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Personal Loan

Loan Against Stock: All You Need to Know

In India, a loan against a stock is defined as a loan given to an individual by a financial institution using shares or stocks as collateral. The loan amount is determined by the value of the shares pledged. Several institutions offer loans against shares, including banks, NBFCs, and stockbroking firms. The loan can be used for various purposes, such as business expansion, personal needs, or working capital requirements. It is a quick and convenient way to raise funds, and the interest rate is usually lower than that of personal loans. Here we will discuss everything you need to know about loans against shares, including how they work, their benefits, etc. [B-01] What is a Loan Against Stock? The definition of a loan against stocks is when an individual borrows money from a financial institution by using securities, such as shares or bonds, as collateral. The loan amount is based on the value of the securities pledged. The lender holds the collateral until the loan is repaid in full. On the one hand, the borrower gets much-needed financial assistance, while on the other, the lender has a low-risk investment. When the loan is repaid, the securities are returned to the borrower. The interest rate on these types of loans is usually lower than that of personal loans. The best part is that you can use the loan amount for any purpose, as there are no restrictions imposed by the lender. How a Loan Against Stock Works The LAS system is simple. You pledge your stocks with the lender, who, in turn, offers you a loan amounting to a certain percentage of the value of your shares. Most of the time, the institution opens a current account in the borrower’s name. The rate of interest is calculated based on the amount withdrawn by you during the period when it was used. This facility can be availed of for a short-term period or on an ongoing basis, depending on your requirements. In the former case, you can use it to meet emergency expenses like medical bills or travel costs. On the other hand, if you require a regular inflow of funds, you can opt for the latter. What are the Features of a Loan Against Stock? Loans against shares are a popular mode of borrowing among investors as they come with several features. Some of them are mentioned below: The loan value is a predefined percentage of the market value for shares held to account. Eligible securities for loan against shares include ESOPs, equity shares, preference shares, and debentures. When taking out a loan against your Demat shares, the loan against share interest rate is generally 12–18% per year and is cheaper than personal loans. You can pledge your Demat shares to avail of a loan amounting to Rs. 20 lakhs. You don’t need a guarantor to avail of a loan against shares. As security, banks or NBFCs ask for a pledge of shares. Benefits of Loan Against Stock The benefits of a loan against stock are many, and it can be a great way to get quick access to cash. Here are some of the main benefits: You can use the loan for any purpose. The loan against share interest rate is usually lower than that of other types of loans. There are no restrictions on how you use the loan. The loan is easy to obtain. You can get the loan quickly. The loan can be used as collateral for other loans. The loan can be paid back over a longer period. You can get a tax deduction on the interest paid on the loan. The loan can be used to buy stock or invest in a business. You can get a loan against multiple stocks. What are the Eligibility Criteria for Loan Against Stock? There are several eligibility criteria for taking a loan against shares, which are as follows: Age Criteria: The applicant must be at least 18 years old. You can avail of this facility until the age of 65. Resident Criteria: You must be a resident of India to apply for this loan. Minimum Stock Value: The shares pledged by you should have a minimum value of Rs. 4 lakh. Documents Required: You have to submit KYC documents, such as identity proof, proof of documents, proof of stocks, address proof, and the latest photographs. These are some of the documents required for taking a loan against shares. Documents Required for Loan Against Security The documents required for a loan against shares are as follows: Identity Proof: Passport, PAN card, Aadhaar card, driving license, voter’s ID card Address Proof: Passport, utility bills such as electricity, water, and gas bills; ration card. Proof of Income: Latest salary slip, bank statements for the last 3 months, Form 16 Proof of Stock: Latest stock holding statement Photographs: Passport-sized photographs How to Apply for a Loan Against Stocks? Almost every bank in India offers loans against shares. However, the process of applying for this loan is different for every bank. In some banks, you can apply for this loan online; in others, you must visit the branch and submit the required documents. Banks also have different eligibility criteria and rates of interest. Hence, you should compare the offers of different banks before applying for this loan. The steps to apply for this loan are as follows: Visit the website of the lender and fill out the application form with personal and financial details. Submit the form along with the documents required. The lender will verify your documents and, if satisfied, will approve the loan. The loan amount will be credited to your account within a few days. These are the steps involved in applying for a loan against shares. [B-02] Conclusion Anyone who has shares in their Demat account can avail of a loan against those shares. The loan amount will depend on the value of your shares. The loan against share interest rate is generally lower than that of other types of loans. You can use the loan for any purpose. The repayment period is also flexible. Parimal Finance offers loans against shares at attractive interest rates and with a simple application process. So, if you are looking for a loan against stocks, then apply with us today!
08-11-2023
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Tax

