Month: May 2017
This year, Union Budget and the subsequent reforms brought good news for homebuyers in the form of lower interest rates on home loans. Banks rushed to reduce their home loan interest rates to offer buyers with better deals to buy the home of their dreams. The reduction in rates is good for new homebuyers who will get home loans at the lower rates. But how will the existing borrowers get benefits of these revised rates?
Existing borrowers have the option of home loan balance transfer which means that they can transfer the remaining amount of their home loan to another bank that is offering a lower interest rate. Since it a competitive market, some banks also give the option of resetting the interest rate so that the customers do not go to another bank.
To understand these two options better, we first need to know how home loan interest rates are charged by the banks.
What are the two types of home loan interest rate models?
Of late, banks have started following the MCLR models. On the other hand, independent housing finance companies are still using the prime-lending model. MCLR stands for Marginal Cost of fund-based Lending Rate. It is a benchmark rate below which the bank cannot lend. Parameters like marginal cost of funds, operational cost, negative CRR cost and the tenure premium are taken into consideration to calculate the MCLR. Prime lending rate model is treated as reference rate for lending. Banks offer rates lower than prime rate to applicants with good credit score, whereas those who have poor credit score will be charged a higher home loan interest rate.
Benefits of MCLR over PLR
MCLR has been recently rolled out by the RBI to offer more transparency in the Indian lending market. Some of the advantages of MCLR model are-
- These home loan interest rates are more dynamic and determined by the money market conditions and prevailing reforms. This dynamic environment is beneficial for the borrowers.
- MCLR reflects the incremental cost of the sum and changes every month, thus offering the benefits of a lower rate to the homebuyers.
- As opposed to PLR, MCLR actively reacts to the changes in the market.
One should remember that the home loan interest rates under MCLR model change only at a date predetermined at the time of taking the loan. Between two rate-reset dates, an MCLR works similar to the fixed lending rate.
Why should you transfer your home loan when interest rates drop?
Policy reforms and rate reductions make the environment better to take new home loans. However, existing borrowers can also make the most of this situation by transferring the balance of their home loan to another bank that offers better rates. This is a wise step to take in the early periods of your loan. Under this, the entire unpaid principal amount is transferred to another bank at a lower home loan interest rate. The new bank pays the entire outstanding amount to your previous bank and now you have to pay the EMIs for the same amount to the new bank at lower interest rates.
For example, if 50 Lakhs of your principal amount stands unpaid at 12% interest and you transfer it for a reduction of 50 basis points bringing the interest rate to 11.5%; you will save around 2.87 Lakhs in interest which is a considerable amount.
Here you should also know that home loan balance transfer is a lengthy process and involves documentation and formalities just like taking a new home loan. The bank will check your credit score and will take on the transfer only when fully satisfied. You will also have to pay certain amount as processing fee.
How to negotiate with your bank to reset your home loan interest rate?
Resetting your interest rate at the same bank is a much simpler process. Given the competitive sentiments in the market, banks do not want their customers to go to a different bank. You can simply do this by writing to your bank. There are two scenarios- the bank can either reduce your tenure or the interest rate. When tenure is reduced, though the EMI remains same, interest component reduces and principal repayment is increased. When the bank reduces your interest rate, it requires you to submit a new ECS and cancelled cheques.
A home is more than just a roof over your head; it is a feeling, a dream that you have nurtured for a long time. And in making this dream a reality, home loans play a very important role. Over the last two decades, home loan has come out as the best and most preferred way of buying a house. Not only the middle-class buyers, but the rich are also taking the home loan route to finance their home purchase. Sensing the high demand, several banks and financial institutions offer a variety of home loan products at attractive interest rates. One such lender is DHFL.
DHFL stands for Dewan Housing Finance Corporation Ltd., established in the year 1984. It is essentially a home financing company and offers home loans at competitive rates of interest. The company envisions transforming the standard of living in Indian households by giving them greater access to home ownership.
DHFL Home Loan
The interest rate on a loan is the most important factor to be considered by a borrower as it determines the amount that he/she has to shell out in the form of EMIs. DHFL offers home loans at attractive rates of interest to make home buying easier for the people. However, the interest rate differs for salaried and self-employed applicants. The lender also ensures that the home loan process is easy and hassle-free for its customers by keeping the documentation formalities minimal.
