Month: September 2016
Buying yourself a home or planning for it is one of the biggest and most important decisions in life because it is a decision you make for your long future. With increase in properties, not everyone can buy a home or a property by paying completely from their pocket. So what to do? The answer lies in taking up a home loan. It is the best option which enables you to buy the property of your dreams. But before you apply for a home loan, you need to understand and research on how your application would not be rejected by the bank or any financial institution. We give you Top 10 reasons as why your Home Loan Application might get rejected.
- Rejection Of Loan By Different Banks
When people apply for a home loan, some people try to apply it in different banks at the same time. What people do not understand that once your home loan application is rejected at a bank or any financial institution, it has an effect on your credit score as well which can lead to your home loan rejection at other banks or financial institution. It is wiser to apply at one bank or financial institution and then wait for the reply or approval or rejection. This will help you know why your loan application was rejected and you can rectify that mistake.
- Your Address Is On The Defaulter’s List
Another reason why your housing loan application can be rejected is if you have shifted to a rented house where someone has not paid up his/her loan. Or maybe has a credit card who’s credit dues have not been paid on time and the address you reside at is in their records. This way, the address would be stored in the defaulters list with every bank. There will be a high possibility that your application may get rejected because of this.
- Any Unpaid Dues?
Credit card dues, late payments, EMI’s can be one of the main reasons of your application being rejected. This is a simple issue which can be resolved with a simple solution and that is to make your payments on regular basis and not delaying any deadlines. You can always keep a check on your credit card and also subscribe to a reminder service through your bank which would help you making the payment before the due date.
- If You Already Have Other Debts?
Banks check for your monthly income and other ongoing monthly payments. The amount minus your payments is considered your real income by the bank or any financial institution. If you have more than one debt, then availing another loan would be difficult for you to pay. This means that the bank can reject your application.
- Guarantor To A Loan Defaulter?
When you sign up as a loan guarantor, it comes with a responsibility. It means if the person who applied for the loan fails to repay the loan amount, then you would be responsible to repay on their behalf. You should not rush into signing anywhere unless you are completely sure of the person’s repayment capabilities.
- Your Own Repayment Capabilities
One of the main points that banks have make sure before processing the loan application is to understand your loan repayment capabilities. It depends on the amount that you save monthly after paying your dues or EMIs. You should make sure that you have a good repayment capability so that in case of an emergency, you still have the capability to not fall short of your EMIs and become a defaulter.
- Age Can Be A Concern
The banks or any financial institution would be a little hesitant if you would be coming near to your retirement age. This is due to the act that you will not be having any loan repayment capabilities after some years. Some banks may offer you short term loans but that would be difficult for you as the EMIs would be too high and be a burden on you. So, the banks may reject your home loan application because of your age as well.
- Have You Switched Jobs Too Often?
This reason is one which many people do not understand. People do not realize that jumping or changing jobs quite often reflects in a bad way on your home loan application. Banks or financial institutions strongly look for job stability. This helps your loan application, as working at a reputed organization helps the bank make the loan approval easier. You should be working for at least 3 or more years to be eligible for a home loan. If the bank thinks that your organization’s future is not stable, then they have the right to hold the application and reject it. Hence, job stability is also a very important factor by any financial institution or bank.
- How Good Is Your Credit Score?
One of the most important factors when a bank is sanctioning a loan is looking at the borrower’s credit score. It is very important to have good credit score before you go and apply for a loan. A god credit score lies between 700 to 850. It can be attained by paying your credit card or due payments on time and on regular basis.
- Do You File Your Income Tax On Time?
Before you apply for a home loan, make sure that you file your IT Returns on time even if you do not get Form 16 from your employer. It always helps when you apply for a home loan as you would be having a clear record of your tax returns for the past 2 years.
Credit cards are becoming increasingly popular in India owing to the benefits and the convenience it offers to the customers. But the higher interest rates and a lot of other added charges means you have to be careful while using them. Listed below are 5 logical tips of using the credit card appropriately and saving you from a whole lot of heartaches in future.
- Pay your balance in full: Though it is the basic rule that has to be followed by the customers using a credit card but most people neglect paying the balance in full. This is a bad practice and can result in huge payoffs. This means if you have a credit card balance that is charged at 30% interest rate per annum and an investment that gives you just an 8% return – you must better pay the entire balance in full before you even think of investing your money. The extra interest you pay on your remaining balance counterbalances any interest income you receive from your investment.
