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Banking

All You Need To Know About Registration, Features and Advantages of Net Banking

Many people are getting accustomed to using net banking for their banking needs. With the increasing use of technology in daily life, banks have started providing banking services on their official websites and this is called net banking. It can be used on different devices such as a laptop, tablet or smartphone. [B-01] Internet banking, or net banking, is a service that eliminates the need to go to the bank in person, stand in queues, fill out handwritten forms and wait in line for transactions to be done in the bank. With net banking, services like fund transfers, updating details and even bill payments are not only possible but are quick and easy. This article explores net banking and its important uses and features. What Is Net Banking? Net banking is an electronic banking service provided by nearly all banks, enabling the customer to access all the financial and non-financial banking services without visiting the bank branch in person. Net banking is also known as internet banking or e-banking. To use net banking, you should have a stable internet connection and a computer, tablet or smartphone. Net banking can help with services like fast and easy transactions, checking your account balance or transaction history and even ordering a new chequebook or card all from the comfort of your home. How To Register For Net Banking? Net banking can be accessed by any customer having an active account in a bank. The user has to go to the bank’s official website, register for net banking and generate a user ID and password. This is required to login into the customer’s net banking account. The user can register for net banking either through the bank branch or online. These are the steps to register for net banking via a bank branch: Visit the nearest branch of the bank where you have an account and fill out and submit the net banking form along with the required documents such as bank account passbook, Aadhaar card and other required documents. Once the form and documents have been verified by the bank, the bank will provide a user ID or a customer ID along with a password required to log in to your net banking account. Here are the steps to register for net banking online: Open the official website of the bank and go to the specified ‘Net Banking‘ section. Click on the ‘New User Registration / Activation Here’ button. You will be redirected to a registration screen. Enter all the required details, such as account number, CIF number, registered mobile number, country and other required details and click ‘Submit’. Enter the OTP sent to your registered mobile number. You will be asked to create a username and password. Once the registration is complete, log in with the login ID and password you created. It should be noted that the registration steps might be a little different for each bank depending on their website and requirements. But in general, most banks will follow a similar registration process. What Are The Features Of Net Banking? Here are some of the most important features of net banking services: The bank does not allow the same username for more than one account. Hence, you get a unique username and password which cannot be known by anyone, which makes net banking extra secure. You can access your net banking account even when you are at home, at your workplace or on vacation. You can transfer funds from one account to another via NEFT, RTGS and IMPS at any time using net banking. The transactions are completed within a few seconds and the balance is even updated immediately. You can check your account balance instantly and can generate a detailed and long transaction history even for up to a year, without any charges. Transactions are even sent to your registered email ID every month. You can access services like applying for a loan or insurance. You can manage your trading accounts or apply for an IPO (Initial Public Offering). You can create or manage FDs or other accounts and make investments. Moreover, you can also pay taxes via net banking. Bill payments and mobile phone recharges can be done instantly. Hence you do not need to wait in a queue to pay the bills. Furthermore, you do not need to worry about remembering the due dates of bills since net banking sets up reminders. Your loan instalments or monthly or periodic recharges or payments can be set up for automatic payment so you will not pay extra penalties or late fees in case you miss a payment. What Are The Advantages Of Net Banking? Here are some of the advantages of net banking: Net banking is considered convenient since you can save time, effort and money by not having to go to the bank in person. Net banking is accessible 24 hours a day so you can even make an urgent transaction at any time of the day. It is a safe banking method since all the user information and personal details are stored on the bank’s secure servers. In addition to financial transactions, you can also pay your bills such as your credit card bill, electricity bill, phone bill and much more using net banking. Net banking gives you access to several non-financial facilities such as FDs / RDs, personal loans, tax payments, investments, checking mortgages, Demat services and more in one single place. [B-02] Conclusion Net banking is a revolutionary and useful service that saves the time and effort of customers and bank staff members. This, in turn, ends up making banking operations quicker and more efficient. Banks go to great lengths to ensure that all of your information is secure and will have tips and suggestions on how to ensure your privacy while using net banking services, such as not sharing your password with anyone and not using net banking on shared devices. To read more articles about the benefits of using net banking, visit the Piramal Finance website and learn more about the future of banking!
08-11-2023
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What is Online Banking: Meaning, Advantages, and Disadvantages you need to know?

