.2 lakhs for the education fees. Instead of going in for another loan product, you can raise an additional loan amount using your home loan. This will help you to save a lot of additional paperwork, was processed much faster and at better rates.

How does it work? Commonly called a 'top-up loan', it is an additional loan extended to existing home loan borrowers. No questions are asked about the end usage. So, whether you use it to fund your home improvement plan or purchase of a car, son's education or any other purpose, no questions are asked.
So if you have a good repayment track record, chances are your financer will be more than happy to lend you some more money at better than prevailing market rates.

INTEREST RATES
As against a personal loan where the interest rate can range from 12 percent to 20 percent or a consumer or car finance loan where the interest rate can be around 12 percent, the interest rates of a top up loan are very close to your prevailing home loan interest rate. So, your top-up loan may cost you around 8.5 to 9 percent. Besides the processing charges are also lower at around 1 percent.

LOAN AMOUNT
The loan amount you raise depends on the customer type (salaried individual or a self employed individual or a professional) you fall into.The top up loan amount could also depend upon the outstanding loan amount or the revalued property (taking into account its current market
value). Financers like HDFC and IDBI Bank may extend a total home loan plus top up loan up to 70-85 percent of the value of the property (minus your outstanding home loan balance) while ICICI Bank chooses to offer a top up loan of up to 20 percent of the original borrowed amount.

Borrowers will find lenders willing to extend top up loans in the scenario where property rates are appreciating.That's because even as you repay your original home loan the value of your property is steadily increasing.

TENURE
The tenure of a top up loan could match the remaining outstanding years in your home loan. Say if you home loan is outstanding for 6 years, you can take a top up loan for a tenure of up to 6 years. Compare this to the other financing options; the tenure would be maximum 2-3 years.
A longer duration helps where you are on a tight budget and are just managing your regular home loan repayments and other expenses.Though on the flip side you are paying more interest. Besides, there is no tax benefit on this loan unlike the regular home loan borrowings.
Credits: timesofindia.com

How to handle your Home Loans

2006-10-22T17:41:00.000+05:30

You are likely to be horrified by the steadily increasing real estate prices. For prospective buyers, taking a loan to fund their home purchase is now an accepted trend.

FACTORS TO CONSIDER

How much loan you can raise will depend on how far you can match the eligibility criteria of the lenders. But instead of leaving it only to the lender, ask yourself how much should you borrow to buy your dream home. Your borrowing will obviously be dependent on your financial needs and the type of house that you plan to purchase. At the same time, it will also depend upon your existing income, your estimated future earning capacity, your existing debts, investments and saving in hand, number of dependants you have, your age and your personal profile and outlook.

You know, Borrowing is definitely a good strategy for buying a house. How much you borrow is largely dependent on the tax benefits you get due to the borrowing, your existing wealth and the regular cash flows you generate. Tax is a very significant driver on deciding the quantum of your borrowing. The amount of tax you can save by taking a housing loan will depend on the tax bracket you fall into.

TYPE OF BORROWERS

Given this background, how much you borrow would depend on case-to-case basis. This is because everybody has a different financial situation and goals.Yet there are common streaks in borrowers like similar age profile, professionals with similar educational qualifications or similar existing liabilities etc. And if you can relate to their profile, you will have some pointers to this questions that are intended to be a starting point.

YOUNG BEGINNER

Say you are young and have just stabilised on your first major job.You may have found a great house, but qualifying for a big enough loan maybe a problem - for the time being. But if you are confident that your disposable income is about to move up substantially in the next few years and you don't foresee any other major liabilities in the near future, as you have age on your side, you may look at a loan offering that takes into account your future income.

HIGH EXISTING LIABILITIES

Lets look at another personality.You may have a good job and may have found a home you adore. But you have many liabilities or practically nil savings. Maybe you have dependant ailing parents or a child with medical issues to take care of. And this takes a large part of your regular income. Or it may just be that you have been leading a carefree life and already have several loan repayments on hand. Keeping such circumstances in mind, it may make sense for you not to borrow beyond your eligible limits. Prudence suggests that you take a much lower amount of loan than you maybe eligible for.

