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Tax

All About Business Loan Tax Deduction Under Section 80C

People who have taken loans for business are entitled to certain tax deductions under Indian income tax laws. Section 80C of the Income Tax Act allows a deduction for the interest paid on loans taken for businesses. The deduction is available for both new and existing businesses. To claim this deduction, you must be able to show that the loan was used for business purposes. The deduction is limited to the amount of interest paid during the year. If you are planning to take out a business loan, it is important to understand how the tax deduction works. This will help you maximise your tax savings. Continue reading to learn more about business loan tax deductions under Section 80C. Section 80C Business Loan Tax Deduction A business loan tax deduction under Section 80C is a deduction that businesses can claim on the interest paid on their loans. The deduction is available for new and existing loans and can be claimed for up to five years. To claim the deduction, businesses must provide evidence of the loan agreement, repayment schedule, and interest paid. The deduction can be claimed in the year the loan is taken out or in subsequent years. The maximum amount that can be deducted yearly is Rs 1 lakh (Rs 100,000). This limit applies to all deductions under Section 80C, including those for home loans, education loans, and life insurance premiums. The business loan tax deduction under Section 80C can save businesses thousands of rupees a year in taxes. It is an important tool for businesses to reduce their tax liability and improve their bottom line. Business Loan Tax Deduction Calculation To calculate a business loan tax deduction in India, you will need to follow these steps: Determine the eligible amount of the business loan. The eligible amount is the total loan minus any prepayment penalties or fees. Calculate the interest paid on the business loan. This can be done by taking the eligible loan amount and multiplying it by the interest rate. Add the calculated interest payment to your other business expenses when filing your taxes. The total amount of deductions for all business expenses cannot exceed 50% of your total income from the business. Types of Business Loans that Qualify for a Tax Deduction Under Section 80C There are many types of business loans that qualify for a tax deduction: Home loans: Under Section 24 of the Income Tax Act, home loans used for business purposes are eligible for a tax deduction of up to Rs. 1.5 lakhs per year. Auto loans: Auto loans taken for business purposes are eligible for a tax deduction of up to Rs. 1 lakh per annum under Section 80E of the Income Tax Act. Education loans: Under Section 80E of the Income Tax Act, education loans taken for business purposes are eligible for a tax deduction of up to Rs. 1.5 lakhs per year. Personal loans: Under Section 80C of the Income Tax Act, personal loans taken for business purposes are eligible for a tax deduction of up to Rs. 2 lakhs per year. Machinery loans: Similar to vehicle loans, you can deduct the interest paid on machinery loans used for business purposes. Startup loans: Many startups take out loans to get their businesses off the ground. The interest paid on these startup loans can be deducted from your taxes. Working capital loans: Often, businesses need extra funds to cover their day-to-day expenses. The interest paid on working capital loans can be deducted from your taxes. Business Loan Tax Deduction: How Much Can Be Saved? Assuming your business is structured as a pass-through entity, such as an LLC or sole proprietorship, the loan proceeds are generally taxable. However, you may deduct a portion of the loan as business expenses if the funds were used for business purposes. Let’s see how much can be saved in taxes. For example: If the business owner takes a loan for business purposes and pays interest on that loan, then she can avail herself of a deduction for the interest paid under Section 80C of the Income Tax Act. The maximum amount that can be deducted is Rs 1.5 lakh per financial year. This deduction is over and above the limit of Rs 1.5 lakh that can be claimed under Section 80C for other deductions such as investments in PPF, life insurance premiums, etc. Thus, if a business owner takes a loan of Rs 10 lakhs at an interest rate of 10%, she can claim a deduction of up to Rs 1.5 lakhs on the interest paid every year. This effectively reduces her annual tax liability by up to Rs 45,000 (30% * 1.5 lakhs). These significant savings can be used for other important expenses, such as growing the business or personal needs. Ways to Claim Business Loan Tax Deduction Under Section 80C Assuming that you have obtained a business loan for your company, you can claim a tax deduction under Section 80C of the Income Tax Act of 1961. The maximum deduction amount is Rs. 1.5 lakhs. To avail yourself of this deduction, you must submit various documents to the lender, such as: Your business loan account statement for the financial year A copy of your income tax return filed for the previous year A certificate from a chartered accountant certifying that the loan has been used for business purposes Once you have submitted these documents, the lender will calculate the eligible deduction amount and send you a confirmation letter. You can then claim the deduction by submitting this letter to the Income Tax Department. Tips for Section 80C Business Loan Tax Deductions Remember a few things to remember while claiming business loan tax deductions under section 80C: Make sure your business loan is for a genuine business purpose, not personal use. You can claim tax deductions on the interest payments made on the business loan under Section 80C of the Income Tax Act. The maximum amount you can claim as a deduction under this section is Rs 1.5 lakhs per financial year. You must submit all supporting documents and income tax returns to claim the deduction. [B-02] Key Takeaways You can save money on your taxes with the right business loan tax deduction. Be sure to talk to your accountant or financial advisor to see if this could benefit you and your business. If you’re interested in learning more about the business loan tax deduction under Section 80C, visit Piramal Finance, where you can read more articles like this and get started on your business loan taxes with the aid of a professional.

