In today’s fast-paced world, quite a lot of people rely on a personal loan to meet their financial needs. Reason being a personal loan is an unsecured loan available for almost everyone at a competitive rate of interest. The most challenging aspect while signing up for this loan is choosing the right loan term. If you choose the longer loan term, you may end up paying higher interest, alternatively, if you choose the shorter tenure, you’ll have to pay higher loan EMIs each month.
A loan term is the total time period preset by the borrower during which the entire loan amount has to be paid in monthly installments. The interest applied on the loan amount shall also be paid before the end of loan term. To be precise, loan tenure is a stipulated time period set by the borrower within which the entire principal amount along with the interest should be paid in full.
If you are one planning to apply for a personal loan anytime soon, below is the list of things that you must consider while choosing a personal loan term:-
- Understand your monthly budget and expenses: It is one of the most obvious things that you must ponder on while choosing the right loan term. Take a paper and a pen and make a list of all the monthly expenses that you are committed to. Based on whatever money is left, you can choose the tenure of the personal loan. Remember, a personal loan may help you in dire need of money but from the time it is availed till the amount is repaid in full; it acts as the biggest liability. Also, make sure the loan term you choose does not weigh you down with additional monetary pressure.
- A careful watch at future financial prospects: This is especially important for salaried individuals who expect a salary hike in the near future. A higher EMI in that case would not be a burden for them. Similarly, self-employed can also consider their future income and financial prospects before choosing the loan term. This scrutiny may add extra burden till the hike, but after that, it works wonders.
- A look at your existing liabilities: Apart from considering a salary hike, you should also think about other monetary commitments as well such as kid’s tuition fee, house rent, existing loans and credit card payouts, etc. Always choose a loan term that helps you balance all your existing liabilities plus the personal loan EMI without much hassle. To make this task simple, you can use spreadsheets, and appropriate formula to arrive at a definite picture.
- Financial stability: Choosing a loan term as per your financial stability is also important. Plus, banks will also not be hesitant in giving you a loan if you are financially stable and have bright future prospects of earning. Moreover, repaying a loan will also be easier if you are financially stable.
- Income: A salary highlights the paying capacity of a borrower. The more you earn, the bigger the amount of loan you can apply for. Considering your income while choosing a loan term is also important. Even banks ask for the salary slip of the borrower based on which they decide whether or not to provide the loan to the borrower.
- Calculate the interest rate: Since the interest rates applicable on a personal loan differ widely across banks and Non-Banking Financial Institutions (NBFCs), it is wise to know about the interest rates offered by every bank before making a decision. Calculate the interest rates applicable on loans by using a combination of tenures and the loan amount proposed. Generally, a loan with longer term means higher interest and nobody wants to take up a loan which they keep on paying for many years.
Personal Loan EMI Calculator
To calculate the interest applied on the personal loan, you can use a personal loan EMI calculator. It is an easy online tool that allows you to get a detailed view of all the finance involved in the loan so that you can make a wise decision in choosing the right loan term. You can find a personal loan EMI calculator on the bank’s website. By using this tool, you can also calculate the monthly loan EMIs and the interest rate that you would be paying to the bank/NBFC within a stipulated period of time to settle the loan. With personal loan EMI calculator, you can make as many searches as you want by using a different combination of a loan amount, and tenure to reach out the best loan scheme that matches your requirements and budget.
These are quite a few significant factors one should keep in mind while choosing a loan term with regards to a personal loan. Although your credit score is also a crucial thing in getting a loan, the above-mentioned factors should not be overlooked in finding the best loan scheme. Also remember that banks provide personal loans at a higher interest rate (18% to 25%), hence it should only be your last point to consider. A personal loan is of two types, a secured and an unsecured one, offered by banks and several non-banking financial institutions.
You can use the loan amount for anything including house renovation, a purchase of bike, four-wheeler, to fund your honeymoon trip and a lot more. But getting a loan for luxury and comfort should be avoided as far as possible. It should be better put to use in emergency situations like for consolidating your credit card or existing loan debts that are attracting higher interest rates, for medical and hospitalization expenses and perhaps for the wedding or education of a son/daughter. A personal loan is a boon for every individual who is facing a serious financial crisis. But to get the loan in the simplest manner possible, one should maintain a good credit score (750 & above), should have a good source of income, and should meet all the eligibility criteria set by the bank.
