Month: June 2016
Gold – the yellow metal, the metal favored by women and men alike. For women, it has ornamental value while for men it has an investment value as gold is always found to appreciate in value over time. If numbers are to be believed, India’s gold imports have shown an increasing trend over the years because consumers are continuing their romance with this favored metal. To cash in on this romance, banks and financial institutions are offering gold loans against the pledge of gold ornaments owned by individuals. These loans are easy to avail, cheap and less risky (from the lender’s perspective) and are highly favored by both borrowers and lenders. The popularity of gold loans is reflected in their CAGR which shows that the Compounded Annual Growth Rate of Gold Loans outstanding from 2008 to 2012 was 57.5% for banks and 98.5% for Non-Banking Financial Corporations (NBFCs).
In short, gold loan is becoming an increasingly favorable borrowing option for many individuals. When it comes to geographical distributions, South Indian leads the race with an annual gold loan demand of 40% followed by West India at 25%, then by North India in the range of 20% to 25% and the race completes with East India with only a 10% to 15% demand of gold loan. Bangalore, Ahmedabad and Mumbai are the top 3 cities which have the highest demand for Gold Loans as people have no qualms in obtaining this easy source of finance. With all the brouhaha over gold loan, here are some reasons why gold loans are a current favorite of many borrowers:
- Low rate of interest – one of the primary reasons of availing this loan is because the loan promises a lower rate of interest compared to other personal loans which are unsecured and thus, have a higher interest incidence.
- Easy availability – unsecured personal loans are issued after checking the creditworthiness of the applicant and usually require thorough checking on the lender’s part and waiting on the borrower’s part. Gold loans are sanctioned against the security of gold ornaments and are thus easily available
- Utilization of assets – your gold ornaments, though assets, remain sitting in your lockers because of lack of any apparent use. A loan against these assets, thus, sounds practical as you can avail money on your ornaments for meeting your personal or business related expenses without having to sell your ornaments off.
- Easy procedure – since the loan is issued against gold assets, the requirement of documents is reduced and the loan processing procedure becomes shorter. This entails easy availability of finances through an easy application and sanction process
- Flexible – many lenders provide for an overdraft facility wherein the interest is charged only on the borrowed amount. There is also the prepayment facility extended by other lenders where the loan can be prepaid anytime without additional charges while some lenders insist only on the interest payments during the loan tenure. Thus, a gold loan comes with flexible features which are suitable for borrowers.
- Beneficial for lenders – since lenders obtain the security of the gold ornaments, they do not have any default risk of non-repayment of the loan. The loan is issued based on the value of the gold pledged with the lenders and as such, the applicant’s income capacity and financial position does not indicate the repayment potential. Thus, lenders are risk-free when it comes to obtaining the repayment of their loans granted.
With so many benefits, no doubt the gold loan sector recorded such a high Compounded Annual Growth Rate (CAGR). Borrowers in Bangalore, Mumbai and Ahmedabad have contributed prominently to the gold loan growth rate story. Gold loan is issued based on the prevailing price of gold and the current price per 10 gram of gold on the date of writing this article in these top 3 cities is as follows:
Purity of Gold
24 Karat Gold
|22 Karat Gold||Rs.28,000||Rs.29,600||
The prices fluctuate every day and as is evident above, is region-specific. The purity of the gold pledged, the current prevailing price of gold and the total quantity of gold pledged are the factors which determine the amount of loan available to the borrower. So, India is taking leaps and bounds in securing a gold loan, how about you?
A saving account maintained with a bank is the basic banking practice followed by all. Moreover, with the recent launch of Jan Dhan Yojana Scheme incorporated by our honorable Prime Minister, the penetration of savings accounts has reached even to the remotest of villages. A savings account provides us with the day-to-day banking facilities like withdrawing cash when required, depositing any excess money in hand, paying bills, making transactions using a Debit Card which comes with the account, etc. With the increasing consumer awareness, banks have added various new features to their savings account to provide an extra edge to customers. With about 100 or more banks in our country today, you have a wide variety of choices when it comes to choosing the best savings account for your needs.
A large variety of choices also makes us scratch our heads wondering which one would be the best among all and it becomes difficult putting a finger on one specific bank’s savings account. I intend to help all you confused people out there who are not able to make this decision. To choose the best savings account, the following features hold relevance and should be considered.
• Network of branches – the most important guiding factor, when it comes to choosing a back for a savings account, is location of the bank’s branch. Banks in the vicinity of your home or office would be obviously given preference as it eases carrying out banking transactions which require a branch visit.