- Avoid credit cards with an annual fee: Never get a credit card with an annual fee unless you have a specific benefit in mind. Instead get a credit card with no annual fee (e.g., Kotak Mahindra bank credit card), because then the only expense you will have to bear, is the interest payment; and if you pay off your balance on time every month, you’ll not have to pay any interest and your credit card will, in fact, be free!
- Stay below your credit card limit: Use a credit card wisely. Just because a credit card gives you the convenience to spend as per your wish, doesn’t mean go over your credit card limit is fine. Your bank with charge a fee for it and increase your interest to a higher penalty rate. To avoid this, it is better you use your credit card wisely. If you use RBL credit card, you can even check your balance online.
- Keep a track of your statement: There are chances that your credit card statement includes transactions that were never made from your credit card and you may end up paying huge amount unnecessary. To avoid being a victim of such case, it is good to keep a track of your monthly statement. Read the statement carefully and check whether the transactions mentioned in the statement are done by your card or not. It is even better if you go online and check the transactions in advance.
- Never use your credit card as an ATM: Most people have the tendency to withdraw cash from their credit card and it is really addictive. Withdrawing cash from your credit card should be the last option. Treating your credit card as the easy and reliable way to get cash will not help you in the long run because first, the interest rates on cash withdrawal are much higher and second if you adopt this habit, you will have higher outstanding balance quickly. In addition to this, the interest rate will be adding up to your outstanding balance and you might face really a tough situation is paying off the loan debt in future.
These are a few significant tips that you must keep in mind while using your credit card. Also note that credit card companies like Kotak Mahindra, RBL keep changing the terms and conditions of your account including changes in fees, interest rates, billing, and other features. They ideally inform about these changes via mail but most people often ignore such emails. It is a bad practice. You must keep a check on such emails to decide whether you want to continue using that card or want to replace it with the better one that also offers good benefits.
The real estate sector in India is growing at a very high speed. With this rapid pace, frauds and scams associated with them are also increasing, which come to light when one goes for a housing loan. Very often when the EMIs for a home loan start but there’s no sight of the home finishing off soon, people realize the hollowness of real estate builders’ promises. Real estate scams have a huge process which include legal frauds, false promises, buy one and get something free schemes, fly by night operators etc. To avoid such scams, here are some important aspects to keep in mind and being an investor, you need to keep a look out for.
Keep an eye out for the following:
- False/Fake Promises:
With the increase in real estate, the competition has increased as well. Builders try to lure in customers or buyers with many offers to gather funds at the initial phase and fund the projects. False and fake promises are part of it. Recently, a Gurgaon-based real estate developer assured the investor of 12% returns on the money invested until the investors were given possession. Unfortunately, the cheques that were given to the investors bounced. It became worse as the investors had to face delays in projects and also the pain of their investments going down the drain. The builder was accused by more than 600 investors for embezzlement of more than 1000 crores in the project.
- Assured Rental Returns:
Many builders today market their projects by giving assurances of a fixed rental income from the properties. Some of them even publish fake rental listings of the various projects on the internet. If a potential buyer does not do his/her own research, they may be fooled or actually believe that the property they bought could be easily rented out for a fixed monthly income. But actually, once you purchase it and it is over, the rentals are pretty hard to come by, leaving the buyer in a no man’s land. And the builder just vanishes without leaving anything to catch hold of.
- Deliberate Delays:
One of most common occurrence in the real estate fraud is disappearing builders and project delays. What builders do is delay a project completion deliberately. This is done to get more numbers of buyers. While some builders put the money in other projects which delays both the projects. What investors are left with are purchase agreements and nothing more while they also pay huge amount in rentals.
- Delayed Approvals:
Out of many cases reported by the investors after they get possession are several sanctions still pending. These include utilities like electricity connection, water connection etc. Issues like building with land use violation, unauthorized layout and sub-divided plan, floor violations etc. which people get to know after construction has commenced and agreement formalities have been done could also lead to the delay. Your title registration and other approvals can also be delayed.
Tips for Real Estate Investors/Buyers:
For potential buyers who want to invest their hard earned money and years of saving in a real estate projects, no amount of caution is less. Here are some precautions that you must take while purchasing property;
- Hire a Legal Advisor:
It is good to hire a legal advisor with whom you can discuss every property-related documents before you sign with the builder. With a legal advisor, you can make sure that all the approvals are in places. If they are not in place or the builder has any partial approvals, then it is better hold on and think again in investing your money.
- Background Check of the Builders:
One of the most important points is to make sure you do a background check of the builder and his credibility. A proper research will do you no harm but also let you know the buidler’s completed and uncompleted projects, their track records and also let you know if they are the members of the CREDAI.