Online banking makes it possible for financial institutions or account holders to make payments. Users who have signed up for these services can use the bank’s website or app to get to them. After using these services, the client no longer needs to go to the bank. They have to take care of their business from home. Online banking is a safe way to bank that is different from the usual ways. The user’s account can be protected with an ID and a password. [B-01] What is Online Banking? A sort of digital payment system known as “online banking,” sometimes known as “internet banking,” “e-banking,” or “virtual banking,” enables bank clients to conduct several financial transactions through the bank’s website. To conduct financial transactions, a user has to utilise the online banking method. For this kind of banking, the web is the main way payments are sent and received. Users can do both things that involve transactions and things that don’t involve transactions. Understanding Online Banking Users can do most common banking tasks online instead of going to a bank branch. They can do all these things whenever they want, at home, at work, or while travelling. For online banking, you need a bank account or debit card, a computer or another device that can connect to the internet. Users must first log in to use their bank’s online banking service. Users must make a password before they can log in. The service can then be used for the user’s banking needs. Online banking banks offer a lot of different services. Most banks offer basic services like sending money and paying bills. Clients of many banks can use online banking portals to open new accounts and apply for credit cards. You can also order checks, stop check payments, and tell the bank about a change of address. Some credit applications, like mortgages, traveller’s checks, bank draughts, and some types of wire transfers, cannot be filled out online and will take a visit to the bank. Pros of doing online banking Online banking gives you more than just the freedom to do business from anywhere and at any time. Also, you could: Online bill payment One of the best things about online banking is that you don’t have to take time out of your day to go to the bank. Log in to your account to pay a bill online right away. If you pay and receive money from vendors every month, setting up regular bill payments could help you keep track of your cash flow. Transfer a payment You might need to move money from one account to another or from one client or vendor to another. You could transfer money online instead of sending a registered check and waiting for it to clear. Depositing a cheque online One can send checks online instead of going to a bank and waiting in line. Also, you can always do your banking on the go because most banks have apps that let you do the same things. Also, some banks have customer service that is open 24/7, so you can talk to a worker at any time. Reduce your overhead expenses If your business uses an online bank, your banking costs may be lower because the online bank may not have to pay for branch operations and maintenance, and the savings may be given to you. They could also give you more choices for free, which would save you even more money. Disadvantages of Online Banking There are, however, some bad things about online banking that are worth mentioning. There are no relationships with others. You may get to know the employees at a conventional bank. If you need to move banks or require additional financial services, such as a loan, this may be helpful. If your circumstances change, a banker may be able to alter the conditions of your account or release you from obligations in exchange for a needed payment or service fee. Transactions have less flexibility. A banker might discover more about you when you meet in person than simply about your finances. Some transactions and issues can benefit from a trip to the bank. Consider the most fundamental approach to managing money, which is to make a deposit. A direct bank may deposit a check via its banking app by photographing the cheque’s front and back. On the other side, depositing money into many online banks might be challenging. If you do this a lot, you should get familiar with the bank’s policies. Some direct banks could make it more difficult to do business internationally. There aren’t any ATMs available there. Users are required to utilise one or more ATM networks, such AllPoint and Cirrus, as online banks do not own their ATMs. It’s crucial to understand the machines close to your house or place of employment even if these systems provide consumers access to tens of thousands of devices throughout the nation and even the globe. Make sure you don’t owe any ATM fees. Even though many direct banks provide free network ATM access or refund monthly costs, there may be a limit on the number of free ATM transactions you may do each month. [B-02] Conclusion There are some good things and some bad things about online banking. Even though online banking gives you more control over your money, everything you do online comes with risks. Even though it would be good for you to keep using online banking in the future, you should still be careful. Taking a proactive approach to reducing cyber risk can make it more likely that your online banking will go well. Consider the pros and cons to decide if online banking is right for you. If you want to find out more about these, you can visit Piramal Finance. To learn more about these, you can visit Piramal Finance for more details.
08-11-2023
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Other