WEALTHY BORROWER

You know you can easily qualify for the home loan thanks to the huge surplus cash you and your spouse generate regularly. Obviously for you the borrowing amount will be largely driven by the maximum tax benefit you can get. You know there are tax benefits of up to Rs.1.5 lakhs for the interest on borrowed capital. Also the principal repayment of the loan/capital borrowed is eligible for rebate under section 88 of up to Rs.20,000. In the high tax bracket, the interest you pay may turn out to be even negative considering the tax benefits you get."

So Make Your Dream Home.

Secure Loan: Tips and Advantages .

2006-10-21T17:31:00.000+05:30

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.

Home Loan: Dream Home Owned By You

2006-10-21T15:34:00.000+05:30

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

Home Loans after Bankruptcy

2006-10-20T19:22:00.000+05:30

Many people feel that a bankruptcy prevents them from ever fulfilling their dreams of becoming a homeowner. This is not true; there are many companies that will extend you a home loan, even if you have filed bankruptcy in the past.

There are specific and specialized bankruptcy lenders that will work with you and provide you with bankruptcy home loans. However, there are some requirements. For example, in general, you must have at least a credit score of 500 or more, in order for a bankruptcy home loan company to consider you. These lenders will generally bend over backwards to help you in securing a home loan.

Here are some situations that generally apply for those wanting a home loan after bankruptcy:
1. You would likely only qualify for a maximum of eighty-percent financing. What this means for you, is that your down payment will be the twenty-percent that the loan does not cover.

2. It is also a requirement, for those wishing to obtain a bankruptcy home loan, to have a debt-to-income ratio of between forty-five to fifty percentile range.

3. You will likely have a higher interest rate than other people will. This should never stop you from obtaining the home of your dreams. However, as you begin to build your credit back up and improve your rating, you will have the option of refinancing at a later day for a lower rate of interest.

It is the goal of most people, to someday become a homeowner. Even if you have filed for bankruptcy, you are not prevented from achieving that goal in any way. Every one makes mistakes; the key is to learn from them.

You do have options and many mortgage companies are offering people, just like you that have filed bankruptcy a way to finally have their dream home. Bankruptcy is not the end of the world and it certainly does not limit you to only renting. Now, your rent can turn into a mortgage payment.

Article Source: http://EzineArticles.com/?expert=Ken_Charnley

The Best benefits of Cash Advance Loans

2006-10-15T15:08:00.000+05:30

Often times when people hit financial snags, they simply need the fastest and easiest solution to help them work through the problem. Sometimes one of the solutions that can be most helpful is for that person to get a payday loan. Luckily there are a number of lenders, both locally in most metropolitan areas and online, that offer payday loan or cash advance services.

Cash advance loans can be a good option for a number of reasons. First, they are fast. Since they are usually small loans ($500 to $2000) and are only loaned for a short period of time, most lenders have pretty loose requirements in terms of what it takes to qualify for such a loan. That also makes them easy to get, even for people with damaged credit or other issues that might make them unable to get a loan from a traditional lender. Also, a traditional lender will probably want to make a loan for an extended period of time, not just to help the borrower make it till their next paycheck as a result of an unexpected financial emergency.

As previously mentioned, these types of loans are typically short term loans. Potential borrowers should be well aware of this fact beforehand and not use these types of loans for long term financial issues. For long term cash flow problems, you should definitely seek out something other than a payday loan or cash advance loan.

One of the reasons why this is the case is that the effective interest rate charged on these types of loans is much higher than a typical loan. However, since the loan is usually paid back in a short period of time (2 to 4 weeks), most borrowers don't feel the impact of this high interest rate. But, if you're unable to pay back the loan in the agreed upon time, late fees will likely be added to the amount you owe which effectively increases the interest rate you'll ultimately be paying as you pay back the loan.

Another reason to avoid cash advance loans as a long term solution is that if you are constantly finding yourself playing catch-up with your finances, it might be an indication of a bigger problem. By continually relying on payday loans to help you get by, it's really only making matters worse. Therefore, if you find yourself in a situation like this, it's probably best to seek out the advice of a qualified financial advisor rather than putting yourself behind the 8-ball with one loan after another.

That being said, all of us have probably had unexpected situations come up where we needed some fast cash and we knew we were "good for it" within a few weeks or so. For instance, your car breaks down, you need to get something fixed in your house, perhaps an unexpected medical payment. In situations like these, a cash advance can be a real life saver, especially when your other options are limited.

STOP: Before you apply for a payday loan, be sure to get more information on how to save money on your loan and learn about your 3 best options for payday loans by visiting the payday loan guide at YourPaydayLoanGuide.com.