In an endeavor to make the life of retiree/senior citizens more independent and self-governing, the Department of Post offers Senior Citizen Savings Scheme (SCSS). As the name depicts, this scheme is solely for senior citizens who are over and above 60 years of age and for retirees on superannuation or on VRS. Launched way back, the Senior Citizen Savings Scheme offers every possible benefit that an investor looks for: Fixed returns on investment, immunity of capital, regular payoffs and security of your money.
Features of Senior Citizens Savings Scheme
- Eligibility: The minimum age to invest in SCSS is 60 years. However, individuals who are 55 years of age can also invest in this scheme if they have chosen retirement through Voluntarily Retirement Scheme (VRS). But it should also be noted that such retirees must open an SCSS account within a month of receiving their retirement benefits. The amount invested in the SCSS should not go beyond the amount an individual has received as a retirement corpus. Depositors who fall under the pre-requisites of this scheme can open a Senior Citizens Savings Account at any post office or at any nominated branch of 12 public sector banks and ICICI bank.
- Investment limit: Under the Senior Citizen Savings Scheme, an investor can deposit not more than ₹ 15 lakh and the investment here can be made in multiples of ₹ 1,000/-. Also, the government allows retirees to open more than one account under the SCSS scheme both single or jointly with their spouse. However, one should note that the maximum investment limit is of ₹ 15 lakh.
- Interest rate: – The interest rate applicable on SCSS is 8.3% (w.e.f 1.07.2017) payable from the date of deposit of 31st March/30th Sept/31st December in the first instance & thereafter, interest shall be payable on 31st March, 30th June, 30th Sept and 31st December. The biggest advantage of investing in SCSS is that the scheme yields assured returns that serves as a regular income for the retirees and senior citizens.
- Interest amount and the frequency of compounding: The interest rate on the SCSS is compounded and paid off on a quarterly basis on scheduled dates that are mostly the first working day of January, April, July, and October every year. This has nothing to do with your investment date. With this scheme, you are sure to get an interest every single quarter. The quarterly interest is very beneficial for retirees as it eill provide them a steady income for their day to day expenditure.
- Investment term and foreclosure: The investment tenure of SCSS is 5 years which can be extended to another 3 years after the successful completion of the investment term. In case of any sudden financial need, an investor can foreclose the account after one year. However, this may attract a deduction, which will be 1.5% of the total amount. As per the rules set by the government, if an individual forecloses the SCSS account in less than 2 years, the penalty is 1.5%, and after two years, the fine is 1% of the total amount. There are no charges applicable on the foreclosure of the account after the successful completion of mandatory 5 years.
- Tax Exemption: Investing in Senior Citizens Savings Scheme would also earn you several tax benefits u/s 80c of Income Tax Act, 1961. In a fiscal year, investors can claim a maximum deduction of ₹5 lakh u/s 80c of Income Tax Act. To claim more deductions from the SCSS account, investors cannot make further investments here.
Benefits of Senior Citizen Savings Scheme
The Senior Citizens Saving Scheme, designated for persons above 60 years of age offers good many benefits to the investors. Some prominent ones are listed below:-
- You can easily apply for this scheme by simply filling out its application form at your local bank or post office nearby.
- As the Department of Post is managed by the Indian government, this scheme is highly reliable and trustable.
- SCSS give depositors the privilege to open more than one account either as a single applicant or jointly with their spouse (husband/wife).
- The profit on your SCSS account is cosmological as it can help you earn annual revenue of whopping 8.6%.
- The investment term of the SCSS is 5 years which can be extended to another 3 years which can easily help you serve your long-term and mid-term goals.
- Under session 80c of the I-T act, you can save a good amount of tax and TDS.
- SCSS requires just your proof of age as KYC documentation. For this you can submit either of the following – Passport/Senior Citizen Card/PAN Card/Voter ID Card/Birth Certificate, etc.
- The applicable interest rate on SCSS is 8.3%per annum.
- Investment in SCSS can be made through cash (if the amount is less than 1 lakh) and through cheque or DD (if the amount is more than 1 lakh).
- You can make multiple nominees for your SCSS account if needed.