Key Difference Between Amortization and Repayment Schedule You Must Know

Have you taken a loan recently and are unable to keep a track of the repayments due? It may feel intimidating to have such a heavy load on your shoulders. If you are a first-time borrower, you may feel sceptical about how you will be able to meet all the payments on time. You may also feel scared about missing a payment and having to pay a penalty for it. [B-01] Well, your problem can be solved with the help of two different things. An amortization schedule can help you with it if you have an amortized loan or you can take the help of a repayment schedule. These two things will help you understand the amount you owe for a certain time beforehand. They will also assist you in planning how to plan the repayments along with the other financial obligations that you have. You can also understand how much you are paying as interest and how much is the principal repayment component. This will help you with things like prepayment benefits. Concept Of Amortization Schedule As your loan term keeps decreasing, you find the respective details in an amortization schedule. These details will be the loan amount, the loan amount balances after every payment you make, the amortization period, the loan tenure and the breakup of the total repayment amount into the principal component and interest component. An amortizing loan can also be called a reducing loan as the balance keeps reducing until it reaches zero and all the outstanding amount is repaid. Amortised Loans And Non-Amortised Loans The loans you take can be divided into two parts: Amortised and Non-Amortised. They both are different from each other in certain aspects. This is a major determinant when you want to know the difference between repayment schedules and amortization tables. The interest applicable on a non-amortizing loan does not compound and stays fixed at a certain sum of money. However, this is not the case when we come to an amortizing loan. Amortizing loans comes with the benefit of paying the loan on time. This implies that you can prepay your amortized loan and save yourself from future interest payments. When it comes to non-amortizing loans, you will have to keep repaying the loan till the end of the loan tenure. You will be unable to prepay your loan or will have to pay a prepayment penalty in case your lender allows you to repay the loan. A few examples of amortized loans are car loans, student loans, personal loans and home loans. A few examples of unamortized loans are credit cards, interest-only loans and loans that have a balloon payment like a mortgage. What Is An Amortization Table? An amortization table consists of all the repayments due by you on your loan. It divides them into the principal and the interest portion. The components of this table are given below: They take the loan details like the loan amount, loan tenure and interest rate under consideration. The payment is considered for any calculations made by the amortization calculator. There is another column that keeps a track of the total monthly payments that you will be making toward your loan. If you have made any payment that is less than the actual monthly payment supposed to be made by you, the table will adjust it with the future payments and show the updated loan balance. This column is for understanding how much of the total amount goes towards the principal repayments. Like the previous column, there is another column that is dedicated to showing the interest payments that you are making on your loan. The last column would be the one that shows the outstanding balance as and when you make the monthly payments due. This amortization table can help you with a few things that are given below: You can calculate the amount you will save in the form of interest if you make surplus payments in advance. You can use it before taking a loan to understand your financial standing and how much is affordable based on that. Interest payable on several loans like home loans are tax deductible. So you can use this table to understand how much benefit you can avail from it. Key Difference Between Amortization (Table) And Repayment Schedule We have discussed the amortization table in detail above. A repayment schedule is nothing but the same with a few columns eliminated. A repayment schedule is a table that includes all the payments that you have to make during the loan tenure. It includes the date of payments and the amount to be paid on the respective dates. Let us understand the difference between the two in a better way: Amortised tables are only available for amortized loans. For unamortized loans, you will have to refer to a repayment schedule. The amortization table breaks down the interest and the principal component. However, a repayment schedule will not give you such concrete details. This makes an amortization table a lot more transparent than a repayment schedule. They are both useful. However, if you are running a small business and want to know your detailed expenses, it may be better to opt for an amortized loan. [B-02] Final words Depending on the details that you want of your loan repayments, you can choose the type of loan as it decides the type of schedule you get. However, experts tend to believe that an amortization table is more helpful for businesses and individuals. This helps to keep a track of what they are spending monthly on interest payments and principal repayments. If you wish to prepay your loan, an amortization table will be more helpful in that case. This is because it will help you determine the interest savings that you could make. If you want to read more such blogs, visit us at Piramal Finance.
08-11-2023
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FD

