Month: March 2017

7 free and low cost ways to protect your credit

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CIBIL score is the most commonly used credit score in India, because CIBIL or Credit Information Bureau Limited is the organization which keeps  a track record  of the financial habits of individuals in the country. CIBIL score is one of the most important factors which banks and financial institutions consider while analyzing your loan application. A CIBIL score is generated based on the credit history which includes the credit you have taken in the past and the manner in which you have repaid it. A score more than 750 qualifies to be called high score and it means that you are very credit worthy. On the other hand a poor score is less than 350 and proves that you are a risky customer for any bank or financial institution. If your CIBIL score is less than 350 then banks and lending organizations will hesitate in approving your loan or credit card.

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Awareness about a good credit score is increasing in the country because most people need to take loans for various purposes. Often people get surprised when their loans are rejected and wonder how to protect and improve their credit score. However, if your credit score is damaged then it may take some time and effort to improve it, and hence prevention is better than cure in this case. Let us look at some ways in which you can protect and improve your credit score.

Pay bills regularly

Regularity of bill payments comprises 35% of a person’s total credit score. Many people are still not aware that paying their bills like electricity bill and phone bills play a major role in improving your credit score. Hence it is important to pay your utility bills on time. If you want a really healthy credit score then you should make no late payments for seven years at least.

Square off debts

Another easy method to improve your credit score is to start paying off your old debts and loans. It is also advisable to make timely payments of the loan EMIs to get rid of your dues, even if the loan amount is a small one. It always helps to minimize your outstanding debts when it comes to improving your CIBIL score.

Less number of credit cards

If you have a credit card, it makes you eligible for loans and you can also take a loan against your credit card. However, owning too many credit cards and making large purchases on credit card can cost you high at times. It is hence advisable to avoid having credit cards more than necessary and avoiding the use of credit cards in the first place. You should also try to limit the total expense on your credit cards between 10-20% of the total credit limit.

No card defaults and new purchases

One important method of improving your credit score is to pay off all your credit card debts and avoiding defaults. It is ideal to maintain the balance of your credit card at least 30% below the credit limit. You should also pay off all dues when the outstanding balance is nearing the credit limit. Also,“credit card apply” is a bad idea because this can further damage your score

Get a secured credit card

If you have a low credit score then it is a good idea to get a secured credit card and build a brand new credit history with its help. If you make payments on time for the secured credit card, it will improve your credit score.

Timely EMI payment

Pending loans and debts have a major impact on your credit scores and the EMIs on these loans and debts should be paid on time. At the same time, if you keep your EMIs pending it will compound your interest.

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Various Types of SBI Home Loan

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SBI is one of the most prestigious and trusted bank in the home loan sector. The bank offers a bunch of different home loans and the SBI home loan types are designed to suit your requirement no matter what occupation you are in and no matter what type of loan you are looking forward to. Let us check out the numerous options offered by the bank.

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SBI Flexi Home loan

As the name suggests this I one of the most preferred SBI home loan types because it offers flexible payment option. The first benefit of the loan is that it offers 1.2 times more the amount as per the eligibility of the customer but the amount has to be Rs 20 lacs or more. So if you are eligible for Rs 20 lacs, you are entitled to receive a loan of Rs 24 lacs. Another benefit of the loan is that you can choose to pay only interest during the pre-EMI period which can range from 36 to 60 months. After that your EMI will shoot up. The repayment tenure can be 25 or 30 years depending on the choice of the customer. Apart from that, the customer can apply the loan with only 2 years of experience. The age range for this type of loan is 21 to 45 years.

SBI MAXGAIN

SBI MAXGAIN is an overdraft home loan. In this case, the customer can operate the account as savings or current account. The loan is sanctioned for more than 20 lacs. The customer can keep the additional fund with the bank and get benefit on the interest of the loan amount. This will help them get yield on their savings as interest on the home loan will be reduced in proportion with the savings deposit. The customer can withdraw the money anytime as per requirement and checkbook and net banking facility will be provided to the customer. Other terms and conditions are same as the regular home loan.

NRI home loan

SBI has a special plan for the nonresidential Indians or people with Indian origin. The loan amount can be 3 lacs or more and 2 years of employment is mandatory.

SBI REALTY

In case, you want to purchase a plot and them make a house on the same, this one is the best choice. The bank provides loan up to 10 crores for the plot and the house together but the construction has to begin within 5 years of purchase of plot. You can first take loan for the plot and then take loan for the building. Repayment period is 15 years.