The table below gives a glimpse of DHFL Home Loan Interest Rates for salaried and self-employed applicants:
|Loan Amount||Interest Rates for Salaried||Interest Rates for Self-Employed|
|Up to Rs.25 Lacs||9.00%||9.10%|
|Above Rs.25 Lacs to Rs.75 Lacs||9.00%||9.10%|
|Above Rs.75 Lacs to Rs.100 Lacs||9.15%||9.25%|
|Loans above Rs.100 Lacs to Rs.150 Lacs||9.15%||9.25%|
|Loans above Rs.150 Lacs to Rs.300 Lacs||9.35%||9.45%|
|Loans above Rs. 300 Lacs||9.75%||10.00%|
Eligibility Criteria for DHFL Home Loan
DHFL offers its home loan services to salaried and self-employed candidates. Though the maximum loan amount is Rs 5,00,00,000 (minimum amount Rs 1 Lakh), it should not exceed 85% of the property cost. However, the exact loan amount that will be sanctioned to an applicant depends on several other factors like-
- Job stability and continuity of income
- Co-applicant’s income
- Educational qualification
- Assets, liabilities and saving habits
- Repayment capacity
- Credit score
Processing Fees on DHFL Home Loan
Much like other home loan providers, DHFL also charges a nominal processing fee for its home loan product. For the salaried individuals and self-employed professionals, the processing fee ranges between Rs 5,000 and Rs 20,000 whereas for the self-employed non-professionals, it is charged at the rate of 1.5%. One should also note that additional service tax and cess are applicable on the mentioned processing fee. Also, this amount is non-refundable.
Other Features and Benefits of DHFL Home Loan
Following are the features of DHFL Home Loan-
- The tenure of this loan ranges from 1 to 30 years but it does not extend beyond the retirement age or 60 years, whichever is earlier. This limit is 65 years for the self-employed individuals.
- This loan can be taken for financing the purchase of a ready-to-move house or an under-construction house/flat.
- The interest rate applicable on the loan is based on the Retail Prime Lending Rate (RPLR) of DHFL, which is subject to change as per the money market conditions.
- There are two options to pay your home loan EMIs- Electronic Clearance Services (ECS) or post-dated cheques drawn on your salary/savings account.
- DHFL also allows you to avail loans along with other co-applicants provided that they meet the eligibility criteria set by the lender.
Documentation for DHFL Home Loan
For salaried individuals, the lender will ask for the last two months’ salary slip or Form 16, copy of bank passbook and company profile (if it is not a well-known organization) along with the general KYC documents like ID Proof and Residence Proof.
On the other hand, self-employed applicants will have to submit the copy of ITR for the last two years, profit and loss statement and balance sheet, last 6 months’ bank statement, copy of shop/business establishment license and a brief profile of the business along with KYC documents.
A home loan is one of the most popular types of retail loans availed by people across the country. Individuals can apply for a home loan to purchase a property or a plot. They can also apply for a housing loan to renovate, repair or extend their existing home.
Applying for a home loan can be emotionally quite taxing. When people apply for a home loan, they eagerly wait for approval and expect to get the go-ahead from the lender. As such, it can be quite a crushing blow if the loan application is rejected by the bank or the non-banking financial organisation.
However, instead of getting disheartened, these applicants can take concrete steps to ensure their application loan will get approved if they reapply for a home loan.
Here are a few of the common reasons why a home loan application may be rejected and the steps to make sure that you get your home loan when you reapply.
Reason 1: Bad Credit Score
Resolution: A bad credit score is one of the major reasons behind a rejected home loan application. One of the key factors that severely hits the credit score of an individual are missed loan repayments or credit card bill payments. You can start by clearing off any debt that you might have and then strive to improve your credit score.
If you do not have a credit score, which means that you have no credit history, there are fewer chances of you getting a home loan. If your application is rejected for this reason, then you should start to work on your credit score. The way to do is to take small loans or credit cards and pay back on time. This increases your score over time. If you want the home loan on an urgent basis, then you should take someone with a good credit history as a co-applicant. Their score will allow you take the loan without the risk of rejection.
Reason 2: Improper Documentation
Resolution: Another major reason behind the rejection of a home loan application is improper filing or documentation of the loan. It is important for an applicant to fill and sign the application properly and also submit the documents required by the bank to approve the loan application.
