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Things to Consider While Choosing Personal Loan Tenure

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In today’s fast-paced world, quite a lot of people rely on a personal loan to meet their financial needs. Reason being a personal loan is an unsecured loan available for almost everyone at a competitive rate of interest.  The most challenging aspect while signing up for this loan is choosing the right loan term. If you choose the longer loan term, you may end up paying higher interest, alternatively, if you choose the shorter tenure, you’ll have to pay higher loan EMIs each month.

A loan term is the total time period preset by the borrower during which the entire loan amount has to be paid in monthly installments. The interest applied on the loan amount shall also be paid before the end of loan term. To be precise, loan tenure is a stipulated time period set by the borrower within which the entire principal amount along with the interest should be paid in full.

If you are one planning to apply for a personal loan anytime soon, below is the list of things that you must consider while choosing a personal loan term:-

  1. Understand your monthly budget and expenses: It is one of the most obvious things that you must ponder on while choosing the right loan term. Take a paper and a pen and make a list of all the monthly expenses that you are committed to. Based on whatever money is left, you can choose the tenure of the personal loan. Remember, a personal loan may help you in dire need of money but from the time it is availed till the amount is repaid in full; it acts as the biggest liability. Also, make sure the loan term you choose does not weigh you down with additional monetary pressure.
  1. A careful watch at future financial prospects: This is especially important for salaried individuals who expect a salary hike in the near future. A higher EMI in that case would not be a burden for them. Similarly, self-employed can also consider their future income and financial prospects before choosing the loan term.  This scrutiny may add extra burden till the hike, but after that, it works wonders.
  1. A look at your existing liabilities: Apart from considering a salary hike, you should also think about other monetary commitments as well such as kid’s tuition fee, house rent, existing loans and credit card payouts, etc. Always choose a loan term that helps you balance all your existing liabilities plus the personal loan EMI without much hassle. To make this task simple, you can use spreadsheets, and appropriate formula to arrive at a definite picture.
  1. Financial stability: Choosing a loan term as per your financial stability is also important. Plus, banks will also not be hesitant in giving you a loan if you are financially stable and have bright future prospects of earning. Moreover, repaying a loan will also be easier if you are financially stable.
  1. Income: A salary highlights the paying capacity of a borrower. The more you earn, the bigger the amount of loan you can apply for. Considering your income while choosing a loan term is also important. Even banks ask for the salary slip of the borrower based on which they decide whether or not to provide the loan to the borrower.
  1. Calculate the interest rate: Since the interest rates applicable on a personal loan differ widely across banks and Non-Banking Financial Institutions (NBFCs), it is wise to know about the interest rates offered by every bank before making a decision. Calculate the interest rates applicable on loans by using a combination of tenures and the loan amount proposed. Generally, a loan with longer term means higher interest and nobody wants to take up a loan which they keep on paying for many years.

Personal Loan EMI Calculator

To calculate the interest applied on the personal loan, you can use a personal loan EMI calculator. It is an easy online tool that allows you to get a detailed view of all the finance involved in the loan so that you can make a wise decision in choosing the right loan term. You can find a personal loan EMI calculator on the bank’s website. By using this tool, you can also calculate the monthly loan EMIs and the interest rate that you would be paying to the bank/NBFC within a stipulated period of time to settle the loan. With personal loan EMI calculator, you can make as many searches as you want by using a different combination of a loan amount, and tenure to reach out the best loan scheme that matches your requirements and budget.

These are quite a few significant factors one should keep in mind while choosing a loan term with regards to a personal loan.  Although your credit score is also a crucial thing in getting a loan, the above-mentioned factors should not be overlooked in finding the best loan scheme. Also remember that banks provide personal loans at a higher interest rate (18% to 25%), hence it should only be your last point to consider.  A personal loan is of two types, a secured and an unsecured one, offered by banks and several non-banking financial institutions.