What is Income Tax Payable And How to Calculate

The government is entitled to a cut of the total revenue of your company, called the income tax. Paying income tax is your company’s financial obligation. However, an accounting term often used is income tax payable. [B-01] What is the income tax payable? The income tax payable is the amount that your company needs to pay in income tax within the following year. Simply put, it is the tax your company has to pay within the next 12 months. Income tax payable grows in proportion to your company’s profit. You will not always have the same tax payable on the total income. The income tax payable on the total income is shown on the balance sheet as a liability. Liabilities can be decreased through tax credits provided by the relevant government agency. Most tax credits have a time limit on when they can be used on your taxes. It is necessary to track when your company becomes eligible for each. Formula to determine the income tax payable Your organization’s taxable income is not determined exclusively by its bookkeeping profit. The total profit reported on the books can differ from the taxable profit that must be applied to the income tax rate. This is because the government permits many modifications that affect the accounting profit. Income tax payable and income tax costs can fluctuate because it takes time for a company to record the earnings in the account. This often happens because some clients are given late payment due dates. Income tax payable is not included in the statement of operations. Instead, it is shown on the balance sheet. There is typically a disparity between income tax expenditure and income tax paid. The difference may be due to depreciation, tax deductions, and other accounting issues. Since the process is complicated, your business needs help calculating its taxable revenue. There is no set method for determining income tax payable. However, the calculation is done according to set standards. Tax costs can be estimated using the following formula: Taxable income x tax rate = income tax payable For example, if the total taxable income is INR 10,00,000 and the tax rate is 25%, your company has to pay INR 2,50,000. Deferred income tax liability vs. income tax payable Income tax payments and deferred income tax liabilities are financial obligations on a company’s balance sheet. It is a common misunderstanding that they are the same thing. These two things couldn’t be more different from an accounting perspective. Income tax payable represents tax that has not yet been paid. It is still not paid often because the filing dates are far. For example, your company expects to pay Rs. 2,50,000 in taxes for the upcoming tax period. Then, you can record an income tax payable of this amount on the balance sheet. This sum is due on the same day as the rest of the company’s tax obligations. On the other hand, a deferred income tax liability refers to an outstanding tax bill that has been postponed until a later tax filing season. Obligations result from discrepancies between tax accounting and generally accepted accounting procedures. Income tax expenses and income tax payable Income tax expense and income tax payable are not the same. Expenses have to be recorded when they are incurred. An income tax expense is an amount your firm estimates it will have to pay in taxes for the reporting period. Income tax expenses can be utilized to record income tax charges. A business that makes its tax payments monthly or quarterly should make corrections to its income statement. On the other hand, the balance sheet will show income tax payable on the total income as a liability. Types of Income Tax Payable Your corporation’s taxable income can be broken down into two categories. There are two types of income taxes that must be paid: Current income tax payable: The estimated tax payment for the current year. Deferred income tax payable: The taxable income in the current year that will not be paid until the following year. How do you calculate the income tax payable for your company? You can use the formula given above to calculate the income tax payable. However, it is not always clear whether the income is taxed. Companies use GAAP-calculated pre-tax net income as a starting point. You can account for changes between the net income and taxable income. You have to make adjustments if there is any discrepancy between accounting and tax regulations. The fines and other costs you deducted from your net income may not be tax deductible. Adding and subtracting these amounts is often done. Once you have completed these processes, you will have your initial taxable income, from which you may deduct any tax-related expenses (such as tax credits). Apply the government’s tax rate to determine your total income tax. This is the amount your company has to pay. On the balance sheet, record this amount as a liability. Deferred impacts of items like future year tax credits, revenue, costs, and net losses might be difficult to account for when calculating income tax payable on the total income. [B-02] Conclusion Your company’s expected income tax payable is a liability. It is your company’s responsibility to pay the income tax in full. The income tax payable by your business might be due in the current or next financial year. Income tax payable is an important obligation for any business. Businesses need to account for various state and local income tax rates. The process can be confusing. If you’re unsure where to start, look to a professional for help.
08-11-2023
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Personal Loan