To file the application again, the applicant must check out the documentation requirements of the bank for the home loan and submit the application form along with the required documents. It may make sense to talk to the bank or a financial advisor before you apply for the loan.
Reason 3: Multiple Financial Obligations
Resolution: The repayment capacity of an applicant is important to the bank to approve a loan. If an applicant has too many financial obligations such as multiple loans, credit cards, etc., the bank may question the repayment capacity of the individual. They may reject the loan on the assumption that these financial obligations will come in the way of home loan repayment since the applicant is already committed to paying other loans and credit card bills.
In this case, the applicant must first try to clear off any debt that he can and then reapply for the loan. If he has too many loans, then he can pay off all the other debts with a single loan. This will show a sense of financial responsibility and he will be seen as a good candidate for a home loan.
Reason 4: Low Income
Resolution: Low income is another reason why banks reject home loan applications. Basically, the bank assumes that the applicant will not be able to repay the loan on time if his income is below a certain level. In such a case, the applicant can add a spouse or family member with a good income as a co-applicant to reapply for the loan.
Since different banks have different criteria, the candidate can also choose to go to another bank for a home loan. Another solution to this problem is to choose a lower loan amount or a longer loan tenure so that the monthly instalment turns out to be manageable as compared to the income of the applicant.
Reason 5: Unreliable Builder/Area
Resolution: Some banks have more stringent rules than others and check the credibility and reputation of a builder from whom a candidate is planning to buy the property. If the builder does not seem genuine or credible to them, they may reject the home loan application of the applicant. In such cases, the candidate can apply to a different bank for a home loan or choose a different builder.
Sometimes, a bank may have a few areas within a city or town blacklisted for a home loan. If you are planning to purchase a property in this area, you can apply for a home loan from another bank or start looking for a property in a different area.
The housing finance sector in India is no longer dominated by public sector commercial banks. Non-Banking Financial Corporations (NBFCs), that so far restricted operations to wealth management and advisory services, have now entered the housing finance business. According to a 2016 study by ICRA, the home loan market of India is worth 12.5 trillion dollars, 60% of which is controlled by the commercial banks and the NBFCs operate in the rest 40%.
Increased competition in the Indian mortgages market has resulted in relaxation of lending norms and reduction in rates. Post demonetisation, the government has also reduced home loan rates to foster the growth of affordable housing, which again works out in favour of the homebuyers. So, let us talk about a few NBFCs that are making it big in the Indian housing finance business and at the same bringing people closer to their dream homes.
LIC Housing Finance
Initially promoted by LIC of India, LIC Housing Finance is now a public sector NBFC dealing in the Indian home loan business. LIC Home Loans are offered to residents as well as non-resident Indians for purchase or construction of a house or for extension of an existing house. The maximum tenure of LIC Home Loan is 30 years for salaried professionals and 20 years for the self-employed applicants. LICHFL offers housing loans on easy terms and conditions and maintains transparency in its transactions. Some key features of LIC Home Loan are-
- Competitive interest rates
- Guidance by skilled professionals
- Quick loan approval based on the applicant’s income status and credit history
- LTV Ratio- 85% for up to Rs 20 Lakhs, 80% for above Rs 20 Lakhs and up to Rs 75 Lakhs, 75% for above Rs 75 Lakhs, and 75% for a plot purchase
- Payment in Equated Monthly Instalments on monthly rest basis
- Hassle-free documentation formalities
DHFL Home Loan
DHFL is one of the most popular NBFCs in India offering home loans to people at attractive interest rates. Fair terms, flexibility and transparency are the three pillars of DHFL Home Loan. This loan can be taken for purchase of a ready-to-move house or an under-construction flat. DHFL caters to both HNIs and mid-segment buyers; the maximum and minimum amount of DHFL home loan is Rs 5 Crores and Rs 1 Lac respectively. Let’s look at some important features of the housing loan by DHFL-
- Maximum loan amount is 5 Crores but in no case exceeding 85% of the property’s cost
- DHFL home loan tenure ranges from 1 to 30 years subject to the retirement age of the applicant
- The interest rate is based on DHFL’s RPLR which fluctuates from time to time
- Processing fee of 1.5% is charged, which is non-refundable
- EMI can be paid through ECS or post-dated cheques drawn on the applicant’s salary account
- Loan can also be applied for with an earning co-applicant
Indiabulls Home Loan