Fixed Deposits-All you need to know: Features and Benefits

Anyone can open a Fixed Deposit account at the post office with cash or a check. The government uses the check realisation date as the account starting date. NRIs are not allowed to open fixed deposit accounts at the post office. The post office Fixed Deposit is a great choice for investors who like to be careful with their money. People who don’t want to take a lot of financial risks and want a steady source of income and protection for their money, like those who are retired or about to retire, are good candidates. So, let’s talk more about the fixed deposit plans at the post office. [B-01] Features of the Post Office Fixed Deposit Scheme Interest Until maturity, you earn interest on top of the return. Post office Fixed Deposit accounts offer a competitive interest rate that often beats that of a bank Fixed Deposit. Flexibility You can open a post office Fixed Deposit account with as little as Rs. 1,000 and as much as you want. You can also change your post office Fixed Deposit account from a joint account to a single account or from a single account to a joint account. The number of fixed deposit accounts you can open at a post office has never been limited. You can open a post office Fixed Deposit account in the name of a minor, but the account must be managed by the minor’s parent or legal guardian. Moving a post office FD account from one post office to another is also possible. Upon Maturity When your post office Fixed Deposit account is up for renewal, you can either take your money out or keep it for the same time. You can also take the money out of your post office Fixed Deposit account before it matures, but you must follow certain rules and regulations set by the post office. The Effects of Tax Section 80C of the Income Tax Act of 1961 lets the post office Fixed Deposit programme get a five-year tax break. Pros of post office Fixed Deposit Programs More than 93,55,825 time deposit accounts are currently open across the country. It is one of the most popular plans in the country because the return on the deposit is guaranteed, and there is very little risk. There are fixed deposit terms of one, two, three, and five years, and you can choose to get interested every year based on compounded rates. It is possible to set up a savings account so that interest is added automatically. Some of the best reasons to open a post office Time Deposit account are: There is no cap on how much you can invest, and you can start with as little as Rs. 200. It is easy to move an account from one post office to another. You can get your deposits early. POTD investments are safer than FDs because the principal invested and a state guarantee cover the interest earned. The maximum number of accounts you can open at any post office is unrestricted. Eligibility Criteria To open a post office Time Deposit Account, you must meet the following requirements: Anyone in India can open and use this account alone or with someone else. This account can be opened by a child at least ten years old. A parent or legal guardian can open a post office Time Deposit account for a minor. Indians who do not live in the country cannot open TD accounts at the post office. How do I get a fixed deposit from the post office? People in rural areas have more used fixed deposit programmes at the post office than at banks. You can choose any term between 1 and 5 years for a POFD. Remember that the interest rate will increase with the increased tenure of FD. The interest rate on a post office Fixed Deposit is somewhere between that of a bank’s FD and that of a company’s FD. There are times when the interest rates on fixed deposits at the post office are higher than those on fixed deposits at banks. The interest rate on your post office Fixed Deposit is between that of a bank FD and a company FD. Benefits from Taxation Under POTD Small investments in savings accounts made at post offices are not taxed based on where the money came from (TDS). Keep in mind that the interest earned on these investments is added to the depositor’s annual income in the year it is earned and is taxed at the investor’s marginal tax rate. Also, Section 80C of the Income Tax Act says that people who put money away for five years can get tax breaks. [B-02] Conclusion With all the features we’ve discussed, a fixed deposit programme from the post office is the best choice for people who don’t like taking risks. You should choose this programme because it is one of the best if you want a safe way to invest that gives you a steady interest income. As was already said, sometimes a post office’s Fixed Deposit offers a higher interest rate than a bank’s fixed deposit. Before choosing a way to invest, you should think about the interest rate. These FD programmes are run by the National Savings Institute, which is a division of the Department of Economic Affairs within the Union Ministry of Finance, similar to other modest savings programmes. post office Fixed Deposits (PO FD) are also referred to as National Savings Time Deposits as a result. You can learn more about fixed deposits by visiting Piramal Finance.
08-11-2023
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Education

Is PAN Card Mandatory While Taking Gold Loan?

India is one of the world’s biggest buyers of gold. The valuable metal can also be used to get a loan in a cash crunch. Getting a gold loan is one of the fastest ways to get cash when you need it most. A low credit score will not cause any issues, if you have gold bullion or jewelry, you will get a gold loan easily. [B-01] You do not necessarily need a PAN card to get a gold loan, but you will need some other paperwork. Continue reading to learn more about these documents and what to keep in mind when applying for a gold loan. What Is a Gold Loan? Gold loans, often known as “loans against gold,” are secured loans in exchange for this precious metal owned by the borrower. Lenders will typically allow you to borrow up to 80% of the gold’s value. After the loan repayment, you will get your gold back. Gold loans, in contrast to other secured loans like mortgages and auto loans, have no limitations on how the money can be used. As a result, it is a good solution to fulfil your urgent money needs, whether for a marriage, a family trip, or your child’s college. Also, many private and national banks and NBFCs give the best gold loans with low interest rates. How Exactly Do Gold Loans Operate? Gold loans are easy to understand for anyone. For a gold loan, the borrower has to give the lender gold in the form of coins or jewelry. You can borrow up to 75% of the value of the pledged gold products. A gold loan can be taken out by an Indian citizen who owns items made of gold. When you give the gold to the lender, an assessor will look it over to ensure it is of good quality and worth what it is selling for now. Once you agree to the loan amount and any fees, you can start filling out the paperwork. After agreeing to give you a loan, the lender will keep the gold and transfer the money to your bank account. During the repayment process, the full amount of the loan plus interest should be paid back. Gold will not likely lose much value or go down in price. Gold’s value is guaranteed to go up over time, unlike the value of other assets that can be used as security. This encourages lenders to offer money against gold. What Documents Are Needed in India to Get a Gold Loan? It is not necessary to have a PAN card to get the best gold loan. But the following documents must be present: An Aadhar card, a driver’s license, a voter’s ID card, or a duplicate of a passport may be used as identification. Landline/postpaid bills, water bills, electricity bills, or rent agreements (together with the most recent owner’s electrical bill) are all acceptable forms of identification as proof of residency. A pair of current passport-sized pictures Interest Rates on Gold Loans Gold loan interest rates range from 7% to 18%. The main factors that affect the interest rate are the size of the loan and the borrower’s monthly income. The gold loan interest rate will be higher if you borrow more money. Likewise, the interest rate will be lower if you have a stable, high income. The loan’s value is directly linked to how much gold you have. The purity of the gold doesn’t make a big difference in the interest rate. If you pay off the loan well before the pre-scheduled payback term of 3-6 months, certain NBFCs and banks may assess a foreclosure cost of up to 2%, excluding GST. A minimum service charge of Rs. 500, or 0.5% to 2% of the loan amount, is further charged. Eligibility Criteria to Apply for a Gold Loan Most people are qualified to obtain a loan against their jewelry, and the method is simple. But, there are some basic eligibility needs. These are given below: You must be at least 18 years old to meet the eligibility criteria for a gold loan. Your source of income must be stable. The Process to Apply for a Gold Loan Online or offline applications are accepted for gold loans. You must go to your nearby branch to submit an offline loan against a gold application. You may follow the steps listed below to apply for a gold loan online: First, go to the website. Select “Gold Loan” from the list of options under “Apply Now.” Complete the online gold loan application by providing your name, contact information (including an email address), and residence address. Choose your state, city, and closest branch in the fourth step. To submit your gold loan application, click “Submit.” Write down the number on your reference ID. A representative from the company will contact you soon. Benefits of a Gold Loan When taken out from reputable companies, the best gold loans offer a wide range of benefits to the borrower. Some of the benefits of a gold loan are as follows: Little paperwork is needed since your gold will be collateral for the loan. Identity and address documents must be provided. No proof of income is needed. You can pay the principal balance in full or only the interest after the loan period. You might save a lot since gold loans offer lower interest rates than personal loans. A gold loan has benefits such as fast processing and rapid distribution of borrowed funds. Loans secured by gold may easily be converted to cash. This loan has security. Therefore, having a poor credit history won’t prevent you from acquiring a loan. Gold loans have either zero or extremely low processing fees. [B-02] Conclusion With so many benefits, a gold loan is among the finest ways to handle any unforeseen financial circumstances. You can still apply for a gold loan without a PAN card. You must submit a few additional documents to prove your identity and address. Many banks and financial institutions offer instant gold loans after a quick and simple verification process. For more information, you can visit the Piramal Finance website and explore their products and services.
08-11-2023
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GST

