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How To Finance Your Home Renovation Using Home Renovation Loan

Home renovations are part of owning a home from time to time. Many people go ahead with home renovation plans to enhance the value of their homes and meet their families' needs. While the need for increased comfort can be one of the most common needs for home renovation, other common reasons are attempts to make the home more eco-friendly and sustainable. There can be many benefits of renovating a home. However, one of the aspects that causes many worries is financial. The financial requirement for renovating a home has been increasing, especially due to inflation. To meet these financial requirements, many opt for a home renovation loan. In this article, we look at the different elements of a home renovation loan and how you can finance your home with one. How to Finance Your Home With a Home Renovation Loan By availing of a home renovation loan with an interest rate and EMI that suits your financial capacity, you can renovate your home in any way you want. It is important to check for certain aspects before purchasing a home renovation loan. Let us have a look at each of these different aspects. Eligibility Home renovations are part of owning a home from time to time. Many people go ahead with home renovation plans to enhance the value of their homes and meet their families' needs. While increased comfort can be one of the most common needs for home renovation, other common reasons are attempts to make the home more eco-friendly and sustainable. There can be many benefits of renovating a home. However, one of the aspects that causes many worries is financial. The financial requirement for renovating a home has been increasing, especially due to inflation. To meet these financial requirements, many opt for a home renovation loan. In this article, we look at the different elements of a home renovation loan and how you can finance your home with one. How to Finance Your Home With a Home Renovation Loan By availing of a home renovation loan with an interest rate and EMI that suits your financial capacity, you can renovate your home any way you want. It is important to check for certain aspects before purchasing a home renovation loan. Let us have a look at each of these different aspects. Eligibility Interest Rate Tenure Tax Benefits Affordability In a Nutshell Availing of a home renovation loan can help you renovate and redesign your home with less financial stress. You can opt for a home renovation loan, ensuring that you meet the eligibility criteria. By meeting the eligibility criteria, you can increase the chances of getting your loan application approved. Moreover, it is also important to check the tenure and interest rate of the home renovation loan before applying to ensure that it aligns with your financial capacity. Interest Rate: Another key factor to check while applying for a home renovation loan is the interest rate offered. The home renovation loan interest rate can determine how much finances you need to repay the loan. It can also be an estimate of the financial burden you may experience. The interest rate you receive on your home renovation loan can also help you calculate the EMI and tenure. Tenure: The tenure of the home renovation loan is also important to consider as it will allow you to understand the flexibility you have to repay the loan. A longer tenure allows you more time to repay your loan with smaller amounts of EMI every month. On the other hand, having a shorter tenure will require you to pay larger amounts of EMI over a shorter period of time. Tax Benefits: With a home renovation loan, you can also experience tax benefits on the interest portion and the loan amount. Under Section 24 of the Income Tax Act, you can avail of tax benefits up to Rs. 1.5 Lakhs on your interest amount. Moreover, if your home renovation loan amount is used on home-related expenses, you will be eligible to avail tax deductions on the principal amount of your loan as well. You can avail of a maximum deduction of Rs. 1 Lakh on the principal. Affordability: The home renovation loan typically provides you access to funds at a lesser interest rate than a typical home loan. Hence, it is considered a much more affordable option than a personal or similar loan. You can also opt for a longer tenure, making the repayment process less stringent. [B-02] In a Nutshell Availing of a home renovation loan can help you renovate and redesign your home with less financial stress. You can opt for a home renovation loan, ensuring that you meet the eligibility criteria. By meeting