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 Such out of date information could also be the outcome of clerical errors or fraudulent transactions (resulting from identity theft) in your name.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.
Personal loan can be one of the options when a person gets strapped for funds, it can help in closing the budget gap or meeting an immediate financial requirement. Whether it’s for house renovation, covering medical and educational expenses or paying off existing debts, a personal loan can be considered an ideal solution. However, with myriad of loans present in the market and each of them claiming their competencies, how would you make sure that you do not end up in a huge loan liability? So before signing on the dotted line, here are some personal loan mistakes that should avoid.
Not knowing your affordability
Most people tend to overstretch their finances by borrowing beyond their affordability. This situation could lead to financial crisis and default on payments, which will ultimately affect the credit report of a borrower. So it’s better to apply for a loan only when you can afford the monthly loan EMIs and other expenses.
Not doing a market survey
Before deciding a lender, it always pays to do a market research of what other lenders are offering. Compare the interest rate, prepayment clauses and other charges offered by other banks and choose the one that is suitable for your needs.
People often forget that personal loan is not the only option they have. A borrower should always compare and analyse key features, rate of interest, loan tenures, terms and conditions of other loans such as gold loans, loans against property, top up loans etc. before going for a personal loan. You can use the online loan aggregator sites for comparing the loans and choosing the right one.
Not choosing a familiar lender
Approaching a familiar lender or banker might work in your favour because they would be already familiar with your credit worthiness. It would also enable easy disbursement and quick loan processing. And probably it would get easier for you to negotiate on the interest rates and other charges of the loan.
Choosing longer tenures with low EMIs
Longer tenures seem like an easier repayment option but as a matter of fact, shorter tenure with higher EMIs are more cost-effective as compared to longer tenures with lower EMIs because the total interest pay-outs are lower. But before deciding the tenure, repayment capability and monthly budget should be taken into consideration.
Neglecting the fine print
Do not forget to read your loan agreement thoroughly, know everything about the interest rates, processing fees and other hidden charges. Clear every query related to the prepayment clauses. Banks generally do not offer pre-payment facility in the first six months and charge pre-payment penalties. Ensure that all your doubts get clear before taking the final decision.
Taking multiple personal loans
Taking multiple loans will increase your loan liability and would affect your loan eligibility. As the lenders would check your credit report which will show them that you are already occupied with several loan EMIs and granting another loan to you would rather be a risk to them. Hence they’ll avoid sanctioning loan to you, and if they do it, then your loan will possess higher EMIs which would ultimately disturb your financial picture.
Not being aware of credit score
Being financially disciplined client really pays you well and it makes sure that you have a good credit score. A person with good credit report is considered a good client and therefore the chances of getting loan approval are higher in that case. Be aware of your past credit records.
Personal loan comes with a flexibility to use it for any kind of household or personal financial requirements. Having said this, a borrower must understand the fine line between necessary and lifestyle based requirements. Considering the high interest rates and other charges of a personal loan, it is advised that a person should opt for a loan only when there is an urgent requirement of funds that cannot be postponed. It’s better to look at other options too before taking a final decision.
Buying a home is a dream for many but only a few individuals can actually make their dreams come true. Home loans have been specifically designed to let you make such dreams come true without having to pay all the money up front. However, once the loan is approved and disbursed, the bank expects you to pay the EMI due till the tenure of the loan ends. If you fail to pay the EMI on time because of losing your job or perhaps due to a medical emergency, you will become a loan defaulter and bank will initiate the process of taking over your property and selling it through an auction to recover your loan amount. Thus to provide a solution to this problem, we have listed a few things that you can do when unable to pay your home loan EMIs:-
- Negotiate: The foremost thing that you must do after becoming a loan defaulter is to negotiate with the bank over this issue. The lender will always be ready to talk with you about this issue as they find it the easier way to resolve the problem rather than going through the tiresome process of taking over your asset forcibly.