Impact of GST on the Working Capital of Small Businesses in India

The Goods and Services Tax, also known as the GST, has been the tax reform that has been both the most comprehensive and the most revolutionary since India’s independence. The implementation of the brand-new national indirect taxation system has both positive and negative effects across the board. [B-01] The new system comprises four tax brackets, with rates of 5%, 12%, 18%, and 28%, respectively. The Goods and Services Tax (GST) is directly related to your working capital loan. The term “working capital” is commonly used to refer to the type of funding that is available to meet the business’s current, short-term obligations. Working capital is sometimes called the “oxygen of a business.” This article will discuss how the Goods and Services Tax (GST) could impact your working capital. Impact of GST on the Working Capital of Small Businesses in India Stock Management The management of inventories has been significantly altered due to the GST. In the past, businesses had to have a network of warehouses in many states to avoid paying cross-border tax charges. Businesses had to spend a lot of working capital loans and time to meet the state’s tax laws and keep track of their numerous warehouses. If the items were sent to a different state, the corporation would be responsible for paying the CST, the octroi, and any other applicable state taxes at that time. The expenses of maintaining the wide network of corporation-owned warehouses and adherence to various tax regimes put significant pressure on the operating capital of the company. Since the GST was implemented, the corporation only needs to maintain four or five strategically located warehouses to serve all fifty states. Also, taxes on the goods are not required to be paid at any of the entry ports along the transportation route. Because there is less of a need for the maintenance of warehouses, businesses can significantly reduce their working capital costs. Additionally, it enables unrestricted participation in inter-national commerce. The eradication of tax collection at state borders reduces the time required for travel. Input Tax Credit The Input Tax Credit (ITC) could only be used in conjunction with taxable outputs. If the company already paid tax on any goods or services, it will not be required to pay tax again under the GST. The input tax credit’s potential uses have broadened since the advent of the GST. Input tax credits may be claimed. The reduced tax burden and the impact on working capital loan interest rate will both be beneficial. Breaking the Chain Reaction Removing the cascading effects of previous taxes is among the most significant advantages of the GST. In the context of the computation of value-added tax, cascade effects do not meet the criteria for a tax on the product or an excise charge. The first benefit is that cash flow is not affected by cascading effects, which increases the amount of working capital loan that can be used. Investing in Primary Materials Before the GST’s introduction, it was widely believed that all businesses would benefit from the new tax system. However, this has yet to be the case. Expenses for running a company vary widely from one sector to another. For instance, if a manufacturing facility imports raw materials from outside, it will now be subject to a GST of 18%. The former slab would have only subjected him to an import duty of 14%. Because of this subsequent tax rise, a company’s working capital loan interest rate will grow. The service industry is also affected, as its tax rate has increased from 15% to 18%. Companies must allocate more working capital loan and revise prices to reflect the new reality. They must also find ways to finance new working capital to compensate for the higher tax rates. Tax Return Due Date Experts agree that this facet of the GST has the greatest effect on the company’s liquidity. Items are liable for GST at the time of transfer. However, businesses may only claim a tax rebate when customers pay for their products. The time it takes to sell products once they have been transferred might be substantial. The input tax credit is not available until after the sale. Firms are often forced to take out a working capital loan to compensate for the sharp drop in operational cash caused by this waiting period. Impact of GST on Resellers Since the government has set a minimum size for businesses, this cap also applies to e-commerce sites. Therefore, all online businesses must sign up. Operators under the new tax system must refund a portion of the GST paid by the seller to the government. Impact of GST on Business Loans Since the GST was initially implemented, there has been an increase in the overall cost of the working capital loan. The introduction of the GST has affected all categories of commercial enterprises. Impact of GST on Startups The straightforward procedure for forming a business and its consequences have been centralized due to the establishment of the GST. The tax legislation stipulates that the federal and state governments are exempt from imposing certain indirect taxes. The initial working capital loan investment required will be lower due to this solution. [B-02] Conclusion Managing working capital loan, which are becoming increasingly important over time, is one that every company must undertake independently. It is in the best interest of the company to improve its performance. The goods and services tax (GST) is a very recent innovation within the context of the new tax regime. For more information, you can visit Piramal Finance. They offer expert opinions and suggestions on various trade and finance-related topics to help you make an informed decision.
08-11-2023
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Business Loan