You can use the loan amount for anything including house renovation, a purchase of bike, four-wheeler, to fund your honeymoon trip and a lot more. But getting a loan for luxury and comfort should be avoided as far as possible. It should be better put to use in emergency situations like for consolidating your credit card or existing loan debts that are attracting higher interest rates, for medical and hospitalization expenses and perhaps for the wedding or education of a son/daughter. A personal loan is a boon for every individual who is facing a serious financial crisis. But to get the loan in the simplest manner possible, one should maintain a good credit score (750 & above), should have a good source of income, and should meet all the eligibility criteria set by the bank.

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40 Times Returns in 20 Years: Investing in Birla Sun Life Fund is a True Wealth Creator

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Investing in a good mutual fund scheme allows individuals to live a life they have always longed for. It gives them the freedom to finance their dreams, needs and desires. Though there are a good many mutual fund schemes available for investors, finding the one that suits one’s requirement is a tough task altogether.

If you are planning to invest in a mutual fund scheme that promises long-term capital growth at a relatively moderate risk, Birla Sun Life advantage fund tops the list here. Launched on 24th February 1995, it is an open-ended equity scheme that let investors earn long-term capital gains through a diversified research based investment approach. Investors willing to invest in a Birla Sun Life Advantage fund can invest in this fund with a minimum of Rs 5,000. The Face Value of the fund is Rs 10/unit.

The Entry Load and the Exit Load

The entry load in the Birla Sun Life Advantage Fund is Nil. Investors planning to invest in Birla Sun Life advantage fund can invest both in Dividend (profits are given to investors from time to time) and growth (profits are put back into the scheme that results in higher NAV).

The table below illustrates the daily NAV and price:-

Scheme Net Access Value (NAV)    Sale Price Repurchase Price Date
Aditya Birla Sun Life Advantage Fund -Reg Dividend 107.32 107.32 106.25 24th Nov 17
Aditya Birla Sun Life Advantage Fund -Reg Growth 438.86 438.86 434.47 24th Nov 17

Birla Sun Life Mutual Fund is a joint venture between Aditya Birla Group and Sun Life Financial. Apart from Birla Sun Life Advantage Fund, below is the list of other open-ended fund schemes offered by Birla Sun Life Mutual Fund:-

  1. Birla Bond Index Fund
  2. Birla Income Plus
  3. Birla Sun Life International Equity Fund
  4. Birla Sun Life Cash Manager
  5. Birla Sun Life Short Term Fund
  6. Birla Infrastructure Fund
  7. Birla Sun Life Savings Fund
  8. Birla Sun Life India Reforms Fund
  9. Birla Sun Life Equity Fund
  10. Birla MNC Fund
  11. Birla Sun Life Freedom Fund
  12. Birla Sun Life Savings Fund
  13. Birla Sun Life Government Securities Fund
  14. Birla Sun Life Buy India Fund
  15. Birla Sun Life Income Fund
  16. Birla Sun Life Tax Relief 96
  17. Birla Sun Life New Millennium Fund

Gone are the days when investing was just restricted to pension schemes, bank fixed deposits, etc. However now, mutual funds are raising high on the minds of people looking to invest their hard-earned money for a secured livelihood. The reason why a good many people nowadays are keen to invest in mutual fund is that it gives them the flexibility to start buying units or shares with a relatively small amount. Some funds also allow the investor to buy more units regularly by paying smaller installments as well. Professional management is the other factor that persuades investors to invest in Mutual fund schemes. These are managed by experts who have the education, skills, and resources with which they invest your money in the right fund that promises long-term capital gains.

Bharat 22 ETF: Diversification Can Give Better Returns

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Bharat 22 is the second Indian government backed Exchange Traded Fund (ETF) designed to partially liquidate government stake in 22 leading public sector and SUUTI companies. The introduction of this ETF in thus part of the government’s plan to reach the proposed Rs 72,500 Cr. disinvestment target for the financial year 2017 – 2018. The first government based CPSE ETF was launched in March 2014 with an AUM of Rs. 5,000Cr and is managed by Reliance Mutual Fund AMC.