08-11-2023

Business Loan

All The Advantages Of Online Business Loans You Need To Know

The satisfaction of being in charge and making decisions comes from owning a business. However, despite the positive note, it has another side. The difficulty and pressure of raising funds for your business. When you have representatives working for you, there is also the fear of uncertainty and the tension of making the right choice. The asset you’re willing to make in top-of-the-line equipment, and staffing with highly skilled workers are critical to your company’s expansion. A business loan is an answer to this problem. With business loans, you can hire new employees, get new pieces of equipment, and also buy raw materials to take advantage of deals and meet seasonal demand. [B-01] Top 7 Benefits of Online Business Loan Online business loans can be beneficial for various purposes, but there are some well-known benefits. Let’s discuss some of the benefits of an online business loan. 1. Convenient and Flexible Online option is the fastest way to get a business loan. You do not need to submit voluminous documentation before submitting your application; instead, you wait for it to be submitted and approved. Digital verification of documentation is used as much as possible, which saves a lot of time. Processing speed is essential when you need an emergency loan, as offline sources would not only be slower but also prove to be more expensive given your desperate need. You can easily apply for a loan from the comfort of your home; no need to wait in long lines in banks to get a loan. It saves time and effort as online moneylenders are available online 24 hours 2. No collateral Collateral is a monetary asset you provide to the bank while requesting a loan. You can easily apply for a loan online without worrying about the collateral and still get up to 25 lakhs. Online Business loans are completely unsecured, unlike other types of loans that require borrowers to put up an asset, such as their home, as collateral. It means you can immediately get money for your business. As a result, getting a loan without collateral makes it easier for business owners to earn money and keep their businesses going. 3. Easy To Avail Obtaining a business loan online is much easier and more convenient than searching for investors and having lengthy discussions. When you need an emergency loan, processing speed is especially helpful as offline sources would not only be slower but also prove to be more expensive, given your need. You can apply for a loan in easy steps, no matter where you are and when you want. You can start your application anytime. As online lenders are available 24/7, you can easily apply for a loan without worrying if the lender’s branch is open, or whether there is ample parking or not. 4. Economical The lender incorporates the costs associated with physical interactions, like site visits, branch infrastructure, and the loan interest rate. There are no additional costs during the online loan application process apart from those clearly stated on the lenders’ websites. Whereas, offline loans may require additional fees as agents may be paid commissions. Another significant cost benefit is that your credit score is not obtained for every lender mapping when you apply online. On the other hand, if you apply offline, each lender will check your credit score, which would increase your borrowing costs. 5. Ample options and Customisations When you apply for a loan online, you get a vast pool of moneylenders with numerous loan options. You can select from various options rather than be forced to take what has been offered. You map out the one that best suits your needs, and if everything goes well, you move on to the next step. An online loan essentially puts you, the borrower, in a position where you can match the business with the right lender. The ability to customize a business loan is another advantage. The borrower can customize the included elements of the loan, such as the loan amount, duration, interest rates, and so on, based on the ability to repay and the required capital. Customization ensures that the borrower does not run out of money and gives them the loan they need without making it expensive. 6. Direct transfer Usually, in the case of offline applications, it takes a long process to transfer funds to you, and it gets complex, but in the case of online loans, the amount is directly transferred to the bank account without any worries. A company does not have to shut down operations or growth plans while waiting for funds, as online business loans usually require minimal documentation and are disbursed quickly. Numerous online lenders that offer business loans will deposit your assets quickly after you are approved. You can get the money the same day you apply, in a few business days, or within 24 hours, depending on the lender you choose. 7. Lower interest rates Online business loans usually have lower interest rates than other types of loans due to the fierce competition among lenders for customers’ attention. Most business owners believe that a business loan comes with a high-interest rate, making it a burdensome financial commitment for them when they don’t know what their future sales and income will be. Online business loans with lower interest rates can reduce their financial obligations while obtaining sufficient funds for their organizations. [B-02] Conclusion You can overcome any financial obstacles with the help of an online business loan, which will also you with the financial support you need to upgrade your business plan. An online business loan is a good option for businesses that want quick and easy financing. Piramal Finance provides fast approval and a wide range of financing options. It offers various types of unsecured loan options that are highly beneficial, further helping you in choosing the one that best suits your requirements. You can apply for a loan from the comfort of your home or office thanks to the online process that saves you time and money. Contact Piramal Finance immediately to boost your business.