What is a Loan NOC letter and How to Get it

In India, when you apply for a loan from a bank or financial institution, they will ask for a No Objection Certificate, or NOC. You may have also heard of this being called a “No Dues Certificate.” The lender requires this document to ensure that you do not have any outstanding loans or debts with any other bank or organization. Several factors can impact your ability to get a NOC, including your credit score, employment history, and income. So, what exactly is a NOC letter, and how do you get one? This article will take a closer look at all these questions. [B-01] What is a Loan NOC Letter? The meaning of “NOC,” or No Objection Certificate may vary depending on the context of the person using it. A NOC is a document issued by a company, organisation, or individual to state that they do not have any objections to a specific action or event. A letter of authorization from your employer, for example, would confirm that you can take time off work for a vacation. In the context of loans, a NOC is a document that your current or previous lender issues to confirm that you have no outstanding debts or loans. Who Issues a NOC Letter? A NOC is typically given on a company, organization, or individual’s letterhead. A manager or company director will typically sign such a document. In the case of an NOC for a loan, this would usually be issued by your current or previous lender. Why Do You Need a Loan NOC Letter? Now that you know more about a NOC, you may wonder why you need one to apply for a loan. There are a few different reasons for this. Firstly, the lender will want to be sure that you do not have any outstanding debts or loans with another bank or organization. If you do, they may be less likely to approve your loan application. Secondly, the lender will use the NOC to check your credit history. This is because having a good credit history shows that you are a responsible borrower and are more likely to repay your loan on time. Finally, the lender will also use the NOC to check your employment history and income. This is because they want to be sure that you have a stable job and earn enough money to repay the loan. Benefits of a Loan NOC Letter There are a few advantages to having a NOC when applying for a loan. First, the lender will approve your loan application more quickly if you have a NOC. The following are the benefits of having a loan NOC letter: This document is trustworthy and accurate, which means there will be no issues in the future regarding the repayment of a personal loan. By having a personal loan contract, you are protected from any legal problems that could arise if there is confusion about the terms of the loan. A NOC is an important document that acts as a precautionary measure for both the borrower and lender. It protects the rights of both parties if something goes wrong during the loan process. A NOC letter can help you get a loan with better terms and conditions. This is because the lender knows that you are financially responsible and have the means to repay the loan. Factors That Affect Your Ability to Get a NOC Below are the factors that affect your ability to get a NOC: Your Credit Score: A high credit score is always advantageous when getting loans. A good credit score reflects your financial responsibility and shows that you will likely repay the loan on time. Your Income: Lenders will always want to know how much money you make each month. This is because they need to ensure you can repay the loan. Your Employment History: Lenders will also want to know how stable your job is. They will want to see that you have a steady income and are unlikely to lose your job soon. Your Debt-to-Income Ratio: This ratio measures how much debt you have compared to your income. Lenders use this ratio to determine whether you can afford more debt. Your Assets: Lenders will also want to know what assets you have. This is because they can use these assets as collateral for the loan. Your Repayment History: Lenders will also check your repayment history to see if you have defaulted on any loans in the past. Getting approved for a loan will be more difficult if you have a bad one. How to Get a Loan NOC Letter? The primary prerequisite for getting a housing loan is a NOC letter. You can get a NOC by following the steps below: 1. Get your documents in order The first step is to get all of your documents in order. Next, you must provide the lender with your identification, income, and bank statements. 2. Choose a lender The next step is to choose a lender. There are many different lenders, so it is essential to compare their terms and conditions before you decide which one to go with. 3. Apply for the loan Once you have chosen a lender, you can apply for the loan online or in person. 4. Get the NOC Once you get approval for the loan, you will need to get a NOC from the lender. This document will list all of the terms and conditions of the loan. 5. Sign the NOC The last step is to sign the NOC. This document is a legally binding contract between you and the lender. By signing in, you agree to repay the loan according to the terms and conditions. [B-02] Conclusion The NOC is an important document that can help you get a loan with better terms and conditions. People usually get a NOC when they apply for personal or housing loans. You must provide the lender with your identification, income, and bank statements to get a NOC. Once approved for the loan, you will need to get a NOC from the lender. We also provide services like personal loans, home loans, car loans, etc. You can apply for a loan online or in person. Piramal Finance has a team of experts who can help you get the best loan for your needs. Contact us today to learn more!
08-11-2023
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Other

What is Inventory Financing & How It Works?