Article Source: http://EzineArticles.com/?

Why Pesonal is most Important?

2006-10-15T14:27:00.000+05:30

We all have our very own personal financial needs that just spring up out of nowhere. And how many of us hoard money for such needs? Public and private sector banks offer an impressive range of personal loans to meet your exclusive financial needs. “A personal loan is a cash loan given to a customer. Actualy its an unsecured loan – that is - it comes without any collateral security or asset backing. A personal loan is given based purely on the financials of the individual. Well, here’s what this loan option is all about:

USING PERSONAL LOANS
A personal loan can be used for any purpose. The lender does not need the borrower to give a reason for taking this loan. A spokesperson for the State Bank of India says, “A personal loan can be taken for any kind of personal expenses such as marriage, family functions, medical emergencies, educational expenses and travel expenses.”

ELIGIBILITY CRITERIA
Personal loans are given to salaried individuals, self-employed professionals (CAs, doctors, MBAs, etc.) and business owners. The broad criteria usually include minimum and maximum age and income. The loan applicant must be between 25 to 60 years of age or the retirement age, whichever is earlier, and up to 65 years in case of a self-employed person. The loan applicant’s eligibility is directly proportional to his/her net income—a salary in case of a salaried person and business income in case of a self-employed person. For a self-employed person the minimum business income requirement is usually Rs 60,000 per year.

SECURITY
Personal loans are very flexible. They do not require any collateral security or asset backing. They are disbursed based purely on the financials of the loan applicant. “Additionally, your spouse's income can be considered in calculating the loan amount provided he/she guarantees the loan or the loan is taken jointly.”

LOAN REPAYMENT
Personal loans are repaid in the form of Equated Monthly Instalments (EMIs). EMIs are calculated based on the loan amount, the rate of interest and the tenure of the loan. “Banks calculate interest using the reducing balance method. The actual interest is calculated on a daily reducing balance".

TRANSFERABILITY
If your lender is charging a high rate on your loan and you are able to find another bank willing to lend at a lower rate, you can transfer your loan to the new bank and thereby reduce the cost of your loan.

Why home improvement loan is better than a personal loan ??

2006-10-15T14:09:00.000+05:30

You need much more than good taste to do up your home – you need a stockpile of moolah. Quite often, the only thing that stops people from revamping their homes is lack of funds. Even when you are convinced that your house badly needs a face-lift, the financial enormity of a renovation makes you stop in your tracks and retrace your steps. Home improvement loans enable you to complete this journey that you have started. “Home improvement loans can be used for any purpose related to enhancing the life or beautification of a house –excluding furnishings.” More specifically, a home improvement loan can be used for external repairs, tiling and flooring, internal and external painting, plumbing and electrical work, waterproofing and roofing, laying grills and aluminium windows, waterproofing a terrace, constructing an underground/overhead water tank, paving a compound wall and/or installing a bore well.

Just like home loans for a new house, home improvement loans also come with a fixed and a floating/variable interest rate option. Several housing finance companies offer home improvement loans at the same interest rate as home loans, while some may charge a premium of 0.50 per cent to 1 per cent. In some cases, you may also have to pay a processing fee of 1 per cent to 2 per cent.

In Brief
Home improvement loans are intended for all purposes related to enhancing the life of or beautifying a home, excluding furnishings.
1. A home improvement loan is better than a personal loan because it offers a lower rate of interest and is available for a longer tenure.
2. Home improvement loans also offer tax benefits while personal loans do not.
3. The property that is being renovated is mortgaged to the lender.
4. Many banks and housing finance companies provide the option of borrowing as a group, which would at times attract a lower interest rate.

AUTO LOANS: To Know Some Real Facts

2006-10-04T17:38:00.000+05:30

Remember Lambretta scooters? You had to pay extra for seats since they were in the optional accessories list. And if you decided that it was time that you booked a car for yourself, you would have to wait a year or two before your Amby or Premier actually reached at your doorsteps. And with a better spectrum of cars to choose from, you have an even better spectrum to finance your buy. Of course, there are the dealers, manufacturers, easy car loans; all out there to make car-buying like a walk in the park. However, the biggest catalyst has to be Financial Organizations.