SBI PAL

Pre-approved loan is for people who are about to purchase a property but have not finalized one. This loan will enable to understand their estimate and they can choose a property accordingly. The validity period of the approval is 4 months within which the customer has to provide the document.

SBI Tribal Plus

This home loan is designed for hill/tribal areas and the maximum loan amount here is 10 lacs. Here. Mortgage of property is not possible but building home is possible. Repair and renovation is also financed.

GRAM NIWAS

This is a loan for the rural area and the maximum amount here is 5 lacs. Areas with less than 50,000 population are eligible for this and the processing fee is waived.

SAHYOG NIWAS

The loan for self help group is sanctioned on the basis of number of members. The amount per member is Rs. 50,000.

SBI PRIVILEGE HOME LOAN

This loan is for the central or state government employees where the repayment can be done up to the age of 75 years. The EMIs will be lower after retirement.

SBI SHAURYA HOME LOAN

This loan is specially made for the defense professional with similar benefit of privilege home loan and lower interest.

All About SBI Fixed Deposits

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State Bank of India is a public sector multinational banking and financial services company of India. The bank is headquartered in Mumbai, Maharashtra and has an asset valuation of 30.72 trillion as of FY2016 -2017. The bank has 20% of the market share in loans and deposits among the Indian commercial banks.

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State Bank of India offers FD schemes with attractive features and great returns that make them very competitive and sought after. They let your money work for you by giving you returns and by letting you save for your medium and long term goals.

SBI TERM DEPOSIT SCHEME:

The SBI Term Deposit not just helps you to save your money, it also earns for you. It has a lot of other important features and benefits which are as follows:

  • Senior citizens earn at 0.50% additional interest rate for deposit amount above Rs 10,000.
  • Minimum deposit tenure allowed is 7 days.
  • Maximum deposit tenure allowed is for 10 years.
  • Premature payment for term deposit between 5 lakhs and 1 crore is 1%.
  • Overdraft (Loan) allowed up to 90% of the principle deposit amount.
  • Interest rates can be paid at Monthly/ Quarterly or Yearly as per your requirements.
  • Monthly payouts are calculated at discounted rates.
  • Nomination facility available
  • TDS (Tax Deduction at Source) is applicable as per current rate, if Form 15G/ 15H is not submitted.
  • Term deposit can be converted to a cumulative interest payout deposit.
  • Automatic renewals
  • No premature penalty on term deposit amount up to Rs 5 lakhs, given the deposit was made for minimum 7 days.
  • Monthly interest payment option.
  • Income tax benefits under section 80C.

Interest rates fees and charges:

Deposit Amount Interest Rates
General Senior Citizen
Rs 1 crore to Rs 10 crores
180 days to 210 days 3.85% 4.35%
211 days to less than 1 year 4.00% 4.50%
1 year to 455 days 4.25% 4.75%
456 days to less than 2 years 4.25% 4.75%
2 years to less than 3 years 4.25% 4.75%
3 years to less than 5 years 4.25% 4.75%
5 years and up to 10 years 4.25% 4.75%
Rs 10 crores and above
180 days to 210 days 3.85% 4.35%
211 days to less than 1 year 4.00% 4.50%
1 year to 455 days 4.25% 4.75%
456 days to less than 2 years 4.25% 4.75%
2 years to less than 3 years 4.25% 4.75%
3 years to less than 5 years 4.25% 4.75%
5 years and up to 10 years 4.25% 4.75%

**Interest rates are subject to change as per government regulations.

Other SBI Fixed Deposit Schemes

  • SBI Tax Saving Scheme: It is a special tax saving term deposit scheme by SBI that has tax benefits under section 80C of Income Tax Act 1961. The deposit tenure is between 5 years to 10 years.
  • SBI Reinvestment Scheme: It is one of the term deposit schemes offered by SBI under which the interest payouts are made at the time of maturity only.
  • SBI MODs: It is a Multi Option Term Deposit scheme linked to the current account or savings account. The deposit in a MOD account is allowed up to a maximum of 5 years and withdrawals can be made in the multiples of 1000 only.