Conclusion: Senior Citizens Savings Scheme comes as a boon for every senior citizen who wants to secure their retirement phase. This savings scheme empowers the senior citizens of our society and gives them wings to live their lives in the best manner possible. Since the interest in the Senior Citizen Savings Scheme is paid off every single quarter, it serves as a quarterly income for the investors and helps them in their day-to-day living.
Many people in the country consider tax planning as one of the judicious tasks and thus, start planning for it at the eleventh hour when the financial year is about to end. But this doesn’t leave enough space for smart planning. In fact, one must prepare for the tax-saving season beforehand and start investing in the early quarters of every financial year. By early planning, you will get time to go through various tax saving plans and options and can choose one which you think will work best in your case. By being proactive, you can also minimize your tax outgo and save big for your future.
Currently, there are quite a lot of smart tax-saving options with which you can reduce your tax outgo and save more on your income. The 7 most prominent investment plans and options are listed below:
- Life insurance: Though it is not the purest form of tax-saving instrument but the dual-edged benefits it offers certainly makes it to the top of this list. A life insurance provides life cover that acts as a financial assistance in case of emergency. Moreover, the premium you pay each month for your life cover is deductible from your income u/s 80C of Income Tax Act. The maximum deduction of Rs.1 lakh can be claimed from the life insurance policy. That’s not all, under section 10(10D), an amount that is paid to the beneficiary in case the emergency is exempted from tax. In case of the pension plan, the 1/3rd of the total maturity amount is paid out in an emergency. This amount is tax-free but the remaining 2/3rd of the amount that is paid during annuity is tax-payable.
- Equity-Linked Savings Scheme (ELSS):- The Equity-Linked Savings Scheme is one of the most sought-after mutual fund investment plan specifically designed for tax-saving purpose. As ELSS is a market-linked product, it comes with high-risk factors and offers high returns as well. The income earned through ELSS is tax deductible u/s 80c of the I-T Act 1961. There are two reasons for mentioning ELSS in this list. One is that it comes with the shortest lock-in period of three years and second, it is the equity-based investment. Also, investment in ELSS can be done via SIPs. It is, by and large, an easy and effective method to save tax.
- National Pension Scheme: – It is yet another tax-saving investment that allows investors to go beyond Rs.1 lakh tax deduction limit set by the section 80c of Income Tax Act. Moreover, under the government-owned national pension scheme, the 10% of your basic salary, which is the employer’s contribution towards your pension scheme, is tax deductible.
- Public Provident Fund (PPF): – For years, the Public Provident Fund has been acknowledged as one of the popular tax-savings scheme by several investors. Reason being, the principal and the returns earned from this scheme not only ensure guarantee but are tax-free as well. PPF offers 7.6 percent interest on the savings per annum. For someone falling under the highest income slab pays 30.9 percent tax, it translates to nearly 11.28 percent taxable return, which is significantly higher than any other tax saving investment plan. PPF is a 15-year plan which can be extended for an indefinite period of five years. Investors keen to enroll in the public provident fund scheme can visit the designated post office or the bank branch, fill up the application form and sign up for the scheme. Few banks also provide online facility to open a PPF account. Also, individuals are allowed to transfer their existing PPF account from a bank to post-office and vice-versa. There is no age limit associated with PPF account. Anyone can open a PPF account. In fact, EPF account holders can also open a PPF account.
- Employee Provident Fund (EPF): EPF is yet another tax-saving investment option that helps salaried individuals not only save tax but accumulate tax-free corpus as well. As a general rule, an employer contributes 12% of the employee’s basic salary every month as a mandatory contribution towards EPF. In return, an equal share is contributed by the employer as well towards an employee’s EPF account, but only 3.67% is added to the EPF. However, only employee’s contribution up to a limit of Rs.1.5 lakh in the EPF account qualifies for tax exemption of u/s 80C of the I-T Act 1961. Plus, both employee and employer share in the EPF account earn interest each year as per the government norms, which is completely tax-free. The rate of interest applicable on EPF account in the FY 17-18 will be reduced to 8.55% from 8.65% in the FY 16-17.