Now why would you want to avail of a loan rather than buy your wheels outright? Thank the low interest rate regime. Compared to rates in 1996, when interest on car loans was over 30 percent, the present rates are less than half of it. Over the last year or so organised finance penetration has increased. There is an vast expansion on operations to the smaller markets because there is a huge potential that is yet to be tapped. Interest rates are very attractive and this will surely bring in more customers. Commercial vehicles also has good in business.

The retail finance pie is expected to grow at 30 percent at the present interest rates. Interest on cars is in the range of 7.5 percent to about 10 percent. Industry sources feel that the interest rates are among the lowest as compared to other countries and that there is not much for further cuts. There may be a rise of 0.5- 0.75 percent in the future, but still it will be difficult to predict the exact movement.

"Repayment of loans across the industry has improved. This has been due to the increase in spending power of the buyers as well as lower interest rates." ICICI Bank has expanded its reach to cater to smaller cities and towns. The bank has planned a higher growth this fiscal and hopes to outpace the industry. State Bank of India (SBI), the other major player in this business is looking to better its previous year's growth of 38-40 percent. It is going all out to capture a larger share of the market.

What bankers are happy about is the new trend in car sales wherein the shift in customer preference for bigger cars has been distinct. Moreover, with new models being launched with greater frequency, the market response has been phenomenal. "Over the last year, the introduction of some new products like the Getz, the Indigo Marina and the Innova. But they have not quite managed to create a frenzy like the Swift did. The equation is simple: new products mean greater demand. And this suits the financiers well.

The spending power among those in the 26-35 age group has increased considerably. More so in centres where services businesses - especially IT and ITES - are very strong. Their preference is for cars priced over Rs 4 lakh, which is much higher considering the fact the largest selling; the Alto is priced a little over Rs 2 lakh. Also, many people are going for the B+ and C segment cars in the larger cities. This has resulted in a huge opportunity for the financiers, But will this trend continue for long? "Every trend will go through ups and downs. Today banks are able to lend at low interest rates because the economy is doing well. But if there is a slowdown then of course sales will be hit and FIs will be forced to hike their rates to tide over the rough times. What is significant though is that the financiers are aware of these situations given their global exposure. They will be able to cross subsidise some loans with others.

However, the present fiscal is expected bring about some changes in the customer preference due to fuel prices. Many banks have entered into tie-ups with leading manufacturers to provide finance to their products. The SBI-Maruti alliance was the one that started it all. Easily available and cheaper credit and increasing income levels have boosted the financing industry.

WHAT HAS TO DO WHEN YOUR LOAN CAR GETS STOLEN?

2006-10-04T17:33:00.000+05:30

Amitab Singh was the proud owner of a ‘Santro Zing’ which He had purchased 9 months ago with the help of a loan. One evening he went out for dinner with his family, parking his car on the road. Much to his disheartenment, when he came back 2 hours later, his car had vanished. It had not been towed away as he had first assumed but, had been stolen. Luckily, he has comprehensive insurance coverage but, he is still at a loss as to what he should do next. If you too wish to know the same, then, read on… IMMEDIATE STEPS TO TAKE WHEN YOUR CAR IS STOLEN.

Go to the police station in the area from which your car has been stolen and lodge a First Information Report (FIR) within 24 hours of the theft. Make sure you keep a copy of the FIR. Next, intimate your car insurer about the theft. The insurer may depute an investigator to verify the facts and collect the necessary paperwork. If the original Registration Certificate (RC) book, driving license and insurance papers were in the car at the time of the theft and you do not have any copies with you, you will have to acquire their copies from the Regional Transport Office (RTO) and the insurance company. You also need to intimate the finance company from whom you have taken a loan about the theft and submit a copy of the FIR to them. LENGTHY PROCESS The theft of a car can lead you into a complicated legal tangle. Not only will it involve trips to the police station but you will also have to answer a series of questions by the insurance investigator till he is satisfied that the car is really stolen.

HOW MUCH INSURANCE WILL YOU GET? Though your car will be insured at its market value at the time of insuring it, claims will be settled at the Insured’s Declared Value (IDV). This value keeps on reducing on a yearly basis as it also accounts for the car depreciation (as per the schedule provided by the Indian Motor Tariff), besides the current market value of the car. The insurance amount that you will be eligible for will be this reduced depreciated value of the car. IF THE CAR IS UNDER A FINANCING SCHEME If the stolen car had been purchased on an auto loan which is still outstanding, then, in spite of the car being stolen you need to repay the loan. In fact, in such cases, the insurer will credit the claim amount directly to the financer since the car is hypothecated in its favour and therefore, the financer is the actual car owner. Further, since the insurer can take up to 6 months to settle the claim, you will be liable to continue to service the loan by paying the applicable Equated Monthly Instalments (EMIs) until then.

