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Home Loan

This is How You Can Manage Your Home Loan in Few Simple Steps

A home loan comes with certain risks. The tenure for housing loans can go up to 30 years, and the loan amount is usually in lakhs or crores. As a result, you will be paying EMIs for a large part of your career. Hence, you should learn how to manage your home loan better. Read on to learn how to effectively manage your home loan. [B-01] Why do You Need to Manage Housing Loans? You might be concerned about how to manage your home loan EMIs. Sadly, it is not as simple as other loans. Housing loans are high-value loans with a long tenure. Aside from a home loan, you will also have to pay for other expenses. Some of these include home expenses, travel costs, and various other expenses. If you have your spouse as a loan co-applicant, it becomes even more crucial to be on top of your costs. You may have taken out a home loan for an amount that can stretch your finances. But why let the joy of being a homeowner be affected by such matters? Let us look at how you can manage your home loan expenses better. How to Manage Your Home Loan? Managing housing loans is a major task. Hence, you should know how to manage your home loan. This helps you have better control over your financial future. Here are a few steps that you can follow: Opt for a low amount: You do not need to take a higher loan just because you are eligible. Borrow only what is needed for the purchase. With a high loan value, you need to make a higher down payment. However, if you can afford that, you will benefit from low EMIs. You will also be able to repay the loan more quickly. Go for a higher EMI: If you have to take up a high home loan amount for some reason, then it will be ideal if you go for a higher EMI. You must adjust your finances based on future growth and then opt for a high EMI that you can afford. But make sure you also need to take care of other costs, so think wisely before you decide. When you go for a higher EMI, you can repay the loan early and ensure the interest cost is also less. Pay EMIs on time: You need to pay your EMIs on time. Otherwise, the lender will levy late fees or penalties. It will be ideal if you opt for the auto-debit option so that there is no oversight on your part. Ensure your account has a sufficient balance around three days before the EMI payment due date. Any delay in paying the EMIs or bounced EMIs can affect your credit score. Pay one extra EMI: People want to repay their loans as soon as possible. If you want the same for your home loan, make it a point to pay an extra EMI every year. This would not hurt your finances but help you repay the loan before maturity. Also, your interest costs will be reduced when you repay the loan earlier than the due date. Start a mutual fund: Mutual funds are ideal for meeting crucial life goals, and buying a home is one of them. You can start a mutual fund investment to help you pay your home loan EMIs on time. This will help you create a sizeable corpus over time that will help you repay the loan amount. Align your portfolio: If you have a home loan EMI to pay, you should align your investment portfolio to meet your commitment. This implies liquidating investments that do not offer a return higher than the home loan interest rate. It will help you lower the loan amount, reduce your EMIs, and save on interest costs. On the other hand, if the investment is giving you a higher return than the home loan interest rate, you may continue with it. Reduce costs and increase income: When you have a home loan EMI, make sure to reduce other costs. At the same time, find ways to boost your income. In the present, when working from home has become the norm, you can take on some freelance projects. Your spouse may also take up such tasks to boost the family’s income. It will help you repay your housing loans faster. Use windfalls: If you receive any windfall income, do not spend it on leisurely activities. Try and use your funds to make home loan payments. It ensures that the loan is paid off on time, lowering your interest payments. [B-02] Wrapping Up Housing loans are not easy to manage. With the right financial planning, however, you can handle them wisely. Try to choose a lender that offers a low home loan interest rate. To learn more about how you can reduce your home loan EMIs, go to the Piramal Finance website. Here, you can read more such finance-related blogs and articles. It will help you understand the different types of home loan options, affordable home loan interest rate options, and ways to manage your housing loans.
08-11-2023
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Know More