What Is Inventory Financing? Inventory financing is a short-term, asset-backed financial solution that a firm can use to cover non-inventory-related expenses. This solution is offered to small and medium-sized shops or wholesalers with a large inventory. To use this benefit, a borrower must give business goods as collateral to gain funds and cover costs. But if the merchant can’t repay the loan on time, the moneylender can take the inventory or any other inventory of similar value. Since inventory is so important to inventory financing, the financing company must ensure that the inventory has a good resale value before giving the loan. As a result, this financing arrangement is inappropriate for businesses that are new to the market or do not have real products in their inventory. [B-01] Types of Inventory Financing A business can apply for any of the following inventory financing options: Inventory Loan When a business needs money quickly and plans to use the value of its inventory to get it, this type of financing is a good choice. An inventory loan can only be taken out once. Inventory Line of Credit This is more popular with businesses because it can be used to pay for unplanned costs after the borrower gets the loan. In this financial arrangement, the lender gives the borrower money whenever needed. Inventory Financing Eligibility Criteria When getting a loan through this program, borrowers must keep the following in mind: The company should have been in operation for at least a year. The company applying for this financial scheme must have a good turnover. The company must have a good business credit history. The borrower should have a successful business sales record. If a company has a mature product and little debt, there is a good probability that the merchant will get a loan to finance their inventory. The business should not have committed severe credit violations like bankruptcy or repossession. If a company has an aging inventory or wants to take out a long-term loan, its loan application will be declined. Documents Required for Inventory Financing You’ll have to submit the following documents if you decide to use this short-term funding arrangement: Applicant’s Driver’s License Cancelled Business Check Bank Statement Business Balance Sheet Company Registration Information Appraisal Report Business Profit and Loss Statement Business Tax Returns Supplementary Documents Copies of Sales Invoices Things a Bank Will Look At Economic, Business, and Industry Inventory Sequences Inventory’s Value for Reselling Limitations in Logistics and Shipping Stock’s life and how quickly it goes bad Provisions for theft and loss, and much more How Does Inventory Financing Work? Inventory financing can work in two ways. A bank can give you a term loan or a line of credit to buy things. The difference is that a term loan gives you the whole amount of money upfront. You usually pay back the loan in fixed monthly payments over a certain period of time. On the other hand, a line of credit is used to buy things as they become available. In this case, you only pay interest on the part of the credit line that you use. And when you pay off your debt, your credit limit will return to what it was before. Here’s an illustration of how it might function. Assume you must buy INR 6,00,000 in inventory to prepare your firm for peak season. You contact a lender who assesses your assets’ liquidation value to be INR 4,50,000. Suppose the lender offers to lend you 80% of that amount, or INR 3,60,000, at a fixed 17% interest rate. Assume you spend the entire INR 3,60,000. Then, you would have to repay INR 4,21,200 (INR 3,60,000 plus INR 61,200 interest) over the course of 12 monthly instalments. That equates to INR 35,100 per month. You repay the loan in full after 12 months. You now have full access to the 3,60,000 INR and can purchase items as needed. Assume you get a better offer by buying in bulk. You decide to withdraw INR 50,000. You’d still have access to the remaining INR 3,10,000. If you repaid the INR 50,000 you borrowed, your credit limit would be reset to INR 3,60,000. With either method of financing, the inventory you purchase serves as security for the loan. Your lender determines the amount you can borrow. For example, Lender A may allow you to borrow up to 100% of the liquidation value of the inventory. However, Lender B may only let you borrow up to 70% of the liquidation value. Lenders usually require professional assessments to determine the liquidation value of any goods you intend to purchase. Things to keep in mind Few private and public sector banks and non-bank financial companies (NBFCs) don’t offer inventory finance because they don’t want to collect and keep collateral that isn’t useful to them in case the borrower doesn’t pay back the loan. Over time, the value of any stock tends to go down. So, it’s possible that the borrower won’t be able to get a loan for the full value of its stock. [B-02] Conclusion When they need emergency credit, many retailers, manufacturers, and dealers choose inventory financing because it immediately gives them access to cash. Inventory financing is a good way for businesses with large inventories to get funds at a lower rate. It is a type of asset-based lending that is efficient and reliable. This financial solution helps small and medium-sized businesses increase sales and operations, improve cash flow, and prepare for peak season. This financial solution can help merchants with short-term cash flow problems and help them buy more inventory. Contact Piramal Finance for great deals on inventory financing.
08-11-2023
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Tax

What is House Rent Allowance, HRA Exemption and Tax Deduction?