When compared to the previous CPSE ETF, the ICICI Prudential Mutual Fund AMC managed Bharat 22 ETF is more diversified as it has investments in 22 listed companies. While the CPSE ETF had exposure in only PSU companies, the Bharat 22 will have exposure in both PSU companies and public sector banks such as SBI and Bank of Baroda which feature substantial Government ownership. Furthermore, Bharat 22 ETF will also invest in a few other companies where the Government holds a stake through the Specified Undertaking of the Unit Trust of India (SUUTI) mechanism. SUUTI companies in the Bharat 22 ETF portfolio include Larsen&Toubro, Axis Bank and ITC.

In addition, the Bharat 22 ETF will be invested across multiple sectors including Industrial (e.g. L&T), utilities (e.g. Power Grid etc), banking (e.g. SBI, Axis Bank etc), FMCG (e.g. ITC), energy (e.g. Indian Oil, BPCL etc), and materials (e.g. National Aluminium). The Bharat 22 ETF, being mainly a large-cap oriented fund, is expected to have only 10% portfolio exposure to mid and small-cap stocks.

The Advantages of Bharat 22 ETF diversification

Individual stocks are subject to high risks from competitors, sector dynamics and market conditions. Thus the risk associated with the individual stock investment cannot be diversified through individual stock investments. However, the market risk of equity investments can be controlled to a significant extent by investing in a larger portfolio of companies (to combat company-specific risk) and investing in assorted sectors (to combat sector-specific risk). Different sectors tend to lie at different stages of the business cycle. Some sectors such as mining and energy are highly susceptible to business cycles which can last for years, while other sectors such as FMCG feature only seasonal variations in demand. The portfolio of Bharat ETF 22 features a high degree of diversification across multiple sectors which are expected to balance the individual volatility of different sectors.  So all in all, it can be stated that diversification can deliver better results as it enables the ETF perform equally well in a wide range of market conditions. For sufficient diversification, a fund should invest in various types of stocks diversified across sectors as well as market capitalization. Hence the Bharat 22 ETF is one of the best exchange traded funds for investors seeking indirect exposure to public sector stock while maintaining a high level of liquidity.

Conclusion

Bharat 22 ETF is a diversified exchange-traded fund which will track Bharat 22 index that is meant to provide good returns to investors planning to invest for the long term and simultaneously enable the government to reach disinvestment goals. The components of the Bharat 22 index work on various reforms and initiatives set by the current government in power like the Goods and Services Tax (GST), Infrastructure Reforms, Direct Benefit Transfer of subsidy, Financial Inclusion, Digital and Cashless Economy, etc. which improves the earnings of the constituent companies which ultimately benefits the investors. Like the CPSE ETF, the Government also offered lucrative discounts of 3% on the face value of the Bharat 22 ETF units during the NFO period.

How we can invest in mutual funds?

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A mutual fund is one of the popular investment options where the Asset Management Company (AMC) collects the money from several investors and further invests it in different instruments such as debt, equity, money market and securities. The consequent profit, after deductions by the AMC, is circulated among the investors according to their mutual fund investment portfolios.

Even though mutual fund investments are subjected to market risks, more people are keen to invest money in it because it can provide good returns despite mitigating losses. What’s good about investing in mutual funds is that you need not have to be an expert on the market since investments here are made by a group of experts who decide how to invest, when to invest and where to invest.