Tips for Loan Against Property

The term, Loan Against Property, is used by lenders to describe the process that enables homeowners or business owners to take out a loan on their home or property. It is done to meet the financial needs of people who may lack the necessary funds but can benefit from owning a property. This process allows lenders with extensive experience and knowledge to help borrowers in need. A loan against property is an option for those who own a property and want to take out money against it. There are various benefits to this process. Beginners get approval for the loan quickly because most people don’t show up with enough collateral or equity in their property and can’t afford the high processing fees that other loans charge. Secondly, the interest rates on this type of bank financing are cheaper than other types, which means your monthly payments will be lower over time with this type of arrangement. For plans like an installment payment plan or a personal loan, the monthly cost could be higher. [B-01] Here are Some Tips and Advice for Loans Against Property 1. Obtain a Reliable Property Appraisal The lender in this situation will want to see that your property has a certain level of market value attached to it. Therefore, you should ensure that you get a good and reliable valuation on your home or property. That way, you will be able to show the lender that the house is worth enough money that they can secure their investment if they choose to loan out any amount against it. If everything checks out, you should have no trouble getting approved for a “loan against property” agreement. 2. Evaluate Your Risks You should know the risks involved with a loan against property transactions. Then you can make an informed choice and avoid any misunderstandings or other problems down the line. You need to consider your situation and how you would be able to handle certain circumstances if they arose. With a loan against property, you also need to consider the risks of not being able to pay it back. A lender will retain their right to call on the property when you don’t make a payment and have legal rights to collect interest on the outstanding principal amount. But if you do everything you’re supposed to, many lenders are happy to give you money based on how much cash you can pay back from your property. 3. Compare Interest Rates Between Lenders Comparing interest rates is a simple task. Lenders usually advertise their rates online or over the telephone. You can apply for a loan against property and get an idea of the interest rates from different sources before applying for one. Go through the loan details if you are interested in finding the best deal, but you need to get all of your ducks in a row before applying. It is essential to be aware of the various levels of lenders and their interest rates that differ from one another. Therefore, potential borrowers should research the situation of the lender before approaching them for help. It will also benefit them greatly if they can accumulate information from other people who have gone through the process before them so that they will have more accurate expectations regarding what it takes to secure a loan against property. 4. Maintain a Good Credit Score It will help you even when you are taking a loan against property. The lender may insist on checking your credit reports and scores, as this will be one of the factors that they consider before approving your loan. They may ask for a credit report to be run several times during the duration of your loan to ensure that you can meet your obligations. Having a good credit score is essential for many reasons. You can use it as collateral to borrow money, ensure that you get better interest rates on loans in general, or have an easier time with other kinds of financial arrangements such as mortgages, credit cards, and more. 5. Choose a Short Tenure Although it’s possible to get a loan against property for tenures as long as 25 years, you may want to try to make the arrangement more short-term to get the best interest rates. When you work out the numbers, it is often less expensive for a lender to make interest payments for a shorter period than a longer period. If this sounds like what you are trying to do, then you will want to choose lenders who can help you with that in your search for ways to secure money. They can also help you find good strategies on how to pay it back and manage your money better during the time that your loan exists. 6. Have Good Credit Scores This helps in getting approved for loans against property without any problems, and it reduces the risk of them having to sell your house or property if it is ever necessary later on. When you have good credit scores, you are going to be in a better position to make payments on any loans that may be taken out under a particular arrangement. [B-02] Conclusion Getting a loan against property is not very difficult. When you are starting on the path to getting a loan against property, you must know what you’re doing. The better educated you are on this topic, the easier (and more comfortable) it will be for you to secure a deal in your favor and make the process as smooth and simple as possible. There are various ways to go about getting this kind of loan, but the best way is likely to go online and contact a few different lenders who can help you get started through their service. You can always consider consulting an institution like Piramal Finance. They can help you with a mortgage loan and can also guide you through the process.
08-11-2023
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Other

All You Need To Know About Working Capital Finance and How it Works

Many business owners believe that financing from banks and other lenders will always be the best option to fund business growth, but that is not always the case. Working capital finance can help your company get the money it needs to meet immediate cash flow challenges. It also allows you to maintain your credit rating and keep control of your assets and debt repayment strategies. Learn more about working capital finance and whether or not it is right for you by reading this article on everything you need to know about working capital finance. [B-01] Defining working capital finance Working capital is the money a company has available to cover its expenses between periods of sales. It can be used for day-to-day operations, long-term investments, or additional working capital loans. Working capital loan interest rate is one of the most important factors in determining how much you will pay in interest on your debt. A low working capital loan interest rate will result in a lower monthly payment, while a high one will lead to higher monthly payments and potentially a higher total cost of borrowing. The primary factor that affects working capital loan interest rates is the length of time between when the funds are borrowed and when they are repaid. The longer it takes for repayment, the higher the rate. Types of working capital Working capital is the amount of money you have available at a given time. There are four types of working capital: Cash in hand: Cash in hand is the most liquid form of working capital finance. It can be put to use immediately. Accounts receivable: Accounts receivable show how much customers owe a company for products or services that have been delivered but not yet paid for. Inventory: Inventory stands for the products a company has on hand that are ready to be sold to its customers. Fixed Assets: The final type of working capital finance is fixed assets. This refers to items like property and equipment that the company owns and may utilise over time. How does working capital work? Working capital is a type of business loan. Here, the finance company allows you to borrow up to 75% of what your inventory, receivables, and other assets are worth. Working capital finance loans have an interest rate that varies depending on the financial strength of your company and what collateral you have for the loan. They can be anywhere from 2% up to 7%. The borrower is required to repay the amount borrowed plus interest within 90 days, or it may face liquidation to pay back the debt. As long as the borrower has some sort of collateral to offer (real estate, a vehicle, etc.), they will receive a lower interest rate than someone who doesn’t. How to calculate working capital The total value of all cash required plus all accounts payable is divided by 365 days in a year to calculate working capital finance. Working capital formula: Current assets / Current liabilities = Working capital ratio If you take out a working capital loan with an interest rate of 12% per year and make monthly payments, it would cost $200 each month to repay the balance at the end of one year. A lower working capital loan interest rate could save you thousands of dollars over the life of your business. This depends on how much working capital you need and how long it takes to get repaid. The importance of working capital management Working capital is the difference between a company’s current assets and liabilities. The level of working capital needed varies based on the type of business. Companies need to manage their working capital levels because this has an impact on liquidity and solvency. This in turn can have a big effect on the company’s creditworthiness. Working capital finance is determined by several factors, including credit history, industry type, and the size of the company. There are some reasons why your business might require additional working capital: To fund new projects and equipment: The working capital loan interest rate is usually lower than the company’s credit card debt. So it can be a good way to help fund projects and equipment that will increase your revenue in the future. As a short-term solution for cash flow issues: Working capital loans are usually paid back in one year or less, so they’re an ideal short-term solution for companies with cash flow issues. To repay higher-interest debts: If you have more expensive debts such as a car loan, student loans, or credit cards, working capital loans can often save you money in the long run by getting rid of these debts. For inventory financing: If your inventory exceeds what you need on hand to fulfil orders, then you may want to look into inventory financing options. This provides additional liquidity for managing inventory levels during busy periods. The working capital loan interest rate is typically lower than the company’s credit card debt, so it can be a good way to help fund projects and equipment. This will increase your revenue in the future. Working capital finance loans are usually paid back in one year or less, which makes them an ideal short-term solution for companies with cash flow issues. [B-02] The bottom line Working capital is the fuel that powers a company. It is an amount of money that can be used for operations or investments. It helps keep the company operating and supplies it with working capital. Working capital loan interest rates are typically set at a fixed rate so that you know how much you will pay over time. Check out more finance-related articles at Piramal Finance on topics that interest you.
08-11-2023
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Schemes