- Bank-approved Projects:
Chances of being a fraud projects are relatively less if the project is approved by a leading bank. Banks perform a background check on their own and duly make sure before they go ahead and become as the home financing partners.
- Get Assurances on Paper:
Get an assurance on a legal paper signed by the builder for all the amenities, utilities etc. for what you are paying for. Many builders show a lot of images and utilities on their brochure but it differs in the end from what was in the brochure. Builders include disclaimers on their brochures to the effect that all projected amenities and images are only somewhat an indication and may or may not be represented in the builders’ actual obligations to the buyer. So it is best for you to get a written assurance by the builder.
- Delay Clauses:
Before you sign on the sale agreement, make sure you have delay clauses in the agreement. It should also include construction stages, time frames and a copy of the approved plan. It is good to keep a look for progress of the project you have invested in.
So, here are the tips and precautions for everyone who is looking forward to invest their hard earned money in a real estate project. Make sure you do all your research before you think of investing in a project.
Owning a home is a great feeling, but paying out a significant portion of your salary every month as EMI payment is not that great. In fact, the interest pay-outs on the home loan over the 20 odd year tenure tend to be larger than the principal amount that was initially borrowed. In this case, foreclosure of your home loan is the best solution because it lightens your debt burden and banks do not levy any foreclosure charges on a borrower with a floating rate home loan. Here are the tips to eliminate your mortgage loan faster.
Start paying extra
The thought of foreclosure seems intimidating, as it’s always difficult for us to trim down our monthly expenses and start saving. But try to make slightly higher EMI payments every month, this would reduce your principal amount and as a result you will be paying overall lesser interest than before. Doing this would reduce your home loan tenure by at least 2-3 years.
Take a look at your financial picture
Consider the refinancing option for your loan and take a closer look at your finances and other investments. Check the number of investments you have and the returns they are yielding. Once you assure that your investments are taking care of future financial goals then you can add up the surplus amount you have towards the foreclosure of your loan. It is advised that you should not take out your emergency funds for this purpose.
Try to do partial payments whenever possible
Many lenders allow their borrowers to make n-number of partial payments in a year. However some banks do restrict the number of partial payments one can do. You should check your bank’s provision on partial payments, and start doing it whenever you have spare funds. Instead of spending it on buying luxury items, you can utilise the money in doing prepayment of your loan. You’ll have to make some compromises but in the long run you will be getting over a huge debt.
Control your expenses
Home loan is big financial burden, but nothing matches to the satisfaction of a roof over your head. Let this thought become your motivation of saving funds, cut corners wherever possible and allocate all the money towards the prepayment of your mortgage loan. Avoid foreign holidays and other luxuries for few years of loan tenure and in this way you’ll be able to foreclose your loan early.
Do regular and timely payments
Even if you sending extra payments every time, doing late and irregular payments would charge you extra charges and penalties and you will end up paying more ultimately. Default on your payments can also get you in a trouble of financial and credit related problems. Therefore try to be regular and do timely payments of your loan EMIs.
When to make prepayment
Initial years of mortgage loan tend to have interest payment that outweighs principal payment and at the end of loan tenure, principal payment is more in comparison to interest payment. Therefore, financially it is beneficial to prepay your loan during first 7 years. But before coming to any conclusion in this regard, you must do a cost-benefit analysis and arrange your prepayment schedule accordingly.
Get your family in loop
You may be the primary earner of your family and the burden of managing the finances is on you, but when it comes on mortgage, your family should be equally involved and responsible of the pre-payment process. They may not help you in pitching up those extra payments but they can surely suggest you ways of doing so.
Using these effective strategies, you can save more and have full ownership of your home before your mortgage tenure actually ends.
Your Credit Information Bureau Limited (CIBIL) TransUnion score is a crucial factor in determining your creditworthiness for any credit instruments like loans or credit cards you may apply for. Your CIBIL score is affected by how you handle your debts and your credit history as shown in your credit report. Your credit report contains details such as past credit availed, payment regularities, etc. A high score, usually 800 and above, means high creditworthiness, whereas a score that is closer to 300 is considered low and labels you as a risky borrower.
A good CIBIL score is your ticket to quick and hassle-free loan and credit card applications and is used as a yardstick by financial institutions to decide whether to extend a new loan or credit card to you and what interest rate to charge on your loan.
The following tips can help you get your credit score under control:
1) Check your credit report periodically
A healthy CIBIL score is rooted in a clean credit report. Request a copy of your credit report and check all entries thoroughly. If you spot any mistakes and/or erroneous entries, have them resolved with the reporting agency/credit bureau at the earliest.