Indiabulls caters to the widest range of homebuyers and is counted among the preferred home loan lenders in the country. The company understands varied needs of its customers and offers customized home loan products accordingly. Indiabulls home loan can be taken for purchase of flat/bungalow/plot, construction of a house or the extension of an existing house. Unlike other lenders, Indiabulls offers maximum loan amount, that is, 90% of the property cost (for properties up to Rs 30 Lakhs). The maximum tenure is 30 years. Given below are a few salient features of Indiabulls home loan-
- Loan can be taken individually or with co-applicant/s
- Home loan is offered at adjustable rate of interest which is linked to IHFL benchmark rates and is subject to change
- Pre-approved home loan facility is also available
- Facility offered to resident Indians as well as NRIs
- Online management of loan account
- Zero prepayment or foreclosure charges
Apart from LIC, Indiabulls and DHFL, several other NBFCs like Muthoot Finance, Capital First, TATA Capital, Shriram Housing Finance are also operating in the market. These NBFCs, though quite experienced in the financial services field, need to sharpen their skills in the home loan market. Changes in guiding rates and the regulatory framework put pressure on these companies to provide better services at competitive rates. Overall, the future is definitely bright for NBFCs operating in the Indian housing finance sector.
The Housing Development Finance Corporation Limited (HDFC) Bank offers competitive car loan options for its customers. A wide range of loan options are available for applicants to choose from where the interest rates are customised as per the applicant’s financial history. HDFC Bank is known as one of the most customer-friendly banks and the applicant can get his car loan approved at low interest rates in a matter of few minutes.
Most banks offer similar interest rates on car loans for a specified tenure but HDFC Bank offers highly flexible interest rates and tenure period. As a matter of fact, HDFC Bank offers the highest tenure of 84 months to its customers to repay the car loan. Let us peruse the interest rates and charges for the HDFC Bank car loan.
HDFC Car Loan Interest Rates and Fees*
|Interest Rate||Starting from 9.35%|
|Processing Fees||Rs 10,000 or 0.4% of the sanctioned car loan, whichever is lower|
|Foreclosure Charges||3-6% depending on the period of the loan (no foreclosure for car loans sanctioned less than 6 months before)|
|Documentation Fees||Rs 600 every time|
|Penalty for Late Payment||2% each month|
|Financing Quantum||Up to 100% of the on-road price of your car depending on the customer’s profile.|
*The facts and figures provided above are indicative and liable to change periodically.
Car Loan Amount
The amount sanctioned by the bank for buying the car is known as the car loan amount. This amount depends on the income of the applicant and the net on-road price of the car. The car loan interest rates vary from one customer to another.
On new cars, the bank provides the loan amount of up to 100% of the on-road price which can be up to 6 times the annual income of the applicant and up to Rs 1.5 Crores.
For pre-owned cars, loans of up to 80% of the price of the car can be sanctioned that can be up to a maximum of Rs 50 Lakhs.
HDFC Bank New Car Loans Interest Rates & Charges
|Charges||New Car Loans|
|Documentation Charges*||Rs. 600 per case|
|Foreclosure charges*||No foreclosure is allowed before 6 months of sanctioning of the loan.|
|6% of the outstanding loan amount for preclosures within an year from 7th EMI|
|5% of the outstanding loan amount for preclosures within 13-24 months from 1st EMI|
|3% of the outstanding loan amount for preclosures after 24 months from 1st EMI|
|Part-Payment charges*||Part-payment is applicable once 12 EMIs have successfully been paid.|
|Part payment is applicable twice only during the complete loan tenure and at most once in a year. The part payment will not be more than 25% of outstanding loan amount in any case.|
|5% on the part-payment sum in case part-prepayment is within 13-24 months from 1st EMI|
|3% on the part-payment sum in case part-prepayment is after 24 months from 1st EMI|
|Processing fees* (Non- refundable)||0.4% of Loan Amount or Rs 10,000, whichever is lower|
|Loan cancellation||In case of cancellation, the customer shall pay the interest on the loan amount from disbursement date till the refund of disbursement amount. Processing Fee, Stamp duty and Documentation Charges are non-refundable and would not be waived off.|
|Collateral Charges*||Rs 450 per case|
|Loan Reschedulement charges/ Rebooking charges||Rs 1,000/- will be charged. If changes are to be made on RC, refundable Security Deposit – non-interest bearing of Rs 5,000 is necessary. The borrower has to provide the transferred Registration Certificate to the bank.|
|LPG/ CNG NOC/ Other Special NOC||Rs 500/-|
|Late Payment Penalty||2% per month|
|Rack interest rate||11.50% to 13.75% depending on the segment in which the vehicle lies|
|Stamp Duty (Non-refundable)||The original cost|
|Amortisation Schedule Charges||The customer can download the schedule from E-Delight for free. Rs. 200/- per schedule would be charged at the customer service desk.|
The rate of interest on the car loan varies from 9.35% to 14.29% in case of new cars. The rate of interest is however, higher for pre-owned cars and it varies from 14.50% to 17.50%, depending on the segment in which the car lies. All interest rates are calculated on the monthly reducing balance.