What kinds of returns can I expect from NPS?

In terms of profit potential, the National Pension Scheme (NPS) is up there with the safest investment vehicles. It has a medium risk level but lower returns than some other investment options. There are eight pension fund managers to choose from in the NPS, which is a significant perk. To participate in the tax saving NPS, you must choose how much of your investment money to put into each asset class. The four asset classes are equity, corporate bonds, government bonds, and alternate assets. [B-01] What exactly is NPS, and what purpose does it solve? The National Pension Scheme is an investment tool governed by the Pension Fund Regulatory and Development Authority of India that promises high rates of return. The programme was established to provide subscribers with monetary support once they reach retirement age. A subscriber can invest in equities, corporate bonds, government bonds, and alternate assets. Furthermore, the fund managers who allocate your assets will directly impact your tax-saving NPS returns. As of right now, India has eight different pension fund managers. This article presents data gathered from various sources to provide a comprehensive picture of the NPS return rate. How can an organisation benefit from a high Net Promoter Score? The rate of return on an NPS tax-saving investment is tied to the success of the underlying investment vehicle. The average NPS return can be estimated by looking at the scheme’s performance in the market. To maximise the size of one’s retirement nest egg, NPS subscribers should start saving as early as possible. The rate of return on an NPS account is the interest earned on the contributions made to the account. As of 2021, the interest rates range from 9% to 12%, making this investment a lucrative choice for those seeking financial stability. Subscribers’ returns on their investments are tied to the type of asset and the size of their initial investment. Because tax-saving NPS funds are invested in debt and equity, the expected returns on those investments fluctuate with market conditions. Below, you’ll find information on the NPS return rates in 2021 and previous years. Investors have achieved high returns across all asset classes and tiers. What is the recent return rate of the tax-saving NPS scheme? By reading on, you will learn about the returns earned by the NPS up to July 19, 2019, and get a feel for what the NPS has returned over the past decade. With this information, you’ll be able to gauge 2020 NPS response rates with greater precision. As of 2019-07-19, the average annual return on NPS Tier 1 (equity) was 3.6%. In comparison, the average annual return on NPS Tier 1 (equity) over the past three years was 9.5%, and the average annual return over the past five years was 8.74%. Tier 1 (corporate bonds) tax saving NPS average returns have been 13.59% after one year, 9.1% after three, 10.34% after five, and 10.31% since inception. The average annual return on Tier 1 (government bonds) in a defined contribution retirement plan was 20.28%, and the average annual return on Tier 1 was 10.29% after three years, 11.56% after five years, and 10.15% after inception. Tier 1 (alternative assets) had an average NPS return of 9.89% over the past year and 7.67% every year since the fund was started. How to open an NPS account for the first time? Today, opening a tax-saving NPS account is a quick and easy process that can be completed in under thirty minutes from the convenience of your own home. A one-time password (OTP) will be used to verify the information you provide, including your Permanent Account Number (PAN), Aadhaar number, and mobile phone number. Once your account is cross-checked and authenticated, you will get a Permanent Retirement Account Number (PRAN), which you can use as your NPS login procedure. How to track down your NPS returns? Due to the market-linked nature of NPS returns, which are comparable to those of mutual funds, no interest is paid on NPS investments. From what has been shown, if you invest in an NPS for a long enough time, you can expect a high rate of return. With the help of an NPS calculator, you can figure out the expected rate of return on a tax-saving NPS investment. This tool has become popular because it can give accurate estimates of future earnings. You can easily estimate how much money you’ll get out of your NPS corpus when you retire (typically after the age of 60) with the help of the NPS calculator. The NPS calculator can also help you determine how much regular savings you’ll need to achieve your desired rate of return. When the above information is put into the NPS calculator, the following will happen: The sum of money in your National Pension System (NPS) Account. The amount of money that a subscriber can expect to have saved by the time they retire, after accounting for interest. The entire sum that will be bought as annuities at maturity Total cash payout upon maturity Based on the annuity purchase, an estimate is also made of the pension that the subscriber will get each month. Why should you invest in NPS? In recent years, tax-saving NPS has become the go-to investment vehicle for subscribers looking to amass a nest egg for old age reliably. Although the NPS allows for diversification across various asset classes, there is a limit on the proportion of the fund allocated to equity shares. These are more volatile than other investment options and do not guarantee a return on investment. Investors’ faith in the tax-saving NPS scheme has been bolstered by the fact that returns have averaged 8–10% annually over the past decade. [B-02] Wrapping it up! Investing under the NPS scheme is a lucrative option as it is a long-term investment scheme and provides high interest rates. It is an ideal investment option if you plan for early retirement. Tax saving NPS scheme gives you dual tax benefits with an additional INR 50, 000 tax concession on your investments. To learn more about the NPS scheme, the benefits, and the returns, you can visit Piramal Finance.
08-11-2023
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Tax