Many people relocate to a new area in search of employment. Companies typically provide a housing allowance to help employees with this out-of-pocket expense. Thus, the house rent allowance (HRA) affects how much tax you have to pay. This article discusses everything you need to know about the HRA exemption and tax deductions. [B-01] What is the house rent allowance? Employees living near their workplace may be eligible for a “rent subsidy.” A rent subsidy, or HRA, is a payment made by your employer to help you with housing. The house rent allowance may be entirely or partially taxable, depending on the circumstances. The salary, HRA, rent, and job location determine how much of your paycheck is subject to HRA deductions. The tax breaks associated with HRAs are available to self-employed and salaried individuals. How to calculate HRA? When an individual pays rent instead of buying a home, the government allows them to deduct a percentage from the housing rental allowance. You can calculate your HRA refund by using an online salary calculator. The HRA calculator is available on the income tax portal. The advantages of paying rent can be claimed under Provision 80GG. HRA can be deducted even if you do not have a fixed income or receive HRA. Guidelines for deducting house rent allowance from your taxes If you fulfill the requirements of Section 10(13A) of the Income Tax Act, you can deduct your house rent allowance from your taxable income. The requirements are as follows: A salaried employee and a business owner can take advantage of the HRA tax deduction. However, you must rent a house to be eligible. Housing expenses cannot be included in HRA tax deductions. You need to submit a rent receipt as proof that you have paid your rent in full. If your company provides you with an HRA as part of your income, you will not be eligible for tax deductions if you do not pay rent. To avoid a tax penalty, employees spending more than INR 1,00,000 per year on rent must include their landlord’s PAN in their tax forms. HRA tax exemption for salaried individuals Rule 2A of the Income Tax Act specifies that salaried persons are exempt from paying tax on HRA contributions if they meet certain requirements. Employees must adhere to the company’s policies while claiming their house rent allowance. How do you determine if the HRA is deductible? The maximum allowable deduction is calculated as follows: Residents of metropolitan cities receive HRA equal to 50% of [base income + discretionary allowance (DA)]. Residents of non-metropolitan cities receive 40% of [base income + DA]. Rent paid should not exceed 10% of [annual base income + DA]. What documentation is needed to qualify for an HRA exemption? To get a deduction from your employer for your house rent allowance, you will need to provide the following: Rent receipts and rental agreements PAN of the home’s owner if the annual rent is higher than Rs 1 lakh HRA deduction is reflected in form 16. Factors to take into account when calculating HRA deductions Some things to keep in mind with HRA tax deductions are as follows: You cannot receive an HRA tax exemption if you pay rent to your spouse. If you have a house loan, you can still take advantage of the tax benefits associated with an HRA. You can claim a house rent allowance if you live with your parents and pay rent. However, you need to show a receipt. HRA and city compensatory allowance Employers (government and private) often offer their employees a City Compensatory Allowance (CCA) to help them deal with the increased cost of living. The CCA is available in major metropolitan areas and Tier 1 cities. CCA is also available to some employees working in a Tier-2 Indian city. The employee’s grade and position on the pay scale are considered. Therefore, it differs from one city to another. The CCA is meant to offset the higher-than-average housing costs of working in some areas, while the house rent allowance (HRA) covers the costs of renting a home. Allowances are subject to taxation in both cases. The HRA exemption is up to INR 1,00,000, while the CCA is not. HRA deduction: how do you get it? Before, businesses were not obligated to verify whether an employee had legitimate rent costs. However, this resulted in many requesting HRA deductions even though they were not renting properties. Many also requested deductions higher than their actual rent. Therefore, on June 1, 2017, the Income Tax Act was revised to prevent fraudulent use of the HRA deduction. Some rules are in effect: If the rent is more than Rs. 1 lakh per year, the renter must now provide the landlord’s PAN to verify the transaction. You need to provide TDS receipts when requesting the house rent allowance perk. The taxpayer can live in a place he or she rents and still claim the HRA deduction. Assessee can claim deductions under other sections of the Act, such as Section 24, Section 80C, and Section 80EE, in such a circumstance. [B-02] Conclusion Note that to qualify for a tax break, neither you nor your spouse can legally own any residential real estate in the same city. No deduction is permitted if you own any residential property and rent from this property. If you work in a different city and do not own any property in that city, you may be able to take advantage of the house rent allowance tax deductions. In the case of Section 80GG, however, this option is unavailable. House rent allowance is a complicated topic but can be beneficial to understand. If you are still unsure how HRA exemptions work, contact the best financial advisors at Piramal Finance to learn more.
08-11-2023
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Personal Loan

What is loan against share and how to get it?

It is now simpler and more socially acceptable than ever before to obtain a loan, whether the purpose is to satisfy immediate financial obligations or to accomplish particular immediate or long-term objectives. However, because there is such a high demand for loans, the interest rates that are attached to them have skyrocketed, rendering them inaccessible and unaffordable to a huge number of people. Also, they sometimes need valuable items or real estate as security, which makes them a risky alternative. Taking out a loan against the shares held in your Demat account is an option worth considering if you need money but don’t want to part with any of your physical possessions in the process. [B-01] Loan Against Shares: How Does it Work? The process of securing a loan by using the value of your shares of stock as collateral is referred to as a loan against your shares. You can make a profit off of your investments using Demat shares to secure a loan, so you won’t have to liquidate them first. When you take out a loan against shares, you do not need to provide any security or additional securities in addition to the shares that are already in your Demat account. Here are some of the reasons why a loan against shares is an excellent borrowing alternative: You have the option of taking out a loan from the same financial institution that is providing you with the Demat account service if you want. When you take out a loan from the same financial institution that manages your Demat account, the process of disbursing the loan you took out against your Demat shares is simplified and streamlined. In reality, you are just borrowing the money from the financial institution because it is pledging your shares against the money that it has received as collateral. You can assure this ease of disbursal by making sure to open a Demat account with a reputable financial institution that offers convenient loans against securities. This will allow you to get a loan without having to pledge any of your stocks as collateral. When you use your Demat shares as collateral for a loan, your shares are essentially retained as a security deposit. Even if your Demat shares are used as collateral for the loan, you will still be eligible for all of the benefits associated with stock investments. This entails receiving and retaining not only profits but also bonuses and rights that are legally yours. Eligibility Criteria for Availing a Loan Against Shares You have to make sure that you are qualified to go through the loan process before you can take out a loan against the shares that are held in your Demat account. Here are the eligibility requirements: You must be between the ages of 18 and 65. It is only possible to pledge the ownership of shares that are registered to individual shareholders. You are not permitted to make a shared commitment on behalf of minors, HUFs, non-resident Indians, or businesses. In addition to that, we will require you to submit certain important papers. These can include a statement from your DP, proof of your identity, proof of your address, and proof of your income. You are not permitted to pledge the company’s shares if you are a director or a promoter. Features of Loans Against Shares The loan that you can get against the shares that are held in your Demat account comes with several unique features that set it apart from other kinds of loans. The following is a list of some of the most crucial aspects that you should be aware of: Your Demat shares can be pledged to obtain a loan of up to INR 20 lakhs. Loans against shares are frequently less expensive than personal loans, with interest rates ranging from 12 to 18% p.a. Guarantors are not required for loans against shares. Furthermore, there are usually no prepayment penalties. Every week, an evaluation of the value of the pledged shares is performed. Things to Avoid While Availing of a Loan Against Shares Even though taking out loans against the shares held in your Demat account might be a practical alternative, it is essential to make use of these funds in a responsible and circumspect manner. Some investors take out loans secured by their Demat shares solely to reinvest the money they get back into the market. If, on the other hand, the market enters a bearish trend, this move could result in significant losses for you because you will still be obligated to pay the interest to the financial institution. Therefore, it is strongly suggested that you steer clear of using this tactic. Instead, it is recommended that the loan amount be used for unexpected financial needs or to quickly accomplish financial goals. These can include finances for home bills, a wedding, schooling, and money for investments in businesses, among other things. [B-02] Conclusion You too can take advantage of the borrowing perks that come with having investments in the stock market by using your Demat shares as collateral for a loan. Finding the proper financial institution that can give you an optimal Demat account and the facility to avail of a loan against your Demat shares is the key. The key is to identify the right financial institution.
08-11-2023
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Personal Loan