So now that you know what mutual funds are, it’s time to understand how you can invest in mutual funds:-

  1. Asset allocation: To start with mutual funds investment, the first thing here is to understand what kind of portfolio you want. This step is also known as asset allocation. Always allocate your assets in a way that it forms a perfect amalgamation of high and low-risk funds. As a general rule, the amount of funds you invest to low-risk debt instruments should be equal to your age. This means, any individual who is 35 years of age, should allocate only 35% of their funds toward debt instruments. This will protect them against any risk in the remaining assets that they have invested in.
  2. Shortlist funds type: Shortlisting the fund type is considered an important part of mutual funds investment. Once you have allocated your assets properly as per your needs, the next step is to study and compare different type of mutual funds on the basis of their past performance and investment perspective. For this, you can refer to the shareholder’s reports and prospectus provided by the AMC. The prospectus will help you get complete information about different types of fund while the shareholder’s report will assist you in understanding the past performances and regularity of returns. Apart from the research work, you must also determine your financial goals and get answers to questions like Are you investing just to substitute your income or for retirement/marriage? What is the time limit of return you are comfortable with? While short listing funds type.
  3. Compare funds: Once you have shortlisted the funds, you should compare and pick the right funds. For example, when looking for a mutual fund,
  4. Check the past records of the funds from shareholder’s report or through online websites.
  5. Look for the top 5 funds in the asset class that match your financial goals, time frame, and risk profile.
  6. Check performance of the funds for a different time frame, such as 3 months, 6 months, and so on.
  7. Check for the fund managers profiles and asset allocators by going through the prospectus of that particular mutual fund.
  8. Understand how important the diversification is: However safe your mutual fund investment may appear, it may be risky at some level. Therefore, the best way to expand your investment is by allocating assets in instruments that are not completely correlated. Make sure that your mutual fund’s portfolio is a concoction of equity, mixed market, debt, gold and other types of funds to balance out the risk factor.

Conclusion

So now when you have made the mutual fund investment in the selected funds, it is also necessary to keep a track of the funds you have invested in. Even though your funds are managed by investors, having a thorough knowledge of your portfolio is important.

How to Make a Crore with Mutual Funds by Investing Rs. 4,000 in a Month?

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A vast majority of us wants to be rich but often wonder if their dream could be true someday. Well, the answer to this question is yes, all of us can become rich if we work towards it. But how can one make this possible? The answer to this is Mutual Funds. Investing in mutual funds can be your quick route to be rich. Most individuals prefer investing in mutual funds when they have a large sum of money to spare. According to them investing lump sum money in funds will help them achieve their financial goals faster. This is also one of the reasons why most people defer investing indefinitely. Contrary to their common belief, investing bit by bit can also help them achieve their goals without compromising on their other financial commitments that comes along in their life.

Investing a small amount of Rs. 4,000 every month in an equity scheme can help them create an amount of Rs. 1 crore in a period little over 15 years. To make this possible all you need is discipline, which nothing other than SIP (Systematic Investment Planning) can bring when you invest. But before we start discussing about the investment strategy, let us first talk a bit about savings and investment risks.

Savings and Investment Risks

Saving money is difficult especially in this modern setup where you need to maintain a lifestyle to fit in the crowd. So how does one save money? The answer is simple: save first and spend later. This way you can control your expenses, save more and accordingly invest money to reach your financial goals.

Before you start investing, understand that investments involve risks. Be it stocks, shares, bonds or mutual funds, there is always a certain amount of risk involved. Another important rule of an investment is that riskier an investment is, greater will be the potential returns. If you want to take high risk, it is better to start investing as early as possible. It is because young investors have fewer responsibilities and resultantly higher risk appetite and risk tolerance than investors in their mid-40s. Another reason for starting early is that when you’re young you get longer time to recover from losses.

How to make a crore with mutual funds investment?

With time due to inflation, one crore price has lost its charm but the amount still means a lot to several people. Now for those who are wondering how much they should invest to achieve this financial goal, the answer is that they can start with an amount as low as Rs. 4,000 per month investment for the first year. From the next year that is the second year, they can increase their monthly investment amount by Rs. 1,000. Let’s consider that they have taken an aggressive investment approach and managed to get returns of 10% per annum. In the table given below, we have explained how the SIP value is expected to grow over the next few years at a 10% rate.