What is Value Added Tax?

Taxes are levied on products at every production stage, from manufacture to sale. They are based on the product’s price, not the manufacturing material price. The prime goal of this blog is to provide you with the necessary information to fully understand what the VAT tax. Without further ado, let’s get started with the follow-up article to learn more about this. [B-01] What is Value Added Tax (VAT)? At every stage of production or distribution, value-added taxes (VAT) are levied on goods and services that add value, starting from raw materials until retail. VAT was introduced in April 2005. It tells you how much value you add at each step, and you pay taxes based on that amount. Consumers finally pay the full VAT when they buy goods, whereas buyers at earlier stages get reimbursed. Because the total tax is passed on to the consumer, the VAT tax is considered a consumption tax. The VAT laws are levied by each state to ensure proper implementation and assessment. Different states apply different VAT rates based on their implied laws. Why Was VAT Introduced? Introducing the VAT tax was the first step towards eliminating double taxation and cascading effects caused by the then-existing sales tax structure. Consequently, the cascading effect occurs when a tax is imposed on a product at every stage of its sales process. As a result, the consumer pays taxes on taxes already paid, so the tax is calculated on the property’s value, including the taxes paid by the previous buyer. In the VAT system, no exemptions are possible. Taxes are charged at each level of the production process, ensuring better compliance and fewer loopholes for exploitation. Pros and Cons of Value Added Tax (VAT) Pros The tax loopholes in the income tax could be closed by substituting a VAT for other types of taxes, such as the income tax. A VAT has a stronger incentive to encourage people to earn more than a progressive income tax. Cons Businesses are burdened with higher costs as a result of VAT. As a consequence, tax evasion may be encouraged. Added costs increase prices, which is particularly difficult for lower-income consumers. VAT Registration If a company generates revenue exceeding Rs. 5 lakh by selling goods and services, it is mandatory to register for VAT. All such entities must register with the relevant state where they operate. The registration process for VAT is essential for an enterprise to pay VAT. All traders are given an individual 11-digit registration number upon registration, which is used to communicate all details regarding the VAT tax. You need to submit some essential documents during VAT registration, including the following list of documents: A copy of the PAN Business address proof Promoters’ identification proof An additional security deposit or surety Rates of VAT in India State governments collect a value-added tax, and the guidelines and rules applied to its implementation vary widely from state to state. Value-added tax in India is divided into four major categories, which are as follows: Nil: It is generally considered that items that fall under this category are exempt from VAT. These represent products and services deemed essential and sold in the unorganized sector. Some of these are items such as khadi or salt. 1%: This class of goods usually has a higher price than other products that belong to this class. There is a reason that VAT is charged at a rate of 1% on expensive goods. If the VAT rate is increased, this will mean that the prices of these items will increase considerably. This category comprises gold, silver, precious stones, and other things. 4-5%: Some daily items are subject to VAT at 4%–5%. These items include cooking oil, tea, medicines, etc. General: It has been established that the items that fall under the general category are subject to VAT rates ranging from 12% to 15%. Most things under the general category are considered luxury items, such as cigarettes, alcoholic beverages, etc. Value Added Tax Collection in India Account-based collection of VAT In the account-based method of collecting your taxes, there is no need for sale receipts. Instead, you calculate your taxes based on the value added. Value added equals the difference between the revenue and the allowable purchase amount. Invoice-based collection of VAT Traders who sell goods and services provide invoices that include separate details about the VAT collected. The invoice-based VAT collection method uses sale receipts or invoices to determine the corresponding VAT. A lot of countries today collect VAT based on invoices. Another way to categorize VAT collection is to assess when it was collected. Accrual-based collection A company collects revenues according to the period during which the income is generated. The accrual-based collection matches the remittance with the period during which the revenue is generated. Unlike the cash-based method of collecting VAT, this method is very complicated. However, it provides essential information regarding any business. Cash-based collection of VAT A cash-based accounting system is more straightforward than an accrual-based system. The focus is on the cash being handled rather than whether all the charges have been paid. Once reimbursement has been received, that date is recorded as the date on which funds have been received. Example of value added tax Ram owns a restaurant and purchases raw materials for it at a cost of Rs. 50,000. The input tax on the raw materials is 10%, so the input tax on the raw materials will be Rs. 5,000. As a result, Ram was able to make Rs. 100,000. Considering an output tax of 10%, Ram could make Rs. 10,000 after selling the food made from the purchased raw materials. Therefore, Ram must pay Rs. 5,000 in VAT tax instead of Rs. 10,000. How to Register for VAT Online? You must follow the following steps to register for VAT online in India. Firstly, you need to go to the official website of the VAT and click on the tab titled “Registration.” Upload all of the relevant documents and enter all of the relevant information. You will receive a temporary VAT number if you register on behalf of a corporation. After you send in your application and all the required paperwork, you will get a VAT number that will stay with you for the rest of your life. [B-02] Conclusion Products are subject to a variety of taxes that are levied on them. An excellent example of one of these tax types is the value-added tax. We hope that this article helped you clarify any doubts that you had about this topic. Your comments encourage us to write better.
08-11-2023
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Business Loan