What is Loan Underwriting? Explaining the Underwriting Process and Rules

If you are planning to get a loan, you need to learn about loan underwriting. Underwriting is a behind-the-scenes process. It is the most crucial step in acquiring a loan. The underwriting process takes place for all types of loans, whether you apply for a personal loan, a home loan, a car loan, or any other kind of loan. Understand the underwriting process and the rules that guide the decision to prevent rejection. [B-01] What is Loan Underwriting? The underwriting process is an assessment of your creditworthiness by the lender. The idea of credit underwriting is to determine whether you meet the eligibility criteria for a loan. Here, the lender assesses your income, debt, assets, and other financial details. They further categorize the findings into three C’s: Collateral. Capacity. Credit. Based on these 3 determiners, the lender establishes whether you can pay the loan. Loan underwriting is important to secure the interest of both parties, the lender and the borrower. Underwriting Process Prequalification Prequalification is not a part of the underwriting process. However, this tool can be used by borrowers to get a fair idea of their eligibility for loans. It’s a casual step that gives you a general idea of how much loan to apply for and what interest rates you can afford. Getting prequalified could mean that if you were to apply formally, you could likely get a loan. Pre-approval Pre-approval is an important part of the loan underwriting process. This step will determine the maximum loan amount that can be offered to you. Here, a lender will evaluate various financial documents and run a credit check. After a thorough evaluation, the lender will determine the loan amount and its interest rate. To get the pre-approval process started, the lender would require certain financial information. Make a formal loan application and offer financial documents. The financial documents include income proofs, debts, savings, credit scores, and other loan information. The lender verifies the information and makes important decisions based on it. The documents submitted should reflect true information. If not, your application will be denied. Income and asset verification The most crucial part of the underwriting process includes the verification of income and other financial proofs. The only reason for this check is to make sure that you can pay back the loan with your current income. The income and asset verification includes a detailed study of your tax returns and bank account statements. The asset study includes the balance in your account, investments, retirement savings, stocks, and much more. If the lender finds your income and asset proofs adequate, they will issue the preapproval letter. A pre-approval letter is an indication that you could obtain a loan. However, this still doesn’t imply that your loan application is accepted. There are further steps to determine that. Appraisal In the case of home loans, this is the most important aspect. The underwriter examines the value of the home you are planning to buy. Here the sale price of the house is verified with the fair market value. This is done so that lenders don’t end up paying more than the worth of the house. The appraisal step rules out the chance that you save loan amounts by buying cheaper homes. Title search and insurance A title search ensures that the property can be transferred. This will prevent the lender from lending money on a house that has legal claims on it. The property history, liens, claims, pending legal actions, mortgages, and other aspects are assessed. The title company then offers insurance to ensure the accuracy of its research. Final decision The entire underwriting process will lead to the decision of whether to deny, approve, or suspend the loan application. The loan application can be rejected if the lender doesn’t find you suitable enough for the loan. They can suspend the application if a few documents are found missing. However, you can reactivate the application again by submitting the required documents. If approved, the lender will finance your loan. Rules that Guide Loan Underwriting Decisions Credit score A high credit score establishes the fact that you are credible. It reflects your history as to how regular you have been in paying your loans. A credit score is a very important factor affecting the loan underwriting decision. A recommended credit score will help you get a loan at competitive rates. If you are applying for loans, a credit score of 750 or above makes a good start. Income Income is the cornerstone that establishes whether you can repay the loan. Lenders determine the income level below which they won’t approve a loan. Collateral To avail a loan, you need to pledge assets that can act as collateral. Collateral is required for nearly all kinds of loans. In cases of default, collateral is used to repay the loan. The value of the collateral is very important. It should ideally be higher than the loan amount to serve the required purpose. Debt and liabilities Don’t apply for new loans while the underwriting process is going on. Your current debts and liabilities are assessed to ensure that you can still repay the new loan. The lender needs to ensure that you can repay the loan with your current debts. Ideally, your total debts should not be more than 30 to 35% of your income. [B-02] Final Takeaway Underwriting is not to be feared. It’s a friendly process. All you need to do is understand the basics that guide the underwriting process and adapt accordingly. With sorted fundamentals, the underwriting process will only get easier. Head over to Piramal Finance and learn more about the world of loans, finance, and markets. Free yourself from the hassles of complicated loan processes with Piramal Finance.
08-11-2023
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Home Loan