Table1. Table showing year by year growth of an SIP investment that is increased by Rs. 1,000 every year*

Year SIP Amount/month Total Savings During the Year Total Investment Value at end of year
1st Year 4,000 48,000 50,658
2nd Year 5,000 60,000 1,33,220
3rd Year 6,000 72,000 2,52,447
4th Year 7,000 84,000 4,13,749
5th Year 8,000 96,000 6,23,262
10th Year 13,000 1,56,000 26,72,391
15th Year 18,000 2,16,000 74,65,602
20th Year 23,000 2,76,000 1,74,23,264

*Figures given in the table are suggestive and based on a constant growth at 10% per annum, which in real-life situation is not possible.

You can see in the table given above that you can definitely achieve the goal of becoming a ‘crorepati’ in 20 years. If you start with an amount greater than Rs. 4,000 then your dream of being a ‘crorepati’ can come true sooner.

Important Points that Can Get You Maximum Returns on Mutual Fund Investments

Besides SIP, there are other important points that an investor must consider to get the best out of their mutual fund investments:

  • Invest keeping your financial goal and risk appetite in mind.
  • Diversify your investment portfolio.
  • Put money in sectors that will outperform.
  • Start investing as early as possible.

Which is a Better way to Invest in Mutual Funds: Lump Sum or SIP?

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People who want to increase their money over a period must invest in mutual funds. In this type of investment a good number of investors pool their money to purchase securities. It is quite popular amongst investors as it yields high returns. Whether investors are seeking for capital gains or want regular income, in mutual funds, they get a wide range of schemes to suit their requirements.

When it comes to investing in mutual funds, a common question that troubles a lot of investors is that whether they should deposit their money in bulk (at one go) or on schedule in one of the best SIP plans. To understand which mutual fund investment method is best for you, we need to first understand both investment strategies.

Systematic Investment Planning (SIP)

If you have financial constraints and cannot deposit a lump sum amount for fund investment, choose SIP. The SIP investment method is available for mutual funds, gold funds and ETFs (exchange-traded funds). In this investment method, a fixed amount of money is periodically (monthly or quarterly) deposited in the chosen mutual fund scheme. To reap the benefits of SIP, it is advisable to invest in the best SIP plans for a long term of at least five years. To learn other benefits of SIP, read below:

  • Brings discipline: A large number of people make investments in mutual funds and fail due to the lack of discipline. Especially beginners find it difficult to regularly invest lump sum amount of money in fund schemes. With the help of SIP, the regularity in making an investment can be done easily.
  • Rupee cost averaging: Rupee cost averaging is an investment strategy that eradicates the need to track the market. All that investors need to do is to regularly invest a pre-decided amount for a long period. Since in SIP the amount of money invested is constant, it allows investors to buy more units when market rates are low and vice-versa, thus, saving investors from the mistake of investing during market peaks and exiting during market lows by reversing the trend.
  • Low investment amount: If investors choose to deposit in mutual funds through SIP, they can begin investing with an amount as low as Rs 500 per month, thus, giving an opportunity to investors from all financial backgrounds to participate and invest in the market. This also ensures that their monthly budget is not strained while staying invested in the market for a long time and yielding great returns.
  • No entry or exit load: In mutual funds, many fund houses waive off entry or exit load when the investment is done through SIP investment method. This lowers the cost of your investment. In mutual funds, the exit load is usually levied to discourage investors from being in and out of schemes. However, the exit load is usually charged if you redeem units within a year of buying the units.

Lump Sum Investment

In lump sum investment, investors deposit the entire amount in mutual fund scheme at one go. Investors who have great knowledge and understanding about market’s current valuations and behaviour choose to make lump sum investment in mutual funds. It is best to invest in lump sum amount when:

  • The market valuations are low.
  • Market’s or a specific stock’s price-earnings ratio is low.