08-11-2023

Personal Loan

What is a pre-approved loan offer? A detailed guide

Choosing the home of your dreams requires patience and time. You would likely look at a few options before finalising one. Just like finding the house of your choice could take time, getting loan approval for the house also takes time. The lender will have to consider and assess various aspects before sanctioning a loan, which could take a while. So, what happens to the home you choose? There is a possibility that you may lose the opportunity to buy a home due to a delay in payment. This is where a pre-approved loan can help you. A pre-approved home loan, as the name suggests, is a loan that is approved before you finalise the property deal. The lender gives an in-principle approval for a loan based on your income, credit score, and financial position. The pre-approval process is the same as the regular loan approval process, except you don’t have to send in any documents about the property. [B-01] The essential features of a pre-approved loan are: A pre-approved home loan is essentially an in-principle approval based on your repayment capacity. The financial institution gives you a pre-approved loan offer after assessing your repayment capacity. The loan disbursal is based on you identifying a house within the given validity period. The property you choose for purchase should meet the legal and technical requirements of the lender. Even if you have a pre-approved loan, if the property is not as per the lender-accepted norms or does not have a clear title, they will not disburse the loan. The pre-approved loan is valid for a specific period, usually 3 months. Pre-approved loans are valid for a limited period, usually three months. To get the loan sanctioned, you must finalise the property within the given period. If you do not choose a property within three months, you can have your loan application reappraised; you will have to pay some costs and submit your latest income documents. The loan terms are finalised at the time of loan disbursement. The actual terms for your pre-approved loan are fixed upon loan disbursal. The offer may have indicative conditions; however, the interest rate may change from when you get the approval to the actual loan sanction. What are the benefits of a pre-approved loan? A pre-approved loan offers the following benefits: Your search for a home is now more focused. A glance at the listings for any property will tell you that you have a wide range to choose from, both in terms of property type and budget. You have a choice between apartments, independent homes, villas, gated communities, and standalone buildings, and the cost could be in the lakhs or crores. When you have a pre-approved loan, you know at least what price range to focus on. If you have a pre-approved loan for 80 lakhs, you know to look at properties around this range. Loan disbursal is quicker and simpler. When you have a pre-approved home loan, the lender completes a significant part of the loan verification process. The lender assesses your repayment capacity and also carries out the checks related to the KYC process. Once you have finalised the property, the lender will verify the property papers and perform due diligence on the property you have chosen. The sanction takes less time. If you have a small window in which you have to pay for your house, a pre-approved loan offers a lot of advantages. Better financial planning. When you apply for a home loan, you are unsure about your eligibility. The lender could reject your application, or you could get a loan sanctioned for a lower amount than what you expected. This could derail your plans to buy a house. A pre-approved loan helps you plan your finances better. You know how much you can borrow; this helps you estimate how much you would need as a down payment when you want to buy a house. You can plan your finances better, keeping in mind the approved loan amount, your savings, and the amount you wish to spend on purchasing a property. You can negotiate better. A pre-approved loan gives you an edge in your negotiations with the lender as well as the seller of the house. The lending institution has assessed your repayment capacity and creditworthiness and has found you fit to sanction a loan. This means you can get a loan from competitors at better terms, too. The lender will also view your application favourably and be willing to offer you a better deal. You get a loan at lower rates, plus you could get more favourable repayment terms with a pre-approved loan. With a pre-approved home loan, you can get a better deal from the seller. The seller is assured of your intent and capacity to buy. They are convinced that you will get a loan sanction quickly and thus be able to pay them faster. How to get a pre-approved home loan? You need to apply to the financial institution of your choice. You can do so online too. Piramal Finance also allows you to apply for a loan online. Along with your application, you will need to send proof of your identity, where you live, and how much money you make. The lender then verifies your repayment capacity based on the details and documents you submit. They also check your credit report to assess your creditworthiness. After the verification process, the financial institution will issue a loan approval letter that has the sanctioned loan amount and the applicable interest rate (the rate may change by the time of disbursal). Banks charge a non-refundable processing fee that is taken out of the loan amount if the borrower gets the money in the allotted time. [B-02] Conclusion Though a pre-approved home loan is not a guarantee of loan disbursal, it offers some advantages. A pre-approved loan can aid your property search and also help you get a loan at better terms. You get a better picture of your loan eligibility and can plan your finances better. So go ahead and get a loan approval if you plan to buy a house soon.

08-11-2023

Home

How do You Smartly Finance a Home Renovation?