These rates and charges are some of the lowest charges among all banks providing car loans. It is necessary to go through the loan procedure and understand all the requirements, terms and conditions and obligations before opting for the loan.
HDFC Bank car loans are quick to get sanctioned and require very less amount of paperwork. The interest rates are highly competitive and the quote by the bank is worth considering. Taking into account the features and ease with which these car loans get sanctioned, the HDFC car loan is probably, one of the best car loan on offer today.
In a cash dominating country like India, credit cards are always criticised. Credit cards are one of those things that people think they know, but they don’t actually understand. However, if used right, credit cards can offer some great benefits. ICICI Bank is one those leading banks which offer credit cards with huge rewards, unmatched benefits and unrivalled features. It has designed a range of credit cards suitable for every lifestyle based on their vast experience over the years. The gemstone and contactless collection of credit cards is specially tailored for people who use their credit cards for day to day expenses. ICICI Coral credit cards are issued under Gemstone and Contactless payment collection and it aspires to provide unique features and benefits like a gemstone. It offers exclusive lifestyle and shopping benefits which offers you more savings and rewards you on every transaction you make. Here’s an overview of the top benefits and features offered by Coral Credit Cards:
ICICI Bank Coral Credit Card
This card lets you enjoy unlimited cash rewards every day and everywhere.
- Avail complimentary Provogue Tie as a welcome gift when you sign up for ICICI Bank Coral Credit Card
- Enjoy 2x cash rewards on dining and grocery shopping at supermarkets.
- Avail 2 complimentary movie tickets every month under the buy one get one movie ticket offer on BookMyShow.
- Save more on your dining bills at over 2100 restaurants across the globe. Enjoy minimum 15% on your dining bills under the Culinary Treats Program.
- Avail 1 complimentary airport lounge access every quarter
- Earn 4 PAYBACK points on every Rs.100 spent on dining and grocery shopping
- Earn 2 PAYBACK points on every Rs.100 spent on all other categories, except fuel.
- Accumulated PAYBACK points can be redeemed for cash or gifts of your choice. 1 accumulated point = Rs.0.25
ICICI Bank Coral Contactless Credit Card
Making transactions was never that easy, simply tap your ICICI Bank Coral Contactless Credit Card to make a contactless payment. Get unlimited rewards and cashback vouchers on your shopping.
- Built-in MasterCard contactless technology to make safe and secure payments at all retail stores.
- Avail 2x reward points on dining and grocery shopping
- Get a Provogue tie as a welcome gift on joining ICICI Bank Coral Contactless Credit Card
- Become a member of Culinary Treat Program and enjoy minimum 15% savings on leading dining outlets and restaurants across 12 major cities of India.
- Get a complimentary airport lounge access every quarter across all MasterCard domestic lounges across the country.
- Save on your fuel spends, get 1% fuel surcharge waiver on all HPCL petrol pumps in India. The offer is applicable on a maximum transaction of worth Rs.4000
- Earn 4 PAYBACK points on every Rs.100 spent on dining and grocery shopping
- Earn 2 PAYBACK points on every Rs.100 spent on all other categories, except fuel.