What To Do If Your Business Loan Is Rejected

Every business needs money to operate successfully. Applying for a business loan is something that most startups do to kickstart their business operations. While there are many business loans available, there is no guarantee that every business loan will be accepted. There are multiple reasons for a business loan rejection, including a bad credit score or businesses that are in debt. But after a business loan gets rejected, there are still steps that can be taken to ensure that your business receives the funding it requires. Here are a few things you should do if you ever face a business loan rejection. [B-01] Determine the Cause of a Business Loan Rejection It is very important to understand the reason for your business loan rejection. This can help you take the necessary steps to make improvements before applying for another business loan. Generally, your lender should send you a business loan rejection letter within 30 days with detailed information about why your business loan was rejected. If not, you can raise a request for this. A few common reasons for business loan rejections include: Poor credit score Cash flow issues Excessive debts New business Absence of collateral High-risk business If your business loan was rejected, there should be a reason for it. Find out what that reason is and work towards improving your standing in that area. Evaluate and Improve Your Credit Score A credit score is an important factor that helps banks approve or reject business loans. This will help them evaluate your income as well as your repayment capacity. In India, four credit bureaus calculate and manage credit scores: TransUnion CIBIL Experian Equifax High Mark Out of these, the CIBIL score is the one that most banks, NBFCs, and private lenders consider while approving business loans. Ideally, a CIBIL score of 750 or above should be good enough to get your business loan approved. You can improve your credit score by following the steps mentioned below: Make sure you repay your debts and clear your credit card dues within the required time. Restrict your credit utilisation to less than 30% of your total credit limit. Request an increase in your credit card limit if possible. Check your credit report for errors and have them corrected as soon as possible. If you cannot improve your credit score even after following these steps, you can try applying for a secured loan. Your bank might approve your loan if you have collateral, as the risk involved will be less. Correct your debt-to-income ratio How much of your business’s earnings go towards repaying your debt is a factor that most banks will consider when approving your business loan. This is called the debt-to-income (DTI) ratio. The debt-to-income ratio is calculated by dividing your total monthly debt repayments by your monthly gross profits and then multiplying the result by 100. The lower your DTI, the better your chances of getting a business loan. Keep your DTI under 36% if you wish to get your business loan approved. Check your documentation. You have to make sure your documentation is in order if you want to apply for a business loan. In addition to the documents that show who you are and where you live, you will also need to send: Bank statement for the past six months Your latest income tax returns, along with the computation of your income, duly certified by an authorised chartered accountant Certified copies of your profit and loss account and balance sheet for the past two years Proof of continuation, such as your trade license, sales tax certificate, or establishment certificate Other important documents, such as your sole proprietorship declaration, partnership deed copy, or a certified true copy of your memorandum of association (MOA), should be included, along with an original copy of the board resolution. Make a list of all the documents you need to make sure you have everything you need. Identify alternate sources of funding. Banks follow strict rules to approve business loans. As a result, most owners of small businesses and startups find it very difficult to get their business loans approved. This makes it very important for businesses to look for alternative financing for their business operations. Alternative financing is available from external lenders who offer loans to businesses with poor credit scores. They are easier and faster to get since the lending criteria are not as strict. These are some alternative financing options if you are facing a business loan rejection: Line of Credit: This is a source of funds that you can access whenever you require finances. Most small businesses use this for equipment financing. It is more or less like using a credit card in that you will be approved for a certain credit limit for a specific period. You can borrow as per your need, as long as you do not cross that limit. This might come in handy while meeting payroll expenses, especially during lean periods. Instalment Loans or Term Loans: These are loans that you repay over time by making regular payments in instalments. They are similar to the loans that you obtain from banks or credit unions. However, they are offered by many external lenders online. You can apply for these on the official websites of lenders or crowdfunding platforms. They are customizable and user-friendly. You can qualify for a term loan even if you have bad credit. Invoice factoring: If your business has outstanding invoices, you can use this option to get money immediately. With this option, the factoring company purchases your invoice and credits your account with 90% of the invoice value. It then collects the payment from your client on your behalf by charging a 1–2% factoring fee. The remaining amount will be credited to your account. Other options include invoice financing, equipment financing, merchant cash advances, microloans, and crowdfunding. [B-02] Conclusion Getting a business loan is not as easy as some may believe. Even if you have a good credit score, there are other factors such as income and experience that can reduce your chances of getting your business loan approved. Even in the event of a business loan rejection, there are still multiple alternative financing options available. For more options after a business loan rejection, visit Piramal Finance to read related articles, like this one, for information and guidance on getting your business loan approved.
08-11-2023
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Gold Loan