You worked hard to save money and are looking forward to giving your house a new look after a long time. Using the funds properly becomes essential when you have a tight budget. Be confident about your other decisions by learning how to finance the home renovation. Renovating an existing property is easier. This is when you have proper insights into the requirements and sections you want to customise. Learning the steps to ensure you only spend within your budget and adequately utilise your funds becomes crucial. Let’s know more about how you can finance home renovation more effectively. [B-01] Stick to the process. Whether it is expansion, renovation, or repair, you must ensure the optimum utilisation of funds. You should ensure that restructuring your home makes your loved ones feel safe and secure. It becomes equally important to plan out the process, from the requirements to the costs you incur. Make a strict plan No matter how big your aspirations are, always plan according to the funds you have. Refrain from being tempted by attractive options and spend your money smartly. Observe your requirements Plan out what parts of your home need repair, renovation, or restructuring. Make a customised plan for your expenditure on those parts so that you don’t overspend on them unnecessarily. Opt for home renovation loans Home renovation loans are quite beneficial when it comes to financing home renovation options. Most banks, non-banking financial corporations, and housing finance companies also provide this facility through their standard home loan products or as a service within the general category of home loans. Choosing repayment methods After observing the renovation improve your home, you need to choose repayment options. You can either opt for EMIs for a fixed period, step-up instalments, or equated instalments to repay the home renovation loans. Benefits of home renovation loans Unlike personal loans, home renovation loans have more accessible repayment options. These leave your credit and financial status unaffected. Home improvement loans have various benefits, as follows: Eligibility – You can easily be eligible for a home renovation loan without income proof or tax documents. You can bring along a family member to improve your eligibility. Applicable to all – Homeowners applying for loans to finance home renovations could be anyone. From salaried individuals (like government employees) to self-employed persons (like business owners), renovation loans can be availed of by all. Usage – You can avail of home loans to either renovate your house or restructure or repair certain sections of your property without any questions. Quick financing – After applying for home renovation loans, lenders will review your application. Officials will visit your property. They will authorise the approval. After this, you will be given funds in less than 72 hours. Tax benefits – The EMI burden on home improvement loans is comparatively lesser than that of personal loans. Take advantage of a home improvement loan under Section 24 of the Income Tax Act of 1961. You must choose the best option among those offering competitive interest rates. Eligibility to avail of home improvement loans The primary eligibility criteria to avail of home renovation loans are as follows – Age limit – You must be over 18 years of age to avail of home improvement loans. Applicant’s status – You can be someone applying for the loan for the first time or an existing borrower looking for a loan to finance the home renovation. Credibility – Your CIBIL score should be around or above 750. It increases your chances of getting a secured loan at a lower interest rate. Improved eligibility – To increase your eligibility for getting a home renovation loan, get a family member along. Add them as co-borrowers. Documents needed The documents you need to produce to the lender are as follows: Application form, including all the personal details Age Proof – Marksheet, Aadhar Card, etc. Income Proof – ITR documents, etc. Proof of Employment – for salaried Individuals Proof of Business – for Self-Employed Individuals Proof of Address – Electricity Bill, Water Bill, Utility Bill, etc. Property Documents Estimated cost of repair Schemes to finance home renovation Opting for home improvement schemes comes with long repayment tenures at a reasonable interest rate and EMI options. The following schemes facilitate home renovation loan options that you can choose from – Bank of Baroda home improvement loans – This scheme offered by the Bank of Baroda is beneficial for individuals looking to finance home renovations. The loans can be used to repair, renovate, and restructure their properties. The residents of metro cities can avail of a loan of up to ₹5 crores (₹10 crores for residents of Mumbai). The interest rate starts at 6.85% with a repayment tenure of up to 30 years. TATA Capital home renovation loans – One can avail of a loan of up to ₹25 lakhs at 2% processing fees. This facility by TATA requires no collateral, has maximum eligibility, and easy repayment options through EMI and step-up repayment. The interest rates start at 10.99% annually with a repayment tenure of up to 6 years. HDFC Bank home improvement loans – This scheme offers an easy documentation process, easier loan approvals, and flexible EMI repayment options. Borrow up to Rs. 75 lakhs at a 7.55% annual interest rate and processing fees of 0.5% (for salaried individuals) and 1.5% (for self-employed individuals). The repayment tenure under this scheme is up to 15 years, with applicable taxes. Canara Bank home improvement loans – You can avail of a maximum loan amount of ₹2 lakhs under this scheme. The interest rates start at 6.9% annually with a repayment tenure of up to 5 years. The processing fee for this facility is 0.5% of the loan amount, plus applicable taxes. This scheme also has a smooth documentation process and easy loan approval. [B-02] Conclusion It is ideal to opt for a home improvement loan rather than a personal loan with the risk of an interest spike. There are various home loans; one of them is a home improvement loan. This pays for all of your home’s renovations and the money needed for repairs. Even these loan types are divided into additional groups based on the individual’s preferences. Through this article, you are now aware that you have the right to know the expenses, charges, and interest you must pay for your home renovation loan. Contact Piramal Finance and get in touch with our consulting experts if you want to know more about home loans and their benefits over personal loans.