All You Need to Know About the Average Interest Rate on a Business Loan in India 2022

No matter how big or small a business is, it needs money to do everything. Funding is needed not only as a one-time investment but on a regular basis as working capital. Not everyone will always have enough money to invest in a business when needed. [B-01] Some days you’ll need a lot of money, and other days you won’t need any. You would all like to get a business loan with a lower interest rate. This article will provide you with information about the interest rate of business loan. You will also learn about start-up business loans, small business loans, and business loan for new business. Types of Business Loan Interest Rates There are two types of interest rates for business loans: Reducing Interest Rate The reducing interest rate is the rate that is calculated monthly on the remaining loan value. In this method, the EMI includes both the principal and the interest that is due each month on the amount of the loan that is still owed. With each EMI payment, the amount still owed on the business loan goes down. So, the interest rate for the next month is based only on the amount of the loan that is still owed. The interest is calculated by multiplying the interest rate per payment by the remaining loan amount. Flat Interest Rate A flat interest rate is the interest rate that is calculated on the full loan amount over the life of the loan. It does not take into account the monthly payments that will reduce the principal amount and, in turn, the interest rate. So, the effective interest rate is much higher than the nominal flat interest rate. A fixed interest rate is calculated as Interest Payable per Payment = Original Loan Amount * Number of Years Interest Rate p.a. / Number of Payments. Average Business Loans Interest Rate in India 2022 Depending on the loan type, the typical interest rate of business loan varies. Business loan interest rates typically range from 15% to 24% annually. Since there are many types of business loans available for clients with a wide range of credit scores, interest rates are ambiguous. Factors that Affect the Interest Rates on Business Loans The interest rates on a business loan are affected by the following factors: Types of Business Most of the time, the lender puts the loan into one of two categories: non-priority sector or priority sector. The interest rate on non-priority sector loans is higher than that on priority sector loans. So, the interest rate of business loan depends on what kind of business you run. Business Existence The longer your company operates, the better for you. No matter what kind of business it is, it must have been operational for at least two years. If you’ve been in business for a long time, you have a better chance of getting loans with lower interest rates. Monthly Sales How much money your business makes or loses each month depends on how much money it makes or loses each month. In short, it’s still a big part of whether or not you can get a business loan. At times, the turnover keeps going up and down. But being consistent is very important because it helps the lender figure out the loan balance and how to pay it back. Credit Rating Your credit history is used to determine your credit score, which is a measure of how reliable you are with money. If you have taken out a loan previously and paid it back on time, or if you pay your credit card debts on time, you will receive a high credit rating. If your credit score is 750 or higher, it will help you when you apply for a business loan. If you have good credit, you’ll get more benefits, such as lower interest rates and more time to pay back debts. Collateral/Security The security that is given to the lender while applying for a loan is called “collateral.” The more valuable the collateral, the more you will get out of it. The bank is protected by things like equipment, real estate, machinery, deposits, and very valuable home equity. If the risk is low, the bank may give you a larger loan after looking at the collateral. Type of Lender Different lenders charge different interest rates on business loans. But if you compare the interest rates that banks and NBFCs charge for business loans, you’ll find that banks usually have lower rates than small finance banks (SFBs), microfinance institutions (MFIs), and non-banking financial companies (NBFCs). Rules to Follow After Taking Out a Business Loan Here are a few general rules you need to follow after you take out new business loans: Before getting the money, make a six-month financial forecast You should make a plan for how your business will do financially. This will help you keep track of your spending and earnings for another six months. By doing this, you’ll also be able to change your budget if you need to. You might also find it helpful to make a budget for yourself. Don’t borrow more than you can afford It’s important to only borrow as much money as you need. If you borrow more than you need, it could put unnecessary stress on your finances. You should only borrow money if you are sure you can pay it back. Never use a business loan to pay off personal debt This is the biggest error that new investors make. It can be tempting to use money from your business to pay for personal expenses, but this is a bad idea. Not only will it hurt your business, but it could also land you in legal trouble. [B-02] The Bottom Line Business loans are an effective way to get quick financing for your vital needs. You may give your dreams wings and help you reach new heights. Yet, before applying for and closing on a business loan, you should carefully examine the factors affecting business loan interest rates. For more blogs on business loans, check out Piramal Finance and explore their products and services.
08-11-2023
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Business Loan