- Unit Linked Insurance Plan (ULIPs):- It is a perfect amalgamation of safety and saving. On one hand, ULIP provides life cover while on the other it helps investors put their savings into various market-based assets for meeting long-term perspectives. A majority of Unit-linked Insurance Plans provide 5 to 9 investment options with different asset allocation involving equity and debt. A ULIP can be operational for more than 20 years but it comes with five years of lock-in period after which one can exit the policy if he wishes to. The interest earned from the fund on exiting the policy after 5 years or on maturity is exempted from tax.
Sukanya Samriddhi Yojana (SSY): It is a small savings schemes specifically meant for a girl child below 10 years of age. Offered at an interest rate of 8.1% (with effect from 1-01-2018), the Sukanya Samriddhi Yojana is aimed at providing ample of tax benefits. Parents and local guardians can open the scheme in the name of their girl child anytime after the birth and till she turns 10 by depositing a minimum of Rs.1000/-. Plus a maximum of Rs.1.5 lakh can be deposited in this scheme every financial year. The maturity period of SSY is 21 years. One can also close the account in 18 years, but on one condition that the girl on whose name the account was opened should be married by then. Currently, the Sukanya Samriddhi Yojana offers higher returns on the investment. The contribution made towards SSY annually qualifies for Section 80C benefit and the maturity benefits are completely exempted from tax.
Investing in a good mutual fund scheme allows individuals to live a life they have always longed for. It gives them the freedom to finance their dreams, needs and desires. Though there are a good many mutual fund schemes available for investors, finding the one that suits one’s requirement is a tough task altogether.
If you are planning to invest in a mutual fund scheme that promises long-term capital growth at a relatively moderate risk, Birla Sun Life advantage fund tops the list here. Launched on 24th February 1995, it is an open-ended equity scheme that let investors earn long-term capital gains through a diversified research based investment approach. Investors willing to invest in a Birla Sun Life Advantage fund can invest in this fund with a minimum of Rs 5,000. The Face Value of the fund is Rs 10/unit.
The Entry Load and the Exit Load
The entry load in the Birla Sun Life Advantage Fund is Nil. Investors planning to invest in Birla Sun Life advantage fund can invest both in Dividend (profits are given to investors from time to time) and growth (profits are put back into the scheme that results in higher NAV).
The table below illustrates the daily NAV and price:-
|Scheme||Net Access Value (NAV)||Sale Price||Repurchase Price||Date|
|Aditya Birla Sun Life Advantage Fund -Reg Dividend||107.32||107.32||106.25||24th Nov 17|
|Aditya Birla Sun Life Advantage Fund -Reg Growth||438.86||438.86||434.47||24th Nov 17|
Birla Sun Life Mutual Fund is a joint venture between Aditya Birla Group and Sun Life Financial. Apart from Birla Sun Life Advantage Fund, below is the list of other open-ended fund schemes offered by Birla Sun Life Mutual Fund:-
- Birla Bond Index Fund
- Birla Income Plus
- Birla Sun Life International Equity Fund
- Birla Sun Life Cash Manager
- Birla Sun Life Short Term Fund
- Birla Infrastructure Fund
- Birla Sun Life Savings Fund
- Birla Sun Life India Reforms Fund
- Birla Sun Life Equity Fund
- Birla MNC Fund
- Birla Sun Life Freedom Fund
- Birla Sun Life Savings Fund
- Birla Sun Life Government Securities Fund
- Birla Sun Life Buy India Fund
- Birla Sun Life Income Fund
- Birla Sun Life Tax Relief 96
- Birla Sun Life New Millennium Fund
Gone are the days when investing was just restricted to pension schemes, bank fixed deposits, etc. However now, mutual funds are raising high on the minds of people looking to invest their hard-earned money for a secured livelihood. The reason why a good many people nowadays are keen to invest in mutual fund is that it gives them the flexibility to start buying units or shares with a relatively small amount. Some funds also allow the investor to buy more units regularly by paying smaller installments as well. Professional management is the other factor that persuades investors to invest in Mutual fund schemes. These are managed by experts who have the education, skills, and resources with which they invest your money in the right fund that promises long-term capital gains.
Bharat 22 is the second Indian government backed Exchange Traded Fund (ETF) designed to partially liquidate government stake in 22 leading public sector and SUUTI companies. The introduction of this ETF in thus part of the government’s plan to reach the proposed Rs 72,500 Cr. disinvestment target for the financial year 2017 – 2018. The first government based CPSE ETF was launched in March 2014 with an AUM of Rs. 5,000Cr and is managed by Reliance Mutual Fund AMC.