08-11-2023

Home Loan

Ultimate Guide on Home Loan Eligibility Calculator

Building a house is everyone’s dream. It is a lifetime achievement and investment. It is important to have enough funds to build a beautiful home. Do not sacrifice comfort for a lack of funding. A home loan is a one-stop solution for all of your funding needs. You should take a look at the eligibility requirements for a home loan. It is smart to compare and check the terms before applying. [B-01] You can check your eligibility online at home. The home loan eligibility calculator helps you fill in details and know your eligibility. Details like job type, monthly income, and amount check eligibility. The monthly income of an individual determines the loan amount. It helps divide EMIs and offers a repayment mode. This manual is all about the home loan eligibility calculator. What is home loan eligibility? If applicants want easy approval, they must meet the eligibility criteria. The criteria are simple yet mandatory. The lender decides the criteria for a home loan. The criteria ensure the lenders are safe with their money. The monthly salary ensures timely repayment. It helps determine EMIs and interest rates. During the tenure, the principal and interest amounts are gradually repaid. If the applicant fails any criteria, it may result in rejection. The negative remark may degrade your credit score. A low credit score can affect future loans and finances. It is better to read the eligibility criteria properly. Complete them prior to applying for a home loan. These steps will lead you to easy approval and disbursal. Factors in the home loan eligibility calculator Here are the following details for the eligibility criteria for the applicant: Age of the applicant The age bar for a self-employed individual is 23–70 years old. The salaried applicant’s minimum age is 21 years. Government employees with pensions can apply until 70 years age limit. Other age-related information can be found on the official website. Monthly income The monthly income of government employees is fixed. So, repayment is not an issue. But salary applicants might not have a stable income. So they have to provide an alternative way to repay the loan. If they fail to pay on time, the nominee has to pay. In the eligibility criteria, you have to provide an income statement as proof. It creates a safety net for lenders. Credit score Credit, or CIBIL, scores provide information about past credit performance. It is a three-digit number that defines creditworthiness. The minimum credit score is 750 for home loans. A low CIBIL score may result in rejection. Maintain your score of more than 750 for a quick approval. Pay your bills on time and make a score of 900. The higher the credit score, the lower the interest rate. The applicant can lower the interest rate with a good CIBIL. Property and LTV value The property value can increase the loan amount. The lender offers a high loan amount for the high-value property. It also helps in quick approval. Occupation The applicant must be employed in the public or private sector. It can be a government office or a multination organization. The company’s reputation also contributes. It increases the chances of approval. How to use the Piramal Finance home loan eligibility calculator? The Piramal home loan eligibility calculator is easy to use. You can use it online. Follow the steps given below. Step 1: Visit the Piramal Finance website. Go to the calculator on the top left area of the home page. Step 2: Select the home loan eligibility calculator. Step 3: Fill in the mode of employment, from self-employed to salaried. Step 4: Enter the gross monthly income of the applicant. Step 5: Select the loan tenure period. Longer tenure facilitates approval. Step 6: Fill in the interest rate of your choice. To find the current interest rates, enter % per year. Step 7: Enter the EMI amount of the existing loan (if any). Step 8: Click the “Apply Now” button. That’s how you can calculate it using the home loan eligibility calculator. Documents for Piramal Finance home loan Banks and financial institutions ask for documents in loan processing. The documents vary for self-employed and salaried applicants. Please check the list of documents given below. Complete the application with the borrower’s signature. Two passport-size pictures. Identity proof includes a PAN card, an Aadhaar card, a driver’s license, a passport, and a voter ID card. Age proof of the applicant, like an Aadhaar card, 10th grade mark sheet, birth certificate, and bank account passbook. Residence proof like utility bills. Income proof of applicants like ITR statement and profit and loss statement of last 3 years. Proof of all educational certifications. Suppose the co-applicant is part of the loan, then their qualifications. You can include additional certificates, such as sports skills. Property documents like occupancy certificates and sales deeds. How to get easy approval for a home loan? Some factors can affect your loan approval. You may follow these tips for fast approval of a home loan. The applicant should board a co-applicant for extra coverage. Plan a repayment plan for a disciplined process. The applicant must maintain a stable income. They should invest and save for repayment. You can mention your extra income. Please keep track of loan money and use it in the best way possible. You should pay your credit card bills on time. It increases the credit score. You must pay off past debts for a clean image. The bank sees every factor separately. You should use tips to keep each of them in good condition. Small steps can lead to fast and easy disbursal. Top 10 home loans with an interest rate The applicant should compare the interest rates of different banks. You can use the home loan eligibility calculator to test your eligibility. Only apply if you meet the eligibility requirements. S.NoBank nameAge LimitInterest Rate1.SBI Home Loan18-70 years8.05-8.55%2.HDFC Home loan18-70 years8.60-9.50%3.Axis Bank21-60 years7.80-8.05%4.ICICI Bank23-70 years8.45-9.80%5.Bank of Baroda21-65 years7.40-8.45%6.PNB Home Loan23-65 years8.30-11.40%7.LIC Home loan21-60 years8.0-9.25%8.Aditya Birla Home Loan18-65 years8.10-13.00%9.Bajaj Housing Finance265 years7.70-14.00%10.Citibank Home Loan21-60 years6.50-7.40% [B-02] Conclusion The home loan eligibility calculator is a tool for easy assessment. Any individual can use a calculator to check eligibility for a home loan. The loan will help you build a new home. The applicant should fulfil all eligibility criteria before applying. This practice helps facilitate easy approval. Check the above manual for fast disbursal. Visit Piramal Finance for similar blogs and look at the products and services they offer.