• Variety – another important criterion is the variety in the types of Savings Accounts offered by the bank. Today, banks offer specialized accounts like salary accounts, premium accounts, women, senior citizens or children oriented accounts, basic accounts and zero balance accounts. You would be benefitted by the account most suitable to you and the choice of the bank also depends on the product variety it offers in terms of saving accounts
• Interest rate – returns are always given the prime position and you would definitely like to earn the highest rate of interest on your savings account. Since RBI has made allowances for flexible interest rates, gone are the days when savings accounts offered a universal rate of 4% per annum. Today, banks offers as high as 6% or 7% rate of interest on their savings account
• Online Banking facilities – this one is gaining importance in the current times when internet has eased the way of life for individuals. Everyone uses the all-too-dependable internet to carry out all their activities and transactions. Banking is no exception to the rule and you should consider the ease of online facilities extended by your bank before choosing it to be the best.
• Fees and charges – though often ignored, you should check the associated charges levied by the bank on its account related transactions and activities. Needless to point out that the bank with the lowest charges is the winner hands down of being the best in its category.
• Minimum balance requirement – most savings accounts require maintenance of a minimum balance in the account monthly or quarterly. If you fail to maintain this balance, you are liable to be penalized. A higher minimum balance requirement is disadvantageous because you lose the returns you would have otherwise earned on investing the minimum balance fund elsewhere. Thus, look for banks which do not have a very high requirement of maintaining the minimum balance in the offered savings account.
If we keep all the above-mentioned points in consideration, IndusInd Bank Savings Accounts qualify in all respects. IndusInd bank has an all-India presence of about 745 branches which solves the branch location problem. There are twelve types of savings accounts designed for different segments of people and each account provides great features and benefits. When we talk about interest rates, 4% is provided in all accounts where the balance is lower than 1 lakhs, 5% for balances between 1-10 lakhs and 6% for balances above 10 lakhs. Thus, individuals have the potential to earn a high rate of interest on their savings account. With internet banking, mobile banking and phone banking facilities, the bank has made banking easier. The minimum balance requirement in the accounts and the fees and charges are also kept low and affordable.
All in all, IndusInd bank does provide some of the best savings accounts and can be chosen for opening a new account.
Personal loans have a unique feature of coming into the picture first, when facing a financial crisis due to emergency of any kind or even a long planned and well – thought over expense. Personal loans are a helpful tool in case of medical urgency or even to redo your living room. No one from the lending institute would ever come back and ask you about the area of usage of the disbursed funds. The absence of any kind of collateral or a security also makes personal loans one of the highest selling asset products offering by any reputed bank or a financial institution.
Next step is to obviously choose from the various options available around us. Nowadays, the lending institutes try to aggressively sell the loans. Remember the last time your friends about receiving another call from a loan department and getting bothered! However, you need to research on seeking feedback about the lowest interest rates and low turn-around time for processing of loan application.
Once you have chosen about the loan amount and the institution where you will be borrowing from, you need to adhere to the eligibility criterion monitored by the borrowing institution. Among the other documentary requirements, one check is completed from the bank’s end – CIBIL score.
What is a CIBIL score?
CIBIL is the abbreviated notation for The Credit Information Bureau (India) Limited. CIBIL happens to be an agency which provides credit history and associated reports linked to any individual or even a commercial set ups. CIBIL agency possesses records and details of your loan of any kind or credit cards even. This being an independent agency, helps to provide the most sought after platform by banks and other Financial Institutes, the credit worthiness of a possible lender. It reflects the history of lending by an individual and the associated repayment history. Any EMI skip or settlement of a long standing overdue for any loan account or credit card by an individual gets captured in the CIBIL scores. Data available on CIBIL gets updated every month with the help of submission of information by various lending institutes.
Good CIBIL score
CIBIL scores typically range from 300 to 900 for a person having any kind of credit history, 300 being the lower end of the score range. In order to be considered eligible for a personal loan, lending institutions look for a safe CIBIL score between 750 and 900 of the borrower. One might question in this scenario, whether a person having no credit history of any kind stands a good chance to get his loan application processed? The response is – NO. The reason behind this is the lenders are no really sure whether you really possess an appetite for credit at all.
You might have a pertinent question post the above information. Why such a high CIBIL score requirement for seeking a personal loan? Simple explanation would be the boon of personal loans –i.e., not seeking collaterals, becomes the bane for the lender. Personal loans have been considered by all lending institutions being an unsecured asset type hence making them very risky. A high CIBIL score would direct the lending institutions to ascertain whether a lender possesses a habit of a disciplined repayment.
Nowadays, CIBIL allows any individual to check his/her credit scores online post submission of a small fee. A tentative lender can check his score directly in case he is unsure about the same. The latter situation is desirable in such a case, since a rejection of any kind of loan application can further bring down the credit scores. On the other hand, a good credit score of 750 and above can help you negotiate better terms with any lending banks/institutions.
In situation where your loan application has been rejected by any bank due to a bad credit score, it is prudent not to apply for a loan immediately at some other organisation. First and foremost, one should check the CIBIL report in details and work towards clearing dues or unattended loan/credit cards.
An individual has to practise to be careful and disciplined while managing loans and credit cards. This can serve a long way to achieving the financial goals in the long term.