What role do gold loans play in India’s economy?

The gold loan has been popularised in India for decades now. Yet most of them were managed and controlled by the unorganised sector, which included the local moneylenders and pawnbrokers. There were no policies or regulations to control their activities. It is only recently that the banking and finance sectors have been informed about the impact that gold loans have on the Indian economy. Compared to the other retail loan products, gold loans are gaining faster traction, with the rising gold prices acting as a boon for the market. Borrowers can get loans faster as they can provide their gold ornaments as collateral. Lenders find it safer to lend money since the collateral is adequate to cover their risk. Many banks as well as NBFCs (non-banking financial companies) have started offering gold loans at low-interest rates. The interest rate is as low as 7% per annum for gold loans in India because of the collateral provided. The tenure for these gold loans ranges from three months to four years, and you can avail of up to Rs. 1.5 crore as a loan, depending upon the value of the gold you keep as collateral. [B-01] Benefits of Taking a Gold Loan Here are a few things you need to understand about gold loans: Gold loans can be used for any purpose. You can pledge your gold ornaments and get a gold loan whenever you face any kind of financial emergency. You can use the money for medical emergencies, educational purposes, or even to go on a holiday. These loans are highly secure. If you pledge your gold with a reputed bank or financial institution, you can rest assured that your gold is safe with them. Whenever you repay your loan, you will get your gold ornaments back in the same condition they were in when you deposited them. There are numerous tenure options. From 3 months to 48 months, you can choose any tenure option to repay your gold loan. Low Fees. Like other loans, gold loans are also associated with certain fees, such as processing fees, valuation fees, and late payment charges. However, these amount to only about 2% of your loan amount. Multiple Repayment Options Most gold loan lenders offer various options for borrowers to repay their gold loans. These include: Regular EMI repayment Paying the interest amount upfront and repaying the principal loan amount at the end of the tenure Paying interest amount in monthly instalments and repaying the principal loan amount at the end of the tenure If you repay your interest amount regularly, you might even get a 1 to 2% rebate on the original rate of interest. Gold loans are often preferred by borrowers because of their quick disbursements, minimal paperwork, and flexible schemes. It is a hassle-free and easily accessible option for borrowers who wish to borrow small loans. However, there is something called loan-to-value (LTV) that you need to be aware of while opting for a gold loan. What is loan-to-value (LTV)? Loan-to-value, or LTV, is the ratio of the gold loan amount to the value of the gold that is being pledged. The RBI (Reserve Bank of India) has capped this at 75%. Nevertheless, this might change depending on the market rate of gold. If there is an increase in the gold rate, you can get more gold for the gold that you pledge. On the other hand, if the gold rate falls, you may have to pledge additional gold for the same amount of money. Banks and financial institutions generally derive the value of gold by analysing the fluctuations in the gold rate over the past 30 days. They then evaluate the LTV by checking the purity of the gold that is being pledged. A professional loan evaluator is usually hired for this purpose. The lender might ask the borrower to pay up the marginal difference or pledge more gold when there is a fall in the gold price. Not paying this up might make you a defaulter, thereby impacting your credit score. In case you fail to repay the loan even after 90 days after the end of your term, the lender might liquidate the pledged gold by auctioning it. However, it is highly unlikely for lenders to follow this route if the tenure of the loan is short. Impact of gold prices on the Indian economy Indians love gold. They buy gold all the time, be it for investing, for weddings or other festive occasions, or to offer as a gift to their loved ones. They consider gold a symbol of prosperity and good fortune. Buying gold is a cultural norm for Indians. The amount of gold that Indians hold is more than what you can find in any other country in the world. 2.5 trillion Indian rupees’ worth of gold was imported by India in the fiscal year 2021. This is estimated to reach 3.4 trillion Indian rupees in the Fiscal year 2022. As a non-productive asset, gold has a huge impact on the Indian economy. Most of the gold that is purchased in India either gets transformed into jewellery or is stashed away in safe boxes and lockers. Most people hold on to their gold to get higher returns on their investments or just to add to their wealth. [B-02] In conclusion With the gold rate expected to rise in the forthcoming future, there are going to be more takers for gold loans. Make sure you make the most of your investment but do evaluate your financial situation and your repayment ability before borrowing your gold loan. Check out the Piramal Finance website for other options if you don’t want to pledge your gold.
08-11-2023
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General Insurance