THE ACTUAL CLAIM Once the insurer has been able to ascertain the genuineness of the claim and the amount to be paid, the applicable sum will be given to you or your financer (as the case may be). Further, if the car is later traced, it will be returned to the insurance company. IN CASE OF ‘THIRD PARY COVER’ If you have skimped on insurance and taken only a third party cover then, you are not eligible to receive any sum from the insurance company as the scope of the cover does not include thefts. LAST WORD Even if you have opted for the comprehensive insurance policy, a theft will set you back financially. So, it always makes sense to take additional precautions while parking your car.

Myth of Loans

2006-10-04T17:32:00.000+05:30

These are mere myths which do more hurt than good for a borrower in terms of the total cost paid on the loan. Following are some of the common myths on loans and how you can guard yourself against being bustle into them.

A FLOATING INTEREST RATE LOAN IS BETTER THAN A FIXED INTEREST RATE LOAN A drifting interest rate loan is one wherein the applicable interest rate moves in sync with the interest rate movements in the economy. In case of a fixed interest rate loan, the interest rate stiff stable during a part of or throughout the tenure of the loan. A floating interest rate loan is highly good every time there is a fall in the ‘benchmark’ interest rate, i.e. the rate to which the floating rate is linked. In case of most lenders, the Prime Lending Rate (PLR) is the ‘benchmark’ rate against which they link the interest rate on all their term deposits and loan merchandise. Whenever the PLR rises or falls, the floating interest rate mirrors a similar movement. However, in a rising interest rate authorities, a floating interest rate loan might result in a higher adoption cost. Since interest rates have become explosive and irregular in the recent times, it is imperative mood to study the interest rate movement instead of blindly believing that floating interest rate loans are better than fixed ones simply because the interest rate attached to them is more often than not lower by 50 to 100 basis points. For a shorter term of office loan (such as a car loan, personal loan, etc.) a fixed rate might do more justice, particularly in a scenario of intensify rates. Then again, be sure about your lender’s definition of ‘fixed rate’ as it may be ‘fixed’ for only a part of the tenure of the loan.

MY 10 PER CENT LOAN IS THE SAME AS YOURS Apart from the interest rate, the method of scheming interest plays an essential role in determining the total interest cost payable on the loan. Lenders generally make use of the reducing balance method for impose interest on loans. Under this mechanism, interest is computed on the ‘principal outstanding’ on the loan. The principal amount outstanding on the loan reduces with every Equated Monthly Instalment (EMI) that you pay and therefore, the more frequently the interest is calculated, the lower is the total interest burden that you have to bear. Lenders calculate the interest payable either on a monthly, quarterly, half-yearly or annual reducing basis. The interest outgo on a ‘reducing balance’ loan would be highest under the annual-rest and lowest under the monthly-rest method. In short, in spite of two lenders offering an identical rate of interest, the total financing cost may differ greatly depending upon the method adopted for interest calculations.

A Home On a Loan

2006-10-04T15:46:00.000+05:30

Today, anyone over the age of 21 can apply for a home loan. All that is needed is some margin money (a relatively small proportion of the cost of the home) and you can easily get a loan for the rest. In addition, interest rates on home loans are at single digit levels. And, to top it all, resident Indians are eligible for certain tax benefits, on the principal and interest components of a loan, under the Income Tax Act, 1961. So, it makes sense to use borrowed funds for your purchase, while you invest your own money elsewhere.

While taking a home loan, the most important element that you need to understand is how the EMIs are constructed.They comprise partly of the principal amount and partly of interest. Typically, in a housing loan, the principal repayment increases gradually, as the years go by. A bulk of the EMI, in the initial years, goes towards paying interest on the loan.

Less than a decade ago, home loans were available at prohibitive rates and the home loan market, which was at a fledgling stage, was fraught with rigidities. So, prepayment was the aim of most home loan users. Today, competition has ensured that loan seekers get the finest rates. Apart from that, the latest union budget has increased the deduction available on principal repayment of housing loans. Besides, the interest paid on a home loan is also eligible for deduction under section 24 of the Income Tax Act. Now, with low interest rates on housing loans, which get notionally reduced due to the tax benefits that accrue, the longer that a home owner can keep his loan going, the better. The law of inflation also suggests that prepaying your loan is not the best option, especially in the case of a fixed rate loan. However, if you have opted for a floating rate housing loan, you may want to prepay your loan, to avoid any uncertainty that could arise due to a rise in interest rates .