What is a Secured Loan? Meaning, Definition, Advantages

In today’s world, staying on top of schemes and loans introduced by banks and the government has become crucial. But unfortunately, many individuals are unaware of the different loans that can aid them. Therefore, they miss out on a lot of life-changing and money-securing opportunities. A secured loan requires the borrower, you, to put forth an asset or security to avail of the specific benefits attached to the secured loan. If you can’t pay back the money by the due date, you can use this asset as payment instead. The most common examples of secured loans are car loans and home loans. Banks usually ask you to give collateral when their loan is too large. This helps the bank retain the money disbursed by setting up auctions for the properties or assets they have seized. Again, this allows them to regain what they are owed. [B-01] What Purpose Does a Secured Loan Serve in the Market? What is the use of a secured loan in a financial market when an unsecured loan already exists? There are two main reasons why someone would take out a secured loan and why a lender would offer one: Lenders offer secured loans so that they have something to fall back on. They do this to ensure that even if you, as a borrower, default on payments, they can recover the total amount through the collateral you have put forth. Individuals take up secured loans because that makes them eligible for larger loans. They are also provided with lower interest rates and more favourable terms, all due to the asset they have given up. Difference between a secured and an unsecured loan An unsecured loan is issued not based on collaterals or submitting properties but on your ability to repay the loan you borrowed. For example, you might be asked for a detailed history of your employment and a credit and background check. These help the lender decide whether you would be a good candidate for the loan. A few common examples of unsecured loans are personal loans, student loans, and credit cards. Different types of secured loans There are many different types of secured loans; some of them are: secured credit cards, car title loans, mortgage loans, vehicle loans, secure lines of credit, life insurance loans, home loans, car loans, home equity loans, bad credit loans, and share-secured or savings secured loans. Advantages of Procuring a Secured Loan The collateral motivates you to fully pay what you owe: If the bank takes your asset as collateral, you will be heavily motivated to repay the loan. Furthermore, since there is a risk of foreclosure from whichever institution the money is borrowed from, that is reason enough to pay back the money borrowed. Lower rates of interest: Typically, a secured loan comes with a lower interest rate than other types. This is because the borrower is providing collateral and the lender is not taking on much financial risk. Tax Deductions: Individuals eligible for some secured loans, like home equity loans or mortgages, can have their taxes deducted at the end of the year. This is due to the interest they are paying on loans. Guarantor not required: Since you have already submitted your assets as a substitute, you do not need a guarantor for the loan you are trying to obtain. Also, lending institutions don’t need a guarantor as long as the collateral you give them meets their requirements. Disadvantages of a Secured Loan Risk of losing property or assets: If you cannot repay the loan for some reason, the property or asset you have provided as collateral is at risk of foreclosure by the lender. This makes the threat more significant for you and serves as a potential disadvantage if you cannot repay your loan. A loan is for a specific asset: A secured loan can only be used for particular assets you want to purchase, like a car or a property. Apart from that, the money cannot be used for anything else. The only exception to this is a home equity loan. Loan rejected in case of no collateral: Your loan application will be immediately denied if you do not own an asset or a property. You need collateral if you are applying for a secured loan. Otherwise, you will have to look into loans that do not require collateral. The collateral value should be more than the loan amount: Any property or asset you submit must be verified by the lender. They will determine the value of the loan and then assess if you are eligible for a secured loan. Finally, an appraisal is carried out for the asset, and a fair price is determined that satisfies the lender enough to disburse a loan. [B-02] No matter which loan you might be considering applying for, it is always wise to get your documents in order and check if you are eligible for that loan. It is also essential that you find out specific details about the loan, such as: If the interest rate of the loan is variable or fixed. The maximum and minimum amount you can borrow. The income and credit requirements for the loan you want to avail. The type of asset/property you need to give to avail of the loan. The annual percentage rate and the interest rate of the loan. There are many different types of loans a person can consider these days. If you want to make an informed decision based on facts and numbers, head to Piramal Finance, an excellent financing solution for individuals looking to secure a loan.
08-11-2023
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Personal Loan