- Ask for a grace period: You can ask for a grace period from the bank to pay the loan. You can clearly explain to them the reason as to why you have not been able to pay the EMIs in a timely manner. Banks sometimes give loan defaulters the grace period for resuming EMI payments with some penalty.
- Go for loan restructuring: This is an apt solution when your home loan interest rates have been escalated and you may not afford the increased EMI. As part of the loan restructuring, the lending bank will increase the tenure of the loan upon which, your individual EMI payouts would go down. Though this will result in you paying more, it will be better than losing possession of the property.
- Seek assistance from credit counseling centers: There are many counseling centers available in many banks that may help you with this issue. They will provide you the appropriate solution of your problem by giving the fair knowledge of the thing that you should do to keep you away from being snared in a debt trap.
- Liquidate your investments: If all the aforementioned options fail to work, liquidating your investments is the last option that can come to your rescue. You can liquidate your existing investments such as deposits or mutual funds to pay the EMI’s. In case you have a life insurance policy such as an LIC policy, you might try to get a loan against the policy. You can then use this amount to make part payment for the loan which will reduce the constantly increasing EMI’s. There is no harm in doing this as it will keep you defaulting on your home loan. Besides life insurance, equities, fixed deposits or other savings can also help you get a secured loan.
- Last Option: When you are left with no other option than to sell off your prized possession in order to pay off the home loan amount, make sure your property is sold at a good price. This will not only help you pay the debts but you will also be left with a bit of extra cash at your disposal if the resale value is greater than the original loan amount.
Conclusion: These are a few of the top options you have in case you are unable to pay your home loan due to whatever reasons. To avoid getting into such situations in future, make sure you have at least 4-5 months of expenses that should be kept aside for the emergency purpose. Besides you must also have individual health insurance and critical illness policies for you and your family that will pay for the sudden medical crisis, during unemployment or in any other adverse situations.
Basics about credit score
Credit score is the major factor which is considered by the lenders when you opt for a home loan, the higher your score is the better are your chances of getting a home loan approval.
A Credit score between 350 and 900 represents a borrower’s credit worthiness which means that whether he/she will be able to pay off the loan which is offered to them. However, a high number shows higher creditworthiness, so an individual who has a credit score of 850 will be considered highly eligible to pay off the debts on time, whereas an individual with a credit score of 350 will be likely to miss payments.
It shows in detail the records of past borrowings. In case you missed or made delayed payments of your credit cards or loan EMIs, these are also reflected in your credit report. Therefore, it is advised that before applying for home loan you must get a copy of your credit score, it will prevent you from being unpleasantly amazed and you will have a chance a fix any kind of errors on it
Good credit score for home loan
Home Loan Credit score is one of the key factors that determine your interest rates on a home loan. Additionally, a higher credit score improves a borrower’s chances of getting lower interest rates. Credit score is a three-digit number which ranges from300 to 900 and sums up your credit history. Credit report contains a credit score which decides the creditworthiness of a borrower. Credit report also includes your personal as well as account details which tell a lender about previous debts such as credit cards and loans. Before sanctioning a home loan to you, a Lender will pull your credit report from one of three credit bureaus- CIBIL TransUnion, Equifax or Experian. Using the information contained in your credit report, loan officers will evaluate your eligibility for the loan and the applicable interest rate. At present, there is not clearly defined definition of a good score, as many banks and financial institutions may have different criteria of judging a good score. But according to CIBIL, 90% of home loans are sanctioned to borrowers who have a credit score more than or equal to 700. So, rule of thumb – the closer your credit score is to 900, higher are the chances of getting a home loan approved at low interest rates.
The Bottom line…
Ideally you should check your credit report every year, so as to make sure that you have ample time to course correct if your credit report is not in shape. Regular checking of the report will ensure that you have a good credit score, enough to help you land a good home loan deal. You have a number of ways to check it online, one such option is Paisabazaaar.com. You can visit the website and generate your free credit report. Don’t leave any stone unturned to create the desirable credit report, so that you stand no chance of losing on your interest rates and you avail your home loan in a hassle free manner.