Sometimes, financial institutions/banks might not update credit bureaus regarding repayments in a regular manner. In such cases, your credit report may reflect even settled dues and closed loans as unpaid. Such out of date information could also be the outcome of clerical errors or fraudulent transactions (resulting from identity theft) in your name.
2) Pay your credit card bills and loan EMIs on time
Regularly paying off your outstanding credit card bills within the stipulated time frame has a positive impact on your credit score. Payment regularity contributes 30%–35% to your total credit score. Having no late on your credit card outstanding balances and not missing loan EMI payments contribute significantly to a healthy credit score.
3) Outstanding debts be gone
To improve your credit score, pay off old debts and outstanding loans. Begin with paying off unsecured loans that carry higher interest rates such as personal loans, credit card outstanding balances, etc. Then focus on other debts. Making timely payments to get rid of your outstanding dues helps boost your credit score.
On the contrary, if you square off all your credit card dues suddenly at one go, it could indicate instability of your financial standing, thus negatively impacting your credit score. While regular repayments boost your credit health, sudden one-time squaring of debts has the exact opposite effect.
4) Spend small, pay in full
Avoid making purchases on your credit card that you doubt you can repay by the end of your billing cycle. Keep a strict control on your credit card spends and always try to pay off the entire outstanding in full each month. Try bringing down the balance of each credit card to 30% or less below your sanctioned credit limit. Settle dues for the card with outstanding balance closest to the maximum credit limit first. This will protect you from falling prey to the “minimum amount” debt trap that entails high interest charges and make the repayment drag on for months or years.
5) Limit your credit utilisation
Your credit utilisation is the amount of credit you use vs. the total credit sanctioned to you. At any point in time, your credit utilisation should ideally remain within the 30-40% range, never exceeding 40%. This will help you maintain a good CIBIL TransUnion credit score.
6) Ensure a healthy credit mix
Business and home loans are secured loans, good for asset creation. Repaying these loans on time improves your credit score. Credit card and personal loans fall in the unsecured category and too many of these will be a reflection of poor credit behaviour and adversely affect your credit history. You must therefore act accordingly to find the correct mix of credit instruments.
7) Put a cap on the number of credit cards you own
Owning a credit card may help you qualify for loans, however, having too many credit cards and making major spends increases the credit utilisation ratio and has an adverse effect on your credit score. Applying for a new credit card when your credit score is already on the lower side is not a good idea.
A low credit score can be prevented by avoiding excessive usage of credit cards and by not keeping more cards than you need. Limiting expenses between 30-40% of your total credit limit prevents your debts from spiraling out of control.
8) Consider a secured credit card
If you have an unsatisfactory CIBIL score but want a credit card nevertheless, consider a secured credit card. Several banks like Citibank, ICICI, SBI, RBL Bank etc. offer secured credit cards that are backed by fixed deposits made with the bank. Secured credit cards help you establish good credit history.
9) Keep a track of your joint, co-signed, and guaranteed accounts
Regularly monitor the statements of your co-signed loans because any negligence on the part of the primary applicant makes you equally liable and can adversely affect your credit score.
10) Limit loan inquiries
Each time you enquire for a loan, your lender makes a credit enquiry and these enquiries are recorded in your credit report. Multiple inquiries in a short span puts a red flag against your name and negatively impacts your credit score, making it tough for banks to decide whether to extend the loan to you or not. If you already have a low credit score, avoid making too many new loan enquiries.
Once you successfully restore your score, make sure not to stack up excess credit nor fall back on timely payments. To build a strong CIBIL score, excellent financial discipline is essential, which in turn is the key to sound and long term financial health.
A majority of Indians rely on bank loans to buy a car. Barring a home loan, repayment of a car loan is considered as one of the largest financial responsibilities that the average Indian commits to. If you are one of them, it takes around five to seven years to pay off the entire amount. To help you in this context below are 5 ways you can manage your car loan debt easily:-
- Pay more than the minimum: As the general rule goes, the longer you take to repay the loan amount the more interest the bank will charge and you’ll end up shelling out more money from your pocket. To put an end to this practice, it is wise to pay at least 2-3% more than the outstanding balance. Let’s suppose if your monthly loan EMI is Rs. 10, 000/-, try to pay the double of it or more. Streamline your normal expenses. It will be easy by making a few sacrifices like if you give up your happy hour drinks, rely on home cooked food and eliminate desserts.
- Make one large extra payment per year: Make a habit of making one large payment each year. Though it seems tough to make a single lump sum payment at one go, but once you make it a routine, you will be more than happy to pay off your car loan easily by saving your interest rate significantly. But before making one large extra payment, make sure to discuss this with the bank as there are some banks which do not provide this facility to the customers and might penalise you for such extra payments or paying off the loan balance early.