Reasons Why Business Loans Are Financially Beneficial

Entrepreneurship has become the talk of the era and is rising at a high pace. Young entrepreneurs are finding ways to get funds for business financing but end up getting nothing in their hands. Pitching in front of big companies isn’t doing any good either, and it is high time to get a decent financing option. [B-01] But what if there is an option that you should probably consider for financing your business? And there is an option, and the answer is business loans. A business loan can help you finance your business venture, buy raw materials, invest in equipment, and tackle marketing and advertising. It can help you take your business to the next level. This article is all about the business loan system. You will come across business loans, why they are taken, and how they can be financially beneficial. Business Loans: Meaning and Significance Like every other type of financial assistance, a business loan is a type of loan that helps you finance your business and meet all the expenses. It allows you to buy raw materials, source new equipment, invest in your market outlets, and meet your consumers’ demands. In a business loan, you borrow money from a lender to facilitate your business, and in return, the lender charges you a rate of interest for a set period. You can repay the borrowed money in the form of instalments within the tenure. A business loan is an unsecured form of credit that doesn’t require you to show any collateral or deposit any security funds at the time of approval. You can just get approved without any collateral and then start investing it right away to fulfill your business dream. Business Loan: Benefits of Opting for It There are numerous reasons why you should give business loans a shot: Lower rate of interest: The rate of interest on most business loans is on the lower side, and this will bother you less while repaying your loan. Banks charge a lower rate of interest so that the maximum amount of your loan money is directed towards growing your business and a minimum of it goes into repaying the instalments. The percentage varies from bank to bank from about 15% to 20% per annum. While some banks also provide a 9.5% per annum of interest rate to some businesses. However, some lenders like Lending kart Finance and Indifi Finance even come down to 1% to 2% per annum. Quick approval: The approval period for an entrepreneurial business loan is somewhere between one and two days. If your credentials, like your credit history and credit score, are decent and your business pitch is strong, you can even go down on the approval period. Loan amount up to 50 lakhs: The loan amount can be as high as 50 lakh rupees for your business, which is a huge amount if your business is at its initial stage. This amount will be a real help if you need a lump sum to invest in your venture. Some banks even go over that and may allow up to 1 crore rupees, but that will depend on the scope of your business growth, your credentials, negotiations, etc. Collateral is not required: You don’t have to give collateral or some security deposits to use it as a guarantee to repay your business loan. It will be of real help to you if you have started from scratch and you lack a property to show as collateral. Convenient instalments: The instalments are likely to be easily payable, considering that the focus would be on growing your business. The monthly or quarterly payments will be lower so that you can manage your expenses wisely and repay your debt at your leisure. Why Are Business Loans Financially Beneficial? Working capital management: Business loans help your business to maintain a cycle of steady cash flow which helps your business to keep going on. This is called working capital management and is a huge reason why you should prefer business financing through a business loan. Regaining control over your business: In case outside investors invest in your business and take a percentage of equity and start controlling it, a business loan will help you to prevent this. Business loans enable you to get over your fund crisis and help you regain control over your business again. Building business credibility: All businesses run on the power of credibility, and building credibility is not a big deal. After having a business loan, you must ensure that you repay your instalments on time, and you will keep building your credit score and bettering your credit history, which will help you out with it. Exemptions from tax: Though the exemption rate from tax in a business loan is not as high as other loans like housing loans and education loans, still there is a decent tax cut. You don’t need to pay tax on the profit you make from the borrowed money. Advertising and marketing: Business loans help you advertise your products and market them to the public so that your sales increase and you land a good amount of profit. [B-02] Conclusion For young entrepreneurs coming up with innovative business ideas, funds could be a real deciding factor. A business loan can provide you with financial assistance and help you reach your business dreams. If you enjoy reading write-ups on finance management, loan systems, investment schemes, and government aid, you should visit Piramal Finance. They have ample content, blogs, articles, and summaries on these topics.
08-11-2023
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Personal Loan