What is the Right Age To Buy a Term Life Insurance Cover?

Term life insurance is essential for protecting your family’s financial future, especially if you are the sole breadwinner. In the unfortunate event of an untimely demise, having a term insurance plan will help your family if you are the one who provides for them financially. Preparing well for the future in case of an unfortunate demise will ensure that your family is well taken care of and will not be in a situation of financial desperation or need. This article will explore different aspects of term insurance, including the age at which you should be investing in a term insurance plan. [B-01] What is a Term Insurance Plan? In simple terms, a term insurance plan is a death benefit insurance plan that will provide the insurer’s nominee with a lump-sum amount upon their untimely death. It is one of the very few types of insurance that can provide a large amount, up to Rs. 1 crore or even more. But the amount depends on the amount of the premium, the number of premiums submitted, and also the age and income of the insurer. It is important to be cautious since there are some insurance plans with a maturity limit, and if the insured outlives the maturity limit, there will be no payout. So, make sure you pay careful attention to those details while investing in a term insurance plan. What Sort of Premium Will You Have To Pay? The premium you will pay depends on factors such as age, sum assured, term, gender, and others. Here are details on five of these important factors: Age: Age plays a significant role in insurance policies. At a younger age, the premium you pay will be lower compared to what you will pay 10 years later. So, if you get term insurance at an early age, you will be paying less than what you will have to pay later. Sum Assured: If the sum assured or the payout is higher, then the premiums you pay will be higher too. Term: Like premiums, the term can impact the final payout that the nominee receives. If you choose to have longer terms, you will also have to pay higher premiums, but you will receive a higher final payout. Most term insurance policymakers have term benefits, such as a duration of 5 to 40 years. Some even have a term that allows insurance until the age of 99. Gender: Some policymakers offer lower premium amounts for women. This is based on studies that indicate that women have a lower death rate compared to men. Lifestyle: Your lifestyle choices can affect the premium you pay. For example, a smoker will have to pay higher premiums. This is based on widely accepted research that indicates smokers have a higher death rate compared to non-smokers. The simple calculation is: the higher the death rate, the higher the premium amount. The Right Age To Buy Term Life Insurance The question many people ask is: When is the right age to buy term life insurance? The answer depends on several factors. Anyone between the ages of 18 and 65 can buy term life insurance. But since most people start getting their first jobs in their early 20s, that is considered a good enough age to start investing in term life insurance. If you are earning well, your expenses are not too high, and you have family members who financially depend on you, then it is important to start thinking about a term insurance plan as soon as you get your first job. Some people may have low earnings and high expenses early in their careers. Once you start earning higher salaries and are capable of managing your expenses, that would be the ideal time to start investing in term life insurance. Mostly, by the end of your 20s or early 30s, you should have a stable enough financial life to buy a term insurance plan. Most insurance policymakers prefer people who are young and in good health. Therefore, it is wise to take advantage of this by investing in term insurance early. Benefits of Term Insurance Term life insurance comes with various tax benefits. So, you will pay a lower premium since there will be no tax amount included in the said premium. Term insurances are exempt under Section 80(C) of the Income Tax Act, as long as the premiums are under Rs. 1.5 lakh. The final payout that the nominee receives will also be exempt from tax under Section 10(10)D as long as the annual premium is less than 10% of the total sum assured. Term insurance can also benefit you if you have any loans in your name that are yet to be repaid. In the event of your untimely demise, the outstanding loan amount can be simply deducted from the final payout of the term insurance. This saves your family from having to worry about how to repay your loans. Most people who want to secure their family’s financial future invest in term insurance. Term life insurance allows your family to have stable financial support after your unfortunate demise and also gives you confidence that they will be well looked after due to your smart financial planning. [B-02] Conclusion Planning your finances well secures your future and the future of your family members. One of the many ways you can do this is by buying term life insurance. This will allow you to easily secure the financial future of your family members, especially if you are their sole provider. If you are searching for term insurance plans, be sure to conduct thorough research to find a term insurance plan that is appropriate for your needs. To read more articles like this one with information on term life insurance, visit Piramal Finance. You will find other articles with details and guidance on term insurance plans and how you can get started on securing your family’s financial future!
08-11-2023
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Home Loan