Fixed Deposit Vs Recurring Deposits:

Criteria Fixed Deposits Recurring Deposit
Deposit Type Lump sum Fixed amount periodically
Deposit Tenure 7 days to 10 years 6 months to 10 years
Income Tax Tax deductible at source as per depositor’s tax slab No tax deductions are made
Nomination One nominee per deposit account One nominee per deposit account.
Loan Facility Loan amount available keeping FD as collateral Loan amount available keeping RD as collateral
Eligibility Individuals (Singly or Jointly), HUFs Individuals (Singly or Jointly), HUFs, Minors

Benefits of Fixed Deposit Calculator

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Fixed Deposit is the safer investment option in comparison to other investment schemes. A fixed deposit account is your investment account where you can keep your money and earn interest on the duration of the deposit. It is among the most popular choices of investment in India as it offers low risk and higher interest (as compared to savings account) on your deposited money. However, fixed interest rate is paid at the end of maturity period and it varies from bank to bank. Usually longer deposit period yields higher interest rate on a fixed deposit account.

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Benefits of a fixed deposit account:

  • You get guaranteed returns of your deposited money as your investment does not depend upon fluctuating market rates unlike other investment schemes such as mutual funds, stocks, etc.
  • Investing your money into a fixed deposit gives you more benefits than depositing money in a savings account.
  • The fixed deposit account helps you in cases of financial urgency. In such cases, some banks also offer you loan against your fixed deposit account. Investor can get a loan of up to 90% of your fixed deposit amount.
  • Interest is paid upon maturity annually or monthly depending on the term you opt for.
  • You can secure your future by saving money into fixed deposit and earning reasonable interest on it.
  • Fixed deposits come with flexible tenure and you can choose the tenure of your investment ranging from 10 days to 10 years.

Fixed Deposit Calculator

Fixed Deposit Calculator is an online tool which helps the depositor in calculating the returns and interest earned on a Fixed Deposit account upon maturity. It is a virtual calculator where the depositor can input their basic FD account details such as FD tenure, deposited amount, rate of interest to calculate the returns from their Fixed Deposit.

How Fixed Deposit Calculator works

The FD Calculator is a very user friendly tool as it eliminates the need of manual calculations. Computer tools such as spreadsheets also fail to provide the ease and convenience offered by a fixed deposit calculator. User has to input the amount which they have invested into their fixed deposit account, tenure of the deposit and rate of interest offered on their FD.

Once all the details have been entered, then the user can click ‘calculate’ in order to get the instant and accurate maturity amount.

Benefits:

  • FD calculator can help you in comparing the returns of various banks. Before investing into any Fixed Deposit, you can do a survey about which bank offers highest returns.
  • Accurate and quick calculations help the user to plan their investments beforehand. FD calculator helps the most in case of deposit renewals as the interest rate offered is fixed but they can differ upon maturity.
  • New interest rates which are offered at the end the term can be higher or lower depending upon the particular bank. FD calculator can be used to calculate this interest rate. It helps the depositor to decide whether he/she should continue with the same fixed deposit scheme or switch to another by comparing their respective returns upon maturity.
  • Manual calculations are more prone to errors and it gets more complicated when it you have to compare between various schemes.

How the interest is calculated

Compound interest is offered on Fixed Deposit and it can be calculated as:

A = P (1 + r/n) (nt)

A= Total returns earned upon maturity of the Fixed Deposit
P= Principal deposited amount
r= Annual interest rate
n= Number of times when interest is compounded every year
t= tenure of your Fixed deposit

Online Tool for Car Loan EMI Calculator

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Equated Monthly Instalments (EMIs) are monthly payments that are made to repay a loan. This is a convenient way for someone to pay off their debt without worrying too much about the total size of the loan amount. It also gives an applicant a lot of flexibility in terms of how they wish to go about paying off their debt.

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A question that applicants often wonder is how EMIs are calculated. The EMI amount depends on three factors. They are:

  • Principal Amount: This is the actual loan amount. The interest and other payments are calculated based on this amount.
  • Rate of Interest: This is the rate at which a bank charges interest. Interest, of course, is the amount that is charged by the bank. It is the profit that a bank earns on a loan. The rate of interest is presented as a percentage and is applied on the total loan amount to arrive at the total interest. Another point that must be noted is the type of interest rate that is being offered. Interest rates may be fixed or floating. In the case of a fixed rate of interest, the EMI amount will remain the same. But on a floating rate, the EMI amount will fluctuate. There are forms of floating interest where the EMI is kept fixed, but these ‘floating’ rates are predetermined and not true floating rates which fluctuate based on market conditions.
  • Duration: This is the total time for which the loan is being availed. It is also called the tenure or loan repayment period. The longer the duration, the more the number of EMIs that an individual would have to pay. However, longer tenures also mean a lower EMI amount.