- Accumulated PAYBACK points can be redeemed for cash or gifts of your choice. 1 accumulated point = Rs.0.25
ICICI Bank HPCL Coral Visa Contactless Credit Card
This card helps you save on your daily commuting. Enjoy 2.5% cashback on fuel spends.
- Get 2.5% cashback and 1% fuel surcharge waiver on your fuel spends across all HPCL petrol pumps in India.
- Avail Rs.100 discount on up to 2 movie tickets booked from BookMyShow every month.
- Become a member of Culinary Treat Program and avail 15% savings on dining at over 2100 restaurants across the country.
- Earn 2 PAYBACK points on every Rs.100 spent on all retail purchases except fuel spends. Accumulated reward points can be redeemed for fuel expenses worth Rs.500.
- Spend Rs.50000 annually and get your annual fee wiz. Rs. 199 waived off.
On an average, Indians save around 10% of their income, with the savings rate forming around 30% of the country’s GDP. This percentage is considered one of the better ones in the world. However, when it comes to actual investments, most people in the country fall on the other side of the spectrum. The reason lies in the simple fact that they consider savings accounts (or at most fixed deposits) as viable investment options. This happens because most of them have little to no idea about other safe investment avenues available to them.
As such, it is important that they learn more about investment avenues that give them better returns and are both safe and secure. This is what serious investors look for when they scout good investment opportunities.
Looking at present financial distribution system and quality of advice available in the market, mutual funds are great investment options that help a lot to investors in realising their financial goals. This article shall look at these safe and stable investment avenues in some detail.
Mutual Funds: Synopsis
A mutual fund can be called a mechanism of pooling resources from the public and investing the collected funds in accordance with the fund objective. In other terms, a mutual fund is an investment scheme which is professionally managed and is run by an assets management company that invests the money of a group of investors in stocks, bonds, and other securities. Investing in a mutual fund is easier than individually buying and selling of shares, stocks and bonds.
Often, people tend to confuse mutual funds with equity investments even though they are both completely different vehicles. Mutual funds offer investment options ranging from 100% debt to 100% equity as well as hybrid products that combine both equity and debt. Mutual funds also came out with Gold Exchange-Traded Fund (ETF) and Gold Funds, which are better investment options as compared to owning physical gold.
Investing in mutual funds helps you to diversify your portfolio across a large number of securities to minimise any risk. As an investor, you can purchase a mutual fund unit that represents your share of holding in a particular scheme. These mutual fund units can be further purchased or redeemed as needed at the current Net Assets Value (NAV) of the fund. These values are not constant and keep fluctuating in accordance with the funds holding. Each investor who has purchased a mutual fund holding shares the gain and loss of the funds proportionately.
Mutual Funds: Benefits
Mutual funds are reliable and safe investment options for people who wish to save and grow their money. They offer several benefits to the investors of which some are discussed here.
- The most significant advantage of investing in mutual funds is that people get access to a professionally-managed and diversified portfolio of equities, bonds and other securities. It would be quite challenging to create such an investment on their own with a small amount of capital.
- Mutual funds permit the investors to put in small amounts of money and still reap the benefits of investing a large pool of cash since many investors jointly hold a mutual fund. They jointly share in the gains and losses incurred by the mutual fund, proportionate to the amount they have invested in the fund.
- Mutual funds are monitored and managed by qualified professionals who create a strong portfolio for the investors. This diverse portfolio consists of stocks, bonds, money market instruments or a combination of all of those financial products.
- Mutual fund investment schemes are also transparent in their nature. The Net Asset Value (NAV) is declared daily and the portfolio of the schemes is also made available every month. There are many agencies that rate the mutual fund schemes depending on risk and reward attached to them.
Mutual Funds: Types
There various types of mutual funds categorised based on factors such as risk, assets management, speciality, benchmark, structure and their investment objectives. Some of the most common types of mutual funds are:
- Open-end Funds: In this type of mutual funds, units are open and available for subscription throughout the year. They are not listed on the stock exchange. Basically, these funds allow investors to keep the investment as long as they want. There are no limits on how much can be invested in the open-end mutual funds.
- Closed-end Funds: A closed-end mutual fund is the one in which holdings can be purchased only during the initial offer period. These mutual funds are also listed on the stock exchange and have a fixed number of shares outstanding. They also operate for a fixed duration. The investors can redeem their units only during the specified dates.