What is the Purpose of a Loan Against Property? Here’s Everything you Need to Know

Your home is one of the most valuable assets you’ll ever own because it will protect you from the elements and keep you dry for the duration of the building’s useful life. For instance, a property owner who needs cash badly doesn’t have to take out expensive personal loans. Instead, he or she can get a loan against property (LAP) to cover the short-term financial need. A loan against property is a unique way to use all of the money that can be made from an immovable asset while still keeping the title. You can get money right away by using your property as collateral for a loan against it. It is a popular choice because it has a long time to pay it back and a low interest rate. [B-01] What is a loan against property (LAP)? In India, an “LAP” is a home loan you get against a property you own. It has become a popular kind of long-term loan in India, especially among self-employed people, because the loan terms are longer and the interest rates are lower. Can I borrow money for my house? All properties, including homes, factories, and offices, are fair game for an LAP. In the case of residential property, it could be a rented property or a property that the owner lives in. This includes apartments, flats, single-family homes, and so on. Commercial property is made up of things like office spaces, stores, shopping areas, complexes, and so on. If you own a piece of land or a plot, you could also get an LAP. Criteria for getting the LAP Even though this may be different from bank to bank, there are some things that all banks look at: the borrower’s income, debts, savings, history of paying back loans and credit cards, and the market value of the property being mortgaged. Aside from this, the borrower’s job status, maturity level, financial situation, and credit score are also important factors in deciding how much of a loan they can get. Lenders prefer that borrowers pay off debt while still employed. Hence, the upper LAP maturity age for salaried workers is 60 (retirement age in India), while for self-employed individuals, it’s 70. Benefits of a loan against property High loan amount with a long repayment term Depending on the lender’s rules, you can get a loan for up to 60% of what the property is worth on the market. You can also take advantage of the long time you have to pay back the loan (up to 15 years) by making sure you can afford the monthly payment. Loans can be used for many different things. The money can be used however the borrower wants. It can be used for various things, from paying for a wedding to financing business and expansion plans. It can also be used to pay for healthcare costs or buy a property or other asset that might not qualify for a loan. Available to everyone The loan is not only for people with regular jobs but also for professionals and businesspeople who work for themselves. Simple process Compared to other loans, a loan against property requires less paperwork and can be paid out quickly. Low-interest rates Since the property is used as collateral, the interest rate is usually lower than a personal loan. The interest rate varies by lender but is usually between 12 and 15%. This is much lower than the interest rate on a personal loan, which is between 15% and 25%. Tax benefit You can not only get cash to pay your bills with a loan against property, but you can also get tax breaks. Under section 24(B) of the Income Tax Act, you can get a deduction if you get a salary. The tax deduction can be used for the principal amount and the interest paid. Documents needed for an LAP For salaried people: As proof of residence, a copy of any of the following is acceptable: Ration Card Electricity bill Phone Bill Voter ID Card Employer’s Card The most recent bank statement or passbook that shows a salary or income has been credited to the account in the last six months Payslip for the last six months that shows all deductions Form 16 in the last two years Copies of all the property papers for the property that will be used as collateral for the loan Self-employed: Statement of financial condition for the past three years As proof of residence, a copy of any of the following is acceptable: Ration Card Electricity Phone Bill ID Card Employer’s Card The most recent bank statement or passbook that shows a salary or income has been credited to the account in the last six months Copies of all the property papers for the property that will be used as collateral for the loan [B-02] Conclusion One of the best ways to get money is to take out a loan against your property, especially when the property market is doing well. But if the borrower can’t pay back the loan on time or in full, the bank can take the mortgaged property and sell it at auction to get the money back for the loan. Like with any other loan, not paying back on time will hurt the borrower’s credit/CIBIL score and add a penalty to the loan repayment. Before taking out a loan against property, it is wise to think carefully about whether or not you will be able to pay it back and to understand all of the terms.
08-11-2023
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