While glancing at your credit report, check for every minute detail like the spelling of your name, your previous addresses, details of the associated accounts and their correct reports along with the ones which are now closed.
After doing this, if you find out any error that might have crept in, dispute them online to get the corrections done. Having a poor credit score that is less than 500 can get you in trouble of getting a home loan with extremely high interest rates and this scenario disturb your financial picture.
Gold – the yellow metal, the metal favored by women and men alike. For women, it has ornamental value while for men it has an investment value as gold is always found to appreciate in value over time. If numbers are to be believed, India’s gold imports have shown an increasing trend over the years because consumers are continuing their romance with this favored metal. To cash in on this romance, banks and financial institutions are offering gold loans against the pledge of gold ornaments owned by individuals. These loans are easy to avail, cheap and less risky (from the lender’s perspective) and are highly favored by both borrowers and lenders. The popularity of gold loans is reflected in their CAGR which shows that the Compounded Annual Growth Rate of Gold Loans outstanding from 2008 to 2012 was 57.5% for banks and 98.5% for Non-Banking Financial Corporations (NBFCs).
In short, gold loan is becoming an increasingly favorable borrowing option for many individuals. When it comes to geographical distributions, South Indian leads the race with an annual gold loan demand of 40% followed by West India at 25%, then by North India in the range of 20% to 25% and the race completes with East India with only a 10% to 15% demand of gold loan. Bangalore, Ahmedabad and Mumbai are the top 3 cities which have the highest demand for Gold Loans as people have no qualms in obtaining this easy source of finance. With all the brouhaha over gold loan, here are some reasons why gold loans are a current favorite of many borrowers:
- Low rate of interest – one of the primary reasons of availing this loan is because the loan promises a lower rate of interest compared to other personal loans which are unsecured and thus, have a higher interest incidence.
- Easy availability – unsecured personal loans are issued after checking the creditworthiness of the applicant and usually require thorough checking on the lender’s part and waiting on the borrower’s part. Gold loans are sanctioned against the security of gold ornaments and are thus easily available
- Utilization of assets – your gold ornaments, though assets, remain sitting in your lockers because of lack of any apparent use. A loan against these assets, thus, sounds practical as you can avail money on your ornaments for meeting your personal or business related expenses without having to sell your ornaments off.
- Easy procedure – since the loan is issued against gold assets, the requirement of documents is reduced and the loan processing procedure becomes shorter. This entails easy availability of finances through an easy application and sanction process
- Flexible – many lenders provide for an overdraft facility wherein the interest is charged only on the borrowed amount. There is also the prepayment facility extended by other lenders where the loan can be prepaid anytime without additional charges while some lenders insist only on the interest payments during the loan tenure. Thus, a gold loan comes with flexible features which are suitable for borrowers.
- Beneficial for lenders – since lenders obtain the security of the gold ornaments, they do not have any default risk of non-repayment of the loan. The loan is issued based on the value of the gold pledged with the lenders and as such, the applicant’s income capacity and financial position does not indicate the repayment potential. Thus, lenders are risk-free when it comes to obtaining the repayment of their loans granted.
With so many benefits, no doubt the gold loan sector recorded such a high Compounded Annual Growth Rate (CAGR). Borrowers in Bangalore, Mumbai and Ahmedabad have contributed prominently to the gold loan growth rate story. Gold loan is issued based on the prevailing price of gold and the current price per 10 gram of gold on the date of writing this article in these top 3 cities is as follows:
Purity of Gold
24 Karat Gold
|22 Karat Gold||Rs.28,000||Rs.29,600||
The prices fluctuate every day and as is evident above, is region-specific. The purity of the gold pledged, the current prevailing price of gold and the total quantity of gold pledged are the factors which determine the amount of loan available to the borrower. So, India is taking leaps and bounds in securing a gold loan, how about you?