What Is Personal Loan And How To Apply For Personal Loan Online During Festive Season

A personal loan is a form of credit that allows you to access funds needed for personal expenses. You can use it for home improvements or to celebrate the holidays without having to use your assets as collateral. A personal loan is an unsecured debt that requires few formalities. You can get it in minutes from anywhere in India by applying online on our website, and once approved, you can receive the money very quickly. [B-01] What is a personal loan? A personal loan is a type of unsecured loan that is used for your personal needs. You can apply for a personal loan from any bank or NBFC (non-banking financial company) in India. The interest rate on this type of loan is usually higher than on other types like home, car, and education loans. There are many reasons why you might need a personal loan. Whatever the reason, it’s important to know how much you can borrow before applying for one. During the festive season, you might want to buy many things. This is when you need a personal loan the most. You can use the money to buy gifts, organise parties at home and the office, or even travel abroad with your family and friends. Personal Loan During Festive Season The festive season brings a lot of joy and happiness. You need money to enjoy this season, and you don’t want any restrictions. To meet these requirements, you can apply for an online personal loan to help you get the money instantly at the lowest interest rates possible. The process is straightforward and takes only a few minutes to complete. Once you complete all formalities, it takes only a few minutes for the banks to approve your application and send the money to your bank account. You can use the money for any purpose, which is completely hassle-free. The best part is that each borrower’s interest rates are different based on their credit score and income. Personal Loan Interest Rate It is important to understand the interest rates if you are looking to apply for a personal loan. The interest rate will also depend on the loan you have taken out. For example, if you have taken out a short-term loan, it will be cheaper than a long-term one because the latter has a higher risk associated with it. Personal loan interest rates can vary from one company to another. You will be charged to determine the personal loan interest rate; you need to compare different lenders and their interest rates. This way, you can get the best deal possible on your loan. Interest rates on personal loans are fixed at the time of approval. Unlike floating rates, the interest is fixed and will remain constant for the entire tenure of the loan. The interest rate on personal loans ranges from 12% to 30%. The interest rate is determined by many factors, such as the industry, credit score, loan amount, and term of repayment. Eligibility to Apply for a Personal Loan During the Festive Season The festive season is the most popular time of year for people to apply for personal loans. However, if you are considering applying for one, there are some things to consider first. For example: You should be in between 21-60 years of age You must live in India and have a valid ID, like a PAN card, passport, voter ID, Aadhaar card, driving license, etc. You should have valid residence proof like an electricity bill, ration card, telephone bill, bank passbook, etc. You should have a regular income source and provide at least six months of employment proof. Your salary should be a minimum of INR 25,000. Your credit score should be good enough to get approval for a loan. You should have an active bank account and decent transactions to prove your credibility. After taking into account the EMI on the personal loan, the FOIR ratio should be between 50 and 55%. You should be able to pass the eligibility check. How to apply for a personal loan online? The first step to applying for a personal loan is to search for one on the internet. Many companies provide personal loans, but you must choose the right one. The second step is to refer to the Personal Loan EMI Calculator and calculate your monthly instalment based on your income, existing debts, and other expenses like rent, mortgage, utility bills, etc. The third step is to get a personal loan from any bank or NBFC that offers low EMI rates so that you can pay it easily without any trouble in the future. The fourth step is to compare the APL, interest rate, and other charges with those of other banks or NBFCs so that you can get a better deal. Once all these formalities are over, select the amount of loan required along with the tenure option and submit it online along with some basic details such as the name of the applicant, address, etc. After entering these details, confirm them once again before submitting, because if there are any errors, it may lead to the rejection of the application form by the lender company. Once the application is submitted, it takes around 1-3 days for approval from the lender company, and once approved, you will get a confirmation message on your registered mobile number. Personal loans are available in any amount, starting from Rs. 1,00,000 up to Rs. 10 lakhs or more. Here, you don’t need to disclose the purpose of taking the loan. [B-02] Conclusion The key to getting a personal loan at the lowest possible interest rate is to shop around, compare different lenders, and choose a lender who will offer you the best deal. It’s also important to keep track of your credit score and report to avoid future surprises. This blog covers what you need to know about personal loans and how to get the best deal from your lender. If you have any queries related to this topic, don’t hesitate to contact Piramal Finance for any query or assistance related to personal loans this festive season.
08-11-2023
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