08-11-2023

Personal Loan

Things to Know Before Taking a Loan against Fixed Deposit

Do you have the ability to put your money to work for you? Initially, this may seem like a pipe dream. The truth is, there are plenty of productive ways to invest your money. Most of us are forced to sell assets like fixed deposits during an emergency. This strategy may help you weather a temporary storm, but it defeats the point of your investment. What is the next best option if you do not want to cash your fixed deposit? To get a loan against it! This blog will discuss what you need to know before applying for a loan against a fixed deposit. [B-01] Things to know before taking a loan against a fixed deposit Loan eligibility Making sure you qualify for a financial product is a top priority. Anyone with a fixed deposit may take advantage of this lending option. The lender will consider your application against their criteria when you request an overdraft. Your occupation, monthly earnings, or credit history will be considered. But, the deposit does not qualify for the lending facility if it is in the name of a juvenile or if the FD was established only to avoid taxes. Borrowing limits Loans secured by fixed deposits have credit limits. The amount in your checking account directly affects how much you can borrow. Lenders often only lend 90-95% of the FD amount. Lien on the fixed deposit There is interest to pay when you use a fixed deposit as collateral for a loan. The bank will create a lien on the deposit when you use it as collateral for a loan. The bank will have an immediate and irrevocable claim on the funds. This claim will be there until the loan term ends. Because of the lien, the loan interest rate is lower than that of a traditional fixed deposit. So, the bank may use the FD to reclaim the loaned money if you fail to make the required payments. After complete repayment, the lien will be lifted automatically. Tenure of the loan The term of the loan is of utmost importance. There is no set repayment period for a loan against a fixed deposit. Hence, the max loan term is equal to the tenure of your fixed deposit. Things to know about loans against a fixed deposit The income, employment, or credit background do not matter. Anyone with a savings account may apply for a loan against a fixed deposit. Any person or couple with a fixed deposit may apply for a loan against FD. You cannot obtain a loan against a fixed deposit on behalf of a minor, nor can a depositor. Self-employed people are also eligible for a loan against a fixed deposit. You may apply for this loan regardless of your credit history. No fees are associated with taking out a loan against a fixed deposit. The interest rate is often lower than other unsecured loans like personal loans. It is possible to repay the loan in a single lump sum or instalments, but only when the FD period has expired. Typically, a loan against a fixed deposit will incur an interest rate of 2% more than the FD interest rate. If the interest rate on your FD is 6%, you might end up paying 8% on your loan. Still, a few banks will provide you with a loan against a fixed deposit. A fixed deposit is used as collateral when someone borrows money from a bank. If you default on a loan against a fixed deposit, the bank will seize the deposits to recover the lent funds. What are the benefits of a loan against a fixed deposit? You can get a loan of up to 70% to 90% of the total amount needed. Based on your bank, you may borrow between 70% and 90% of the value of your fixed deposit. If you have Rs. 10,000 in a fixed deposit, you are entitled to benefits of up to Rs. 9,000. After a loan is approved, any funds still in the fixed deposit account will continue to add interest. Each financial institution has its set limits. You will incur a relatively low-interest rate. A loan against a fixed deposit has a lower interest rate. It is usually a few percentages more than the interest on a savings account. If the bank offers a 9.25% interest rate on your savings account, you may have to pay approximately 11.25% for a loan against a fixed deposit. This rate is far lower than what banks charge for a personal loan. There is a flexible payment procedure. The loan term secured by a fixed deposit matches the term of the fixed deposit. Loan terms may be less than the term of the fixed deposit, but they cannot be more. For example, if the fixed deposit term is five years, the loan term cannot exceed that. There are no processing fees. Unlike other types of loans, you do not have to pay additional charges for application processes. Furthermore, the application process is hassle-free. This financing option is one of the simplest out there. Very little paperwork is necessary when you have a fixed deposit account. After completing the required paperwork, you can get a loan against a fixed deposit with minimal paperwork. You do not need to break the fixed deposit. Many people need urgent access to cash. They must break their FD savings due to this. You may still meet your financial requirements without withdrawing from your FD. Your investments are still secure when you take out a loan against a fixed deposit. [B-02] Conclusion A loan against a fixed deposit might be a good option when you’re short on funds. You should see it as a way to get funds quickly. If you take out a loan against a fixed deposit and fail to make the required repayments, the bank may foreclose on your FD to recoup the money it loaned to you. These factors will make it straightforward for you to apply for a loan against a fixed deposit. Looking for a quick personal loan? Apply for a personal loan with Piramal Finance and get up to Rs. 10 Lakhs!

08-11-2023

Other

What is PPF And How to Calculate it Online?

Public Provident Fund (PPF) is financial security for life after retirement and is suitable for a long-term stable investment. It is a powerful tool for investment and savings, making it the most preferred savings option among Indians, mainly because of the government’s intervention. Read this article to understand Public Provident Fund and how to calculate it online using a PPF Calculator. [B-01] What exactly is a Public Provident Fund (PPF)? Public Provident Fund (PPF) was first introduced in India in the year 1968. The PPF scheme is guaranteed fully by the Central Government of India. For this reason, it is regarded as the most secure option for investment in the nation. Public Provident Fund is also called savings-cum-tax savings investment. What is a PPF Account and What are its Features? PPF Account When you choose to invest in the PPF scheme, a PPF account is created. In this account, the money you invest every month is deposited. The interest is also compounded. A PPF account can be opened with participating institutions like post offices or banks. Features Principal: Principal amount is the amount you invest in the PPF account. It can range from INR 500 to 1,50,000 for a year. Deposition of the Principal Amount: You can deposit this principal amount partly or as a whole. You can also opt for monthly payments. Minimum Deposits: You must deposit mandatorily at least once a year into your PPF account. Interest Rate: The interest rate for PPF is 7.1 % p.a. This interest rate is fixed by the Finance Ministry every year. In most cases, the PPF is not influenced by inflation (general rise of prices). Lock-in Period: The amount you deposit in the PPF account can’t be withdrawn for 15 years. Lock-in Period Extension: You can also extend this 15-year period by 5 years. But it is entirely optional. Nominee: A PPF account allows you to add a nominee by option. Loan on Investment: You can avail of a loan for the principal that you invest. But it is allowed only from the 3rd year to the 5th year of the account opening. Account Closing: You may close the PPF account whenever you want. But you can do it only after 5 years of opening the account. What are the Eligibilities to Open a PPF Account? Indian Citizens: A PPF account can be opened only by an Indian citizen. NRIs: Non-Residential Indians (NRI) cannot open. But, if an NRI already has a PPF account, it will be accepted. However, the 5-year extension period does not apply to NRIs. Minors: PPF accounts can also be opened in the name of a minor. But their parents should operate the account. What are the Documents Necessary to Open a PPF Account? The documents necessary to open a PPF account are: Passport Size Photograph Account Opening Form KYC Documents Address Proof Declaration Form (filled by the applicant) How to Calculate PPF Online? PPF Calculation The formula used to calculate the Public Provident Fund and its maturity rate is as follows. A = P [({(1+i) ^n}-1)/i] where A- Amount you get at the maturity period. P- Principal amount you invest in the PPF account. I- The interest you get as a return for the PPF. n- Total period for which you make the PPF investment. Example A person X plans to invest INR 10,000 for a year in their PPF account. The total period for the PPF account is 15 years. The rate of interest is 7.1 %. So, at the end of the PPF investment (15-year period), they will get Total Investment: 1,50,000 Total Interest: ₹1,21,214 Maturity Amount: ₹2,71,214 How to use the online PPF Calculator? Using our online PPF Calculator is as simple as eating chocolates. First, it will ask you to enter the amount you plan to invest for a year and the period. It will then calculate your interest. Now you will get to know your maturity amount. Note: The interest is subject to changes. It is fixed every year by the Ministry of Finance. Benefits of Using an online PPF Calculator Making calculations is not easy for everyone. You may get errors in manual calculations. Our online PPF Calculator is an error-free tool for your PPF calculation. It will give you an exact figure for you to invest. Benefits of Public Provident Fund (PPF) Secure Option: For PPF, the government guarantees the investment. As the government is involved, it is one of the safest investments. Security is one of the most popular advantages of the Public Provident Fund. Higher Interest Rate: The interest rate for the Public Provident Fund (PPF) is higher when compared to fixed deposits. This is because the authority to fix the interest rates lies with the government. Flexible Deposits: Depositing in a PPF account is very flexible. You can deposit via cash, cheque, demand draft (DD), or online mode. Flexible Number of Deposits: The number of deposits you make does not matter. You can deposit as many times as you need. Emergency: If you have an emergency, you can partially withdraw the principal. But it is possible only from the 7th year of the account opening. Tax Exemption: The greatest benefit is the tax exemption. As per section 80C of the Income Tax Act (ITA), the PPF is exempted from tax. The returns from PPF are also tax-free. [B-02] The Bottom Line Open a PPF account and live a happy life after retirement! Our user-friendly PPF Calculator will make your job easier. If you have any doubts, consult Piramal Finance. Our expert team will help you through the entire process.