In case loans where part prepayments are allowed, the EMIs will be affected. With part prepayments, the total loan amount will decrease and hence, the amount of interest charged on the remaining loan amount goes down. This will work to the benefit of the applicant, as long as the prepayment charges are not too high.

Calculating the EMI yourself used to be a real pain. Fortunately, these days, there are many tools available online that give people the option of calculating their own EMIs at the click of a button. Most banks today provide this facility on their websites, as do many online financial aggregators. An individual needs to do is visit the bank’s official website and search for the EMI calculator tool. There, they can fill out the principal loan amount and the duration for which they require the loan. The rest of the information such as interest rate and processing fee would already have been filled out by the bank. Now, all they need to do is press the calculate button and within seconds, the EMI amount is in front of them. If you use an EMI calculator on a financial aggregator, you may have to put the rate of interest in yourself or if you are calculating the EMI for a particular product or bank, it will be automatically filled in. These websites that offer financial services may also allow you to compare the EMIs of different products and banks.

The EMI calculator tool is been provided with the intent of making banking seamless and feasible for customers. You can easily calculate EMIs for car loans, for instance. Now, the customer feels like a part of the system as they now know how the EMI amount is calculated. It empowers the applicant and gives them a clear picture about how they should go about paying off their debt.

The various benefits of a car loan EMI calculator have been briefly listed here.

  • Saves Time: EMI calculators save time as a loan applicant does not have to visit a bank in order to ascertain their EMI amount.
  • Transparency: The process of loan payment and interest calculation is made more transparent. The applicant is in the loop when it comes to calculating the EMI amount. There is no more guesswork or fear that they are being swindled.
  • Planning: Once an applicant knows the amount they have to pay, they can plan their monthly budget accordingly. Further, they can know ahead of time if they will be able to afford the EMI. If it is too high, they can avoid applying altogether.
  • Comparison: The EMI calculator can be used to compare the car loans from different banks with varying rates of interest. This can help the applicant decide which bank or type of loan is the best for them. The applicant can go over all the available options and would be in a position to make a wise decision.

Which Banks Currently Offer Personal Loans at Low Interest Rates in India?

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Personal loans are primarily meant for expenses that a person may not have anticipated or cannot afford at one go. It lets them spread out the cost over a period of several months with amounts that they can pay easily. Personal loans can fulfil various purposes such as a marriage, starting a business, medical expenses not covered by insurance, etc. They give the borrower a lot of flexibility in terms of how they wish to use the money.

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Personal loans are given an unsecured loan, so the risk factor for the lender is high. Therefore, the interest rate on personal loans is relatively high when compared with other loans.

There are many factors that decide whether an individual’s loan is approved or not. The most important considered is the individual’s credit score. The credit rating tells the bank the financial behaviour of an individual including details such as the borrower’s track record of making repayment. A bad score and a poor credit history usually mean that the individual is not going to get approved. Therefore, it is imperative for an applicant to make sure they have a good credit score. A good credit score is virtually a must if you are looking for a low interest rate.

The market for personal loan is quite competitive with many private banks offering lucrative deals and offers. Some of the major players are SBI, PNB, ICICI, HDFC, and Standard Chartered. These are all reputed banks that give personal loans at low interest rates. Therefore, it becomes a hassle when one has to choose a bank for a personal loan. The information provided here will help you decide which bank to choose.

Bank Interest Rates Where to Apply?
State Bank of India Starting from 11.95% Apply Online
Punjab National Bank 11.55% to 14.55% Apply Online
HDFC Bank 15.75% to 20% Apply Online
ICICI Bank 11.59% to 16.65% Apply Online
Standard Chartered Bank 11.25% to 14.49% Apply Online

State Bank of India

India’s premier government-owned bank is also the largest bank in the country with more than 14,000 branches all over India. SBI gives personal loans at an interest rate starting at 11.95% for a period of up to 5 years. The loan amount starts at Rs. 50 thousand and extends to Rs. 15 lakh. A processing fee of 1% is charged on the total loan amount.

Punjab National Bank

Punjab National Bank is another premier state-owned bank with almost 7000 branches across India. PNB offer personal loans at interest rates starting at 11.55% to 14.55%. The tenure of the loan can be up to 60 months which works out to an approximate starting EMI of around Rs. 2,250 per lakh. A processing fee of 1.80% plus service tax is charged during the approval process.

HDFC

The Housing Development Finance Corporation Bank is the second-largest private bank in the country. The bank offers interest rates of 15.75% to 20% per annum on HDFC personal loans. The amount borrowed can be in the range of Rs. 50 thousand to Rs. 15 lakh. The tenure of the loan can be between 12 and 60 months. This means that the EMI starts at around Rs. 2400 per lakh for the maximum period of 5 years. A processing fee of 2.50% of the total loan amount is levied on the borrower.