- Never skip payments: Some banks may allow you to skip your payment at leave once or even twice a year. But it is advised not to get tempted with this facility as it may give you leniency for the initial month but in return, it will lengthen your loan term and cost you more in terms of total interest payouts.
- Refinance your loan: You can even take new credit to pay off the original loan. Refinancing is done to provide lender the facility to obtain a better loan term and lower car loan interest rate. This way you can take a new loan, negotiate a new monthly payment and a new pay-off date for your new loan. Do this only if the bank provides a lower monthly payment and sooner pay off date for your new loan. Otherwise refinancing your loan will be of no benefit as you will end up paying the same principal and at increased interest rates.
- Find extra money: If all the aforementioned plans fail to work, you can cash out your savings and investments and use the money to pay off your car loan faster. Though this may sound a strange idea at once but is considered a shrewd way to pay off car loan debts without spending much and saving big on the interest payouts instead.
The bottom line is that managing your car loan astutely by paying off the debt early will save you money that is otherwise spent on paying the interest amount especially if your car loan interest rate is floating instead of fixed. Also, it will decrease the overall term of the loan significantly. Just imagine what you can do with your extra money: save for retirement, renovate your home, and much more to ensure a happy life in future without worrying about the loan debts and burden of EMIs that keep dragging on for years.
Owing to escalating property prices, very few people are able to finance a house out of their pocket through a lump sum payment. To help such individuals buy their own residential property, home loans offered by leading banks and NBFCs in India play a vital role. Designed to suit the unique needs of today’s homeowners, these loans are apt for both salaried and self-employed professionals as it offers attractive interest rates that make these loans affordable.
There are times when due to extremely busy schedule you may fail to keep track of your home loan repayments. The immensely beneficial Home Loan EMI calculator makes the process of calculating your monthly EMI payouts easier by enabling you to get to the nitty-gritty of these payments without having to work out these complex calculations by hand. Using this service is 100% free and aids you in calculating as well as recalculating your home loan EMI and total interest due in a snap even if you are changing multiple variables in each calculation.
The obvious perks of Home Loan EMI calculator include the massive saving of time and energy. Apart from this, the time taking phenomena of boring calculations can now be completed in mere seconds, instead of hours. Using a Home Loan EMI calculator allows you to examine your EMI payouts for different loan interest rates and help you find the right home loan too.
With the Home Loan EMI Calculator, the usually tedious and time-consuming task of calculating the EMI related to your home loan is simplified and all the essential home loan repayment data including amortization details and ability to change components such as interest rate and tenure to test several combinations. Some basic loan parameters that are to be kept handy while using the Home Loan EMI calculator. These include the loan amount, applicable processing fee and pre-payments to be made. These factors would help you estimate your monthly EMI payouts better.
How does it work?
The free Home Loan EMI calculator service offered online possesses a user-friendly interface. As mentioned above, you are required to provide some key information such as Loan amount, relevant tenure and interest rate and press the ‘calculate’ button. The result page will provide you the details of the EMI applicable to your home loan, as per the information provided by you. In addition to this, amortization details i.e. a breakdown of the interest and principal payouts are also provided as part of the results displayed by the EMI calculator.
Home Loan EMI calculator Benefits:-
- Determines the EMI amount: It is one of the key benefits of using a Home Loan EMI calculator. Thanks to this unique friendly service, you can get the exact EMI amount you need to pay by simply providing basic inputs such as loan amount, the rate of interest and the loan tenure. ,
- Access to various finance charges: Using the EMI calculator will give you an access to processing fee value and the total interest that you have paid till date. Since banks and financial institutions treat this amount as a percentage of the principal amount, knowing the actual value will greatly help you in deciding the additional costs of taking out the loan.
- Evaluate numerous Loan Offers: You can use the calculator to compare home loans provided by several banks. All you need to do is to provide some basic details of the home loan, get access to various home loan offers of different banks, and compare them. You can even sign up for the most suitable loan option which suits your interest rate and charges.
- Helps in choosing the loan tenure: Once you know the EMI value through the home loan EMI calculator, it will further help you in choosing the loan tenure. If your EMI is higher and the tenure is short, you can try to extend your home loan occupancy depending upon your monthly income and budget.
- Assist in Managing your loan repayment: If you are in the middle of repaying a home loan and would like to pay off the outstanding loan before the end of the loan term, using the Home Loan EMI calculator can help you significantly in this regard.