08-11-2023

Other

How Decrease In Repo Rate Affects Interest Rate?

From interest rates to tenure and monthly EMIs, people consider several factors when taking out a home loan. Nonetheless, most people don’t think much about the repo rate. In other words, the interest rates your bank offers on home loans depend on the lending rate at which funds are provided to the bank by the Reserve Bank of India (RBI). Still confused? Well, the concept of repo rate is still a puzzle to most borrowers. However, it doesn’t have to be so. Here’s a complete guide on the repo rate and how it can influence interest rates on home loans. When you urgently need funds, you approach banks or other financial institutions for a loan. But what do such financial institutions do when they face a crisis like inflation? [B-01] Well, they approach the country’s central bank, in our case, the Reserve Bank of India (RBI). And just like you, financial institutions borrow funds from the RBI at a fixed interest rate, known as the repo rate. So in simple words, the repo rate is the interest rate at which RBI lends funds to financial institutions when they face a shortage of funds. “Repo” stands for “repurchasing option”. When financial institutions need funds from the RBI, they use their government securities (bonds and treasury bills, aka T-bills) as collateral. They sell these securities to the RBI and sign an agreement to buy them back later at a predetermined price. Now that you know what the repo rate is, let us look at its importance. RBI Repo Rate: Why is it Important? The repo rate plays an integral role in the country’s monetary control. Primarily, it helps authorities deal with inflation. During inflation, the repo rate is hiked by the RBI. This means that financial institutions have to pay a higher interest rate on funds they borrow from the RBI. This makes lending expensive for such organizations. So, they use two methods to mitigate their loss and help tame inflation. First, financial institutions pay interest rates on deposit accounts. This encourages customers to keep their money in banks for higher returns. As a result, the flow of money in the economy (liquidity) decreases, and growth is restricted. Second, financial institutions increase the interest rates on various loan options. This prevents people from taking out loans. So, consumers take fewer loans and make fewer purchases. Again, this reduces the money at their disposal and results in a fall in liquidity and demand in the economy. Both these ways contribute to bringing down inflation. Now, what happens when the country is inching toward deflation? During a period of deflation, RBI lowers the repo rate. This makes interest rates cheaper and the return on deposits minimal. Therefore, businesses feel more encouraged to avail of loans and withdraw funds for investment. As a result, the supply of money in the market increases, and the economic growth rates improve. The Repo Rate and its Effect on Interest Rates As per the update from RBI on 30th September 2022, the current repo rate is 5.90%. The repo rate was increased by 50 basis points from 4.40% in May 2022. The apparent change in interest rates and deposit rates was to be implemented soon. This resulted in much distress for people planning to get a loan. The hike would make loans costlier, whether they are housing loans, car loans, or personal loans. Hence, borrowers will be subject to a hefty interest rate and huge monthly EMIs. This affects both people who are planning to get a loan and those who are in the process of repaying a loan with a floating interest rate. All housing loans issued since October 2019 are subject to the repo rate. So, every time there is a hike in the repo rate, the home loan rate will be revised. Typically, the change in the repo rate leads to a tenure adjustment. Meaning people who are planning to get a home loan will have to deal with longer loan durations and in turn, more EMIs, and more money repaid in the form of interest. Nonetheless, people who have taken a loan with a fixed interest rate, such as personal and car loans, are safe. An increase or decrease in the repo rate wouldn’t affect their monthly instalments. [B-02] Final Thoughts Financial experts believe that the RBI will continue to raise the repo rate. The rise in the repo rate in September was the third hike in 2022. It was earlier increased by 40 basis points and then 50 basis points in May and June, respectively. The inflation in India is growing beyond RBI’s tolerance level. So, it is forecasted that the repo rate might be raised by 0.5% by the end of this year. As a borrower, you must stay prepared to deal with the hike in repo rates. As a first step, apply as soon as possible if you plan to get a loan. The repo rates will only increase. So, the earlier you get a loan, the lower the interest rate you pay. Also, ensure you get a fixed-interest rate loan, such as a personal loan from Piramal Finance. This will keep you on the safer side as far as EMIs are concerned. Next, if you are in the process of repaying a loss, ask your lender if the loan terms can be revised. If yes, request your lender for an increase in EMI if your loan has less than 5 years of tenure remaining. Additionally, switch from a floating to a fixed interest rate loan. Lastly, if your remaining tenure on an ongoing loan is more than 10 years, you might want to think of a loan balance transfer. Research the various loan interest rates offered by multiple lenders. Find the most affordable one and switch to that option.