ICICI

India’s largest private bank offers some of the lowest interest rates in the market for personal loans. ICICI charges an interest of 11.59% to 16.65% with tenures from 1 year and up to 5 years. The amount borrowed can be between Rs. 50 thousand to Rs. 15 lakh. The EMI starts at around Rs. 2,200 per lakh for the maximum tenure. A processing fee of up to 2% is also levied on the total amount borrowed.

Standard Chartered

Standard Chartered Bank is one of the few international banks that are quite popular for their personal loans. The bank offers personal loans at interest rates starting at 11.25% to a maximum of 14.49%. The maximum amount that can be borrowed is Rs. 30 lakh. The maximum tenure of their personal loans is 5 years. A major advantage with Standard Chartered is that they charge no processing fee for personal loans.

How Does the Credit Information Bureau Limited (CIBIL) Calculate Credit Scores?

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Credit scores have acquired a position of vital importance. They are used to ascertain whether an individual is eligible for a loan or not. At face value, it is just a number that denotes a person’s credit worthiness. But few people know how their credit scores are calculated.

Earlier, banks used to take borrowers on their word and this proved to be a less than adequate. Quite often, good applicants would get rejected while others would get their loans approved despite several red flags. Lying on loan applications has cheated banks of crores of rupees. It also led to the proliferation of unscrupulous agents that could work their way around the system to get almost anyone approved, provided they were compensated well. Thankfully, the widespread adoption of CIBIL scores as a tool to determine credit eligibility has ended the deteriorating conditions.

The Credit Information Bureau Limited is India’s first credit rating agency. Originally, they collected credit information of companies and rated them accordingly. This helped in restoring faith and brought transparency to the financial systems. Now, a similar rating is also provided for individuals in the form of a credit score. The credit score is measured out of 900 points and gives a clear indication to the lender about the applicant’s financial abilities and behaviour.

CIBIL has its own methodology for calculating credit scores. They use sophisticated algorithms which are specifically designed for credit rating calculations. Some of the criteria they use to calculate an individual’s credit score are briefly explained here.

Repaying Loans

The credit history of an individual shows their complete financial history with credit and debt data. This data helps in categorising the individual as reliable or risky. An individual’s ability to repay loans on time contributes greatly to their credit rating. This shows that the individual in question is capable of repaying their loans. A higher score means that the person is more likely to get approved when they apply for any credit product.

Balancing the Loan

Another criterion that greatly affects an individual’s credit score is the total amount that has been borrowed and the share of the total that has been spent. If the individual spends the amount carefully, then this shows them to be responsible borrowers and spenders. On the other hand, if an individual were to fritter away the loan amount within a short period of time, they would be considered risky. Such behaviour does not bode well for loan applicants.

Loan Tenure

The duration or tenure for which a loan was active and the payments made during that time is a major contributor to a person’s credit score. A good history of timely payments without any late or skipped EMIs shows that the individual is a responsible borrower who takes their repayments seriously. This is also an indication that the person is a wise spender who does not make spending decisions in haste.

Application for New Credit

If the applicant has applied for a loan then the creditor will run a credit check. Each such check shows up in the credit history. If there are too many queries then it will negatively impact the credit score. This is generally an indication of a desperate need for funds, usually without the means to repay it. Banks are wary of such applicants and often deny them.

A Mixed Bag

If an individual keeps opting for the same type of loan or credit product over and over again, it will have a negative impact on their credit score. Therefore, it is important to have a mix of secured and unsecured loans in order to balance out one’s credit portfolio and obtain a higher credit score. This shows that the borrower’s finances are diverse and they have other financial options at their disposal.

Your CIBIL Credit Report is like your financial report card. It highlights your financial behaviour and whether you are a good investment for the lender. A good credit score speaks volumes about a person’s ability to handle and manage various types of debt including loans, credit cards, etc. Such individuals are in a position to bargain for better interest rates and other favourable terms and conditions for their loans. It is important for people who are applying for loans to ensure that their credit score is good. You can do so by requesting your won credit report. A score of 750 or above is considered to be good by banks. If they are in the red, then steps must be taken to improve it. People with low scores should avoid applying for new loans and instead work to pay off any outstanding debt first. If you find any errors in your credit history, they must be corrected. Rectifying errors as quickly as possible will improve your credit score significantly.