MUDRA Loan Documents – Required Documentation for Mudra Yojana

Small and microbusiness enterprises have been on the rise in recent times. There are millions of businesses that emerge every year with unique business ideas. Catering to such a huge audience is a big deal, and financing them to grow their business is equally tough. Because of the lack of enough financing options, the growth of these businesses is inhibited. [B-01] To tackle this issue, the government of India launched the MUDRA loan initiative under the MUDRA Yojana scheme in the 2016 Union Budget. This initiative funds microfinance institutions, non-banking financial institutions, societies, trusts, etc. These institutions then provide loans to the MSMEs (Medium, Small and Micro enterprises) at subsidised interest rates. In this article, you will come across topics like the MUDRA loan, its features, the eligibility criteria, the benefits, and the documentation requirements to apply for it. What exactly is a MUDRA loan, and what is its purpose? MUDRA, which stands for Micro Units Development and Refinance Agency, is a loan-providing scheme that targets microfinance institutions, non-banking finance agencies, societies, rural banks, trusts, and other informal sources of credit. MUDRA loan refinances these institutions to provide credit to small and micro businesses at subsidised rates. Since the emergence of small business units at an exponential rate, it has become difficult for them to get finance from the banks because of a lack of exposure and collateral. According to government statistics, more than 90 percent of these units do not get credit from banks, which acts as a massive bottleneck. What does the MUDRA loan offer to small business units? To refinance small financing institutions, the Government of India has formed three categories under which credit is provided to small business units. They have been named: Sishu, Kishor, and Tarun. According to these categories, the financial limits of different groups have been set. For the Sishu category, the maximum amount of money you can spend is 50 thousand rupees at a discounted rate. For the Kishor category, the financial limit is above 50 thousand rupees, and the upper limit is below 5 lakhs. Similarly, the Tarun category’s financial range is between 5 lakhs and 10 lakhs. What business sectors does the MUDRA loan touch on? These are some of the sectors that the MUDRA loan touches upon: Transport Sector: A MUDRA loan is given for purchasing rickshaws, autorickshaws, taxis, etc. Day-to-day service sector: This includes saloons, parlors, medicine stores, gyms, tailors, milk booths, etc. Agriculture sector: MUDRA loans also focus on financing poultry, dairy, livestock, horticulture, rearing, etc. Textile industries: This includes mostly handlooms, weaving, shoemaking, etc. Food production: This includes pickles, jaggery, Papads, sweets, cold-pressed oils, etc. MUDRA Loan also gives financial assistance to traders, shopkeepers, service enterprises, etc. What are the benefits of applying for a MUDRA loan? The exclusive benefits of applying for a MUDRA loan are as follows: No collateral or security deposit is required to get a MUDRA loan. The loan amount can be up to Rs. 10 lakhs, which is a huge amount for a developing business. MUDRA loan is available for businesses in both rural and urban areas. Extra perks and benefits are given to women entrepreneurs to expand their businesses and increase their revenues. The interest rate is quite low for businesses in both urban and rural areas, which mostly ranges between 8.40 percent per year and 12.45 percent per year. The tenure to repay the loan amount can be extended up to 7 years, which is a pretty decent amount of time to repay the loan. You can also claim a MUDRA loan debit card, which you can use to withdraw and perform other related transaction services. What are the important documents required to apply for a MUDRA loan? Here is the list of documentation that shows the minimum documentation required to apply for a MUDRA loan: Identity Proof: This includes your Aadhar card, voter ID card, driving license, PAN card, etc. Address Proof: Any legal document that shows your address, like your voter ID card, Aadhar card, domicile certificate, etc. Income Proof: You must show your bank statements or ITR for the financial year as your source of income proof. You have to show your MUDRA loan application form and passport-size photographs. What are the eligibility criteria to apply for a MUDRA loan? You must be an Indian citizen to be eligible to apply for a MUDRA loan under the MUDRA Yojana. You must either have a business or a business plan for any non-farm income-generating activities like textiles, manufacturing, the service sector, etc. Your credit requirement must be up to Rs 10 lakhs, the maximum limit for obtaining a Tarun loan. [B-02] Summing it up Of several government schemes, MUDRA Yojana stands to be one of the most profound because of the scale of business it caters to. MUDRA loan has different interest rates for different categories. For the Shishu category, the interest rate is 8%–12% per annum. For the Kishore category, the interest rate is about 14% to 17% per annum. For the Tarun category, the interest rate is mostly above 16% per annum. For women entrepreneurs, there are several offers, and the interest rates are much lower. If you like reading articles on topics like these, you must visit this website: Piramal Finance. They have ample engaging content on personal finance, investment schemes, government aid, etc.
08-11-2023
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