The above two points also hold true for SIP method of investment but in SIP the fund manager takes care of such things.

Which one is better: Lump sum or SIP?

The main purpose of making an investment is to increase money. An investor should invest money in those avenues where he/she can churn out maximum returns. When it comes to mutual funds, investors must closely study whether their funds are aligned with their financial objectives or not. They must not choose a fund scheme or an investment method because of other people but because this is what fulfils their requirements.

When it comes to deciding which investment mode (lump sum or SIP) is better, it is difficult to say as a direct comparison between the two is not possible or fair as both have their own pros and cons. Also in deciding which method of investment is better a lot of other factors come into play – the most important factor being the investor’s requirements and circumstances. For a beginner or a salaried person, SIP is a safer way to invest as it inculcates discipline to invest regularly without having much to worry about market valuations. People who closely follow market and have experience about it can invest their money at one go (lump sum). Therefore, before making the final call weigh all pros and cons and see which one out the two fits your requirement.

Gold Loan: Rescuer of All Hard Situations

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Financial hardships in one form or another are a surety of life and everyone goes through ups and downs during their lifetime. In case there is a financial emergency, you might need to take a loan in order to tide over the hard times. One of the most popular options when seeking financial help in case of these hardships is a personal loan, however, this option does have a few problems such as high interest rates and a borrowing limit depending on your income. Additionally, such loans might be a lot more difficult to avail in case you are a self employed individual or do contractual work that does not have a constant revenue stream. In cases such as these, a gold loan can truly be a rescuer from hard times if you have the precious metal to use as collateral. The following are some of the key reasons why gold loans are preferred by many in order to overcome financial hardships.

Short Processing Times  

A gold loan can be availed within as short a period as a few hours and in most cases the same day no matter who your lender is. No other loan currently features as short a processing time and this makes gold loans a popular choice if your own gold jewelry or coins and need to get hold of your money really fast. This processing time also include the time it takes for the in-house valuation expert to determine the value of the ornaments or jewelry to be used as security for the loan.

Flexible Payments 

Another key benefit of the gold loan is the availability of multiple payment options. While most loans have to be paid in EMIs spread over the loan duration, a loan against gold has a unique bullet payment option. In case you avail this option, you only need to service the interest component of the loan during the loan tenure. Towards the end of the tenure, you can choose to make a single large payment and pay off your gold loan in one go.

Zero Pre-Payment Penalties

A loan availed using gold as collateral is one of the few borrowing options that you can hope to pay off without incurring the standard 1% to 3% penalty usually applicable to loan payments made before completion of their tenure. As a result of this, the borrower is in complete control when he/she wants to pay off her loan. This way you can save on interest charges that may be applied in case the borrowing was to run its original tenure. This is one of the key reasons why this secured loan is preferred by many.

Low Interest Rates

Aside from home loans, which incidentally is also a secured loan, a gold loan is probably the cheapest loan an individual can avail in terms of the rate of interest that is charged. This benefit definitely makes this asset-backed loan easy to pay off in a hurry, while the money to be borrowed is readily available in case of an emergency.

Minimal Documentation

In case of most loans, the borrower has to worry about the wide range of documents that they need to submit. In case of a loan against gold, the prospective borrower can rest easy because he/she only needs to furnish the most basic of KYC documents mainly for identity and address verification purposes. Even a valid PAN card is not necessary unless the loan amount being sanctioned is above a certain limit. Also no credit score information needs to be considered by the lender, which further decreases the time to disbursal.

Flexible Tenure 

A loan provided using gold as security can have a tenure ranging from a few days to a few years, though in most cases, the maximum limit is fixed at 12 months. This flexibility is perfectly suited for individuals who might need a cash infusion in a hurry and can pay it off within a very short time once they have the money hand to pay the loan off.

In view of the above benefits, there shouldn’t be any reason to doubt how helpful a gold loan can be in case one is going through a temporary financial hardship.