When compared to the previous CPSE ETF, the ICICI Prudential Mutual Fund AMC managed Bharat 22 ETF is more diversified as it has investments in 22 listed companies. While the CPSE ETF had exposure in only PSU companies, the Bharat 22 will have exposure in both PSU companies and public sector banks such as SBI and Bank of Baroda which feature substantial Government ownership. Furthermore, Bharat 22 ETF will also invest in a few other companies where the Government holds a stake through the Specified Undertaking of the Unit Trust of India (SUUTI) mechanism. SUUTI companies in the Bharat 22 ETF portfolio include Larsen&Toubro, Axis Bank and ITC.
In addition, the Bharat 22 ETF will be invested across multiple sectors including Industrial (e.g. L&T), utilities (e.g. Power Grid etc), banking (e.g. SBI, Axis Bank etc), FMCG (e.g. ITC), energy (e.g. Indian Oil, BPCL etc), and materials (e.g. National Aluminium). The Bharat 22 ETF, being mainly a large-cap oriented fund, is expected to have only 10% portfolio exposure to mid and small-cap stocks.
The Advantages of Bharat 22 ETF diversification
Individual stocks are subject to high risks from competitors, sector dynamics and market conditions. Thus the risk associated with the individual stock investment cannot be diversified through individual stock investments. However, the market risk of equity investments can be controlled to a significant extent by investing in a larger portfolio of companies (to combat company-specific risk) and investing in assorted sectors (to combat sector-specific risk). Different sectors tend to lie at different stages of the business cycle. Some sectors such as mining and energy are highly susceptible to business cycles which can last for years, while other sectors such as FMCG feature only seasonal variations in demand. The portfolio of Bharat ETF 22 features a high degree of diversification across multiple sectors which are expected to balance the individual volatility of different sectors. So all in all, it can be stated that diversification can deliver better results as it enables the ETF perform equally well in a wide range of market conditions. For sufficient diversification, a fund should invest in various types of stocks diversified across sectors as well as market capitalization. Hence the Bharat 22 ETF is one of the best exchange traded funds for investors seeking indirect exposure to public sector stock while maintaining a high level of liquidity.
Bharat 22 ETF is a diversified exchange-traded fund which will track Bharat 22 index that is meant to provide good returns to investors planning to invest for the long term and simultaneously enable the government to reach disinvestment goals. The components of the Bharat 22 index work on various reforms and initiatives set by the current government in power like the Goods and Services Tax (GST), Infrastructure Reforms, Direct Benefit Transfer of subsidy, Financial Inclusion, Digital and Cashless Economy, etc. which improves the earnings of the constituent companies which ultimately benefits the investors. Like the CPSE ETF, the Government also offered lucrative discounts of 3% on the face value of the Bharat 22 ETF units during the NFO period.
Most individuals tend to opt for refinancing or a home loan transfer to avail lower interest rates available in the market. Usually, any borrower who is about two or more years into the loan tenure does not get the opportunity of getting the benefit of falling interest rates in the market. The Reserve Bank of India is also asking the lenders to pass on the benefit of lower interest rates to the existing borrowers.
If any individual thinks that he is stuck with a bank or financial institution, which charges high interest rates on a home loan then he can opt to transfer his home loan to a bank or financial institution that charges a lower rate of interest. Before opting for transfer of home loan, such individuals can also discuss with their current bank or financial institution on re-negotiating the interest rates based on the good repayment track record, etc. If the bank denies re-negotiation, then they could shift to a bank that offers a home loan at a lower interest rate.
Process for Home Loan Transfer
- Close the Deal with the Existing Bank: When you want to make a home loan transfer, then it becomes essential to get approval from the existing bank or financial institution. You need to submit a letter to existing bank to request a home loan transfer. Bank will send you a consent letter or a No Objection Certificate (NOC) along with a statement mentioning the outstanding amount.
- Provide the letter to the New Lender: Give the NOC to the new bank or financial institution to approve your loan amount to the old lender for an account closure.
- Transfer Documents: Post the completion of the transaction, your property documents will be handed over to the new lender. The leftover post-dated cheques are cancelled. Also, stay cautious at this step to ensure that you do not leave any document from being transferred.