Tax Benefit through Home Loan

2006-10-04T15:31:00.000+05:30

The home loan industry has been abuzz with activity. No other loan sector has witnessed such a phenomenal growth in the recent past. A booming real estate market, intense competition amongst the home loan lenders and higher disposable incomes of individuals has all led to a splurge in the home loan segment. However, factors such as globally rising interest rates, domestic inflation and a liquidity crunch have resulted in the hardening of interest rates. This has led home loan lenders to increase their lending rates by 1-2 per cent

TAX BENEFITS ON HOME LOANS

A home loan is repaid in the form of Equated Monthly Instalments (EMIs). This is a fixed amount payable each month to the lender. The EMI is made up of a portion of repayment of principal and payment of interest due. Both these components have tax benefits associated with them. Under Section 80 C of the Income Tax Act 1961, an amount of up to Rs 1 lakh can be claimed as deduction on the ‘principal’ portion of the total EMIs paid in a financial year. Under Section 24, a tax deduction of up to Rs 1.5 lakh is allowed per financial year on the interest paid on a home loan.

TAX HELPS REDUCE COST OF HOME LOAN

If you factor-in both these tax benefits, then the cost of availing a home loan even in today’s interest rate regime, is not expensive. Here is an example for clarification.
Let’s assume that you have taken a home loan for Rs 8 lakh, for a term of 10 years at an interest rate of 10 per cent per annum on which the total EMI payable in the first year is Rs 1 lakh. This Rs 1 lakh constitutes both, the interest component and the principal repayment component.
The interest component is Rs 80,000 (interest rate of 10 per cent x the loan amount of Rs 8 lakh) and the balance is the principal portion i.e. Rs 20,000. Both these amounts fall below the ceiling of the tax benefit available and are reduced from your taxable income. Therefore, the tax that you save assuming that you fall in the highest tax bracket of 33.66 per cent (30 per cent tax + 10 per cent surcharge + 2 per cent education cess) would be Rs 33,660 (tax rate of 33.66 per cent x Rs 1 lakh). In other words, the cost of your loan is Rs 46,340 (Rs 80,000 interest paid – Rs 33,660 tax saved) and the effective cost of your loan in the first year is 5.79 per cent (Rs 46,340 / Rs 8 lakh x 100). Clearly, the tax savings can substantially bring down the cost of a home loan.

IN CONCLUSION

Do not dismiss a home loan simply because the interest rates are showing an upward movement. Evaluate your options by understanding the tax implications and the actual cost of borrowing. The tremendous joy that you experience when you own a home can truly be enhanced, if the purchase of the home has been wisely planned.

Car Loans

2006-10-03T12:04:00.000+05:30

When applying for a loan for an original automobile, there are many companies offering respective loans, with one of them start the automobile championship loan. An automobile championship loan is a loan where money is loaned, while keeping the automobile’s championship certification as protection. The lender keeps the championship as protection in lawsuit the loan is not paid.

The procedure of an automobile championship loan is quick and simple. However, as this is a short-term loan where refund is payable anywhere from 14 days to a month of the loan being issued, it attracts a higher pace of stake. The lender holds the championship while you push the automobile; it is returned when the principal and stake of the loan is paid. At the moment of the championship loan, the lender gives the borrower a printed championship loan accord. The borrower has to learn the contract cautiously and realize all the clauses before signing it. One has to be cautious with this loan, for if you break to repay the loan the lender can repossess your automobile. You are so given a chance to have the automobile accessible at a stipulated appointment; moment and spot of reciprocal appliance. You can withdraw your belongings from the vehicle prior to repossession. After repossessing the automobile, the lender sells the automobile and you are entitled to any proceeding of the sale in surplus of the sum you owed to the lender.

If you can’t salary off the loan, you can roll it over for another payment period. Rollovers are essentially big stake payments paid with the intent of keeping a loan from defaulting where less or none of the principal is paid away. However, by rolling over your loan a few times, you will finish upward paying many times the sum of the loan in stake and fees