08-11-2023

Personal Loan

How a Personal Loan is Better Than a Business Loan?

Loans provide support during financial crises, help with emergency treatments, and much more. Sometimes, small and medium-scale businesses can take a loan for their growth. If you require a loan, you have two options. These are personal loans and business loans. Every person must understand the differences between these loan types. This will prevent from things going wrong. For instance, you might take a personal loan for your business when you don’t require it. Similarly, the consequences won’t be good if you choose a professional loan for personal purposes. So, to help you understand, we have listed the details of business and personal loans. This will help you understand the fundamentals of these credit types excellently. [B-01] What is a personal loan? What is a business loan? Both business and personal loans are different credit types. They differ in terms of usage. You can apply for a personal loan when you require funds for personal use. For example, your wedding expenses have crossed the budget. You can opt for a wedding personal loan to meet the funds shortage. Similarly for medical emergencies. It helps solve fund emergencies or shortages for private use. On the contrary, creditors grant business loans to businesses and companies. It can be due to many reasons, like: Getting new stocks for the business Kickstarting the business Expansion of the business location Building the new infrastructure Paying off business debts Creditors grant the personal loan to the applicant’s name. But when it comes to the business loan, creditors do so for the applicant’s and the business’s name. Features of personal loan A personal loan doesn’t require any fees. For instance, if you prepay the debt amount, you won’t get charged for the same. Similarly, most creditors do not charge any processing fee when you apply for a loan. Sometimes, creditors offer discounts based on different situations. For instance, they can give you a discount for an automatic payment method. Similarly, you can enjoy a rebate if you pay an additional month to clear the debt faster. This is one of the best features of a personal loan. Personal loans do not require too many documents and proofs. You must submit income proof (salaried employees), ID proof, and credit report. If you do not have a good score, go for secured loans. Most creditors offer payment flexibility for personal loans. It means you can extend the repayment term based on your convenience. Furthermore, if you cannot pay the debt on time, you can easily foreclose the personal loan. Almost all creditors offer personal loans. You won’t have to search a lot to get in touch with the creditor. Features of business loan Most business loans do not require any collateral. It means you won’t have to keep any asset as the mortgage. Business loans are risk-proof. You won’t have to worry much about suffering from any risk, like a poor credit report. You can ask for a higher principal amount with the business loan. This is because the creditor grants the loan to a commercial entity. Business loans also come with flexible repayment terms. Moreover, you can extend the repayment term if you cannot pay EMIs on time. You won’t have to submit a credit report for the business loan. But yes, you do require to submit business earnings, capital investment, and tax reports. Pros and cons of personal loan Pros A personal loan helps grow the credit score with on-time EMI payments. The documentation process is less intense. You only have to submit income documents, a credit report, and ID proof. Personal loan offers an excellent opportunity for debt consolidation. You can use a personal loan for almost anything without any explanation. The principal amount can be as low as possible for lower interest. Cons Security on a personal loan can create problems. It depends on your credit score. In addition, a lower score can lead to application rejection. Personal loans involve several penalties, like late payment interest charges. Pros and cons of business loan Pros You can use the funds flexibly according to business requirements. There are no hard and fast rules. Usually, the sum assured for business loans is higher. You can ask for INR 50,00,000 and more as the capital for the credit. The interest rates are usually low for business loans. Repayment terms are flexible. Therefore, you can adjust the total time for debt repayment at your convenience. Cons The funding process is slow and takes approximately weeks. You have to go through an intensive application process. Most creditors keep eligibility criteria quite strict. Personal loan VS business loan: A parallel study Attribute Personal loanBusiness loanPrincipal amountYou can get flexibility for the personal loan principal amount. Moreover, you cannot expect it to be much higher. Often, creditors offer higher principal amounts for business loans. You can get the exact amount of credit that you require.Repayment termsRepayment terms are more flexible.Business loans have flexible repayment terms. But it is mostly for startups and small-scale businesses.PurposeYou can get a personal loan for any purpose. For instance, you can take it for weddings, education, medical emergencies, and more. Business loans are strictly for business purposes. For instance, you can expand the business location with the same. You can also get new stock for inventory. Interest ratesAlthough rebates will be there, the interest rates are usually high.For business loans, you will get flexible interest rates. Additionally, you can lower the same by increasing the capital amount from your pocket. SecurityPersonal loans involve higher risks. But you can reduce the same with security. You don’t have to give security for a business loan. However, that might increase the risks.Documentation processAn easy documentation process makes a personal loan more feasible. You only need to give three to four documents.Business loans involve more documentation. You need to submit documents in the name of your business. [B-02] Conclusion In this article, we have explored the differences between business and personal loans. Additionally, we have also learned about the features of the loan types and their pros and cons. If you want to know more about a personal loan or business loan, you can read the online materials on Piramal Finance.

08-11-2023