Things to Consider Before Home Loan Transfer
Following are the top 5 things that you need to consider before you opt for a home loan transfer to make sure you get the best deal.
- Check the market for affordable interest rates: Before you opt to transfer your home loan to another lender, it becomes essential for you to check the interest rates offered by various lenders in the market. You should also check the type of interest system the lender is based on and whether they are floating or fixed.
- Study the lender’s profile: There are various banks and financial institutions that are competing in the market and are ready to lend you money. Each of these banks and financial institutions has made a certain reputation in the field. You should be aware of your chosen lender’s service. So, go through reviews and testimonials on several platforms as choosing a trustworthy lender is a must.
- Check for charges and costs: A home loan balance transfer can come with numerous costs such as processing fee, application fee, legal fee and even prepayment charges concerning your new and existing lender. Carefully understand all the costs you have to pay and ask your lenders all questions you have in mind about the costs. Make sure you negotiate for low fees and penalties.
- Read the Terms and Conditions Carefully: Low interest rates may seem attractive, but it is important to be aware of all the terms and conditions of your new lender. Go through the documents containing the terms and condition provided by the bank and check if it contains any hidden charges or any important condition you are unaware of.
- Ensure that you switch early in the tenure: Balance transfer in the second half of the tenure is worthless as most of your interest led EMI payments have already been made. If you plan to transfer home loan then ensure that you do in the earlier half of the tenure. This will benefit you as you will be paying lower home loan interest rate when you make a home loan transfer.
Buying a home depends on the funds you have and the amount of home loan you can avail. Taking a home loan is not as easy as it is said. Though it appears that banks are eager to lend, but getting a loan sanctioned can be a tedious task. Home loans are the major hurdle, which an individual looking for an affordable home deal need to cross. Getting approval for a home loan involves a lot of paperwork and documentation, which can be time consuming and exhaust someone looking for a home and also applying for a home loan.
But before you decide on borrowing and choosing a home loan in India, here are 5 things that you should keep in mind before applying for a home loan in India.
- Know the Maximum Loan Eligibility: The loan amount that will be sanctioned depends on the income and previous track record or credit history when it comes to repaying the loans and credit card dues. After assessing the income generally, home loan lenders provide 80 percent of the value of the property. While assessing the income, the lender usually considers only the income heads, which can be used to repay the loan. For instance, the medical allowances and travel allowances are deducted from the monthly net salary as you are expected to spend the amount received for the respective activities they are provided for.
- Check CIBIL Score: The home loan eligibility depends on the credit worthiness of the individual. Credit Information Bureau India Limited assist in providing a credit score on a scale of 300 to 900, which is based on your previous credit card usage, existing loans, loan repayments etc. The CIBIL score also depends on the number of times you have applied for a loan or a credit card. The more an individual applies for the loan, CIBIL considers it being credit hungry and the chance of getting a loan is minimized. CIBIL credit rating and net salary, which includes variable heads and existing loans, are the vital components in deciding the repayment capacity of the applicant.
- Type of interest rate: Before taking a home loan, you should have clarity about different types of interest rates. The type of interest rate you choose also leaves an impact on the monthly EMIs to be paid. One should be aware of the difference between a fixed rate home loan and floating rate home loan. In fixed rate home loan, the EMIs don’t vary over the loan tenure. So, a fixed rate home loan is beneficial when the interest rates are expected to rise in the near future. In floating rate home loan, the interest rate is determined based on the prevailing base rates plus a floating rate. The EMIs are based on the base rates. And a floating rate home loan is beneficial when the interest rates are expected to fall in the near future.
- Loan Tenure: You should decide your loan tenure wisely as the loan tenure can impact your EMI payments and interest paid. To calculate EMI of the home loan, one has to consider home loan amount, interest rate and tenure. The amount of the monthly EMI is inversely proportional to the home loan tenure and the interest amount is directly proportional to the loan tenure. In case of longer loan tenure, the monthly EMI amount is lower and the total interest paid is higher. In case of short loan tenure, the monthly EMI amount will be high but total interest paid amount will be less.
- Read the Documents: Do not sign the marked spots blindly without even reading anything mentioned in it. You should check the documents carefully and read all the terms and conditions to know about different charges applicable and other charges like processing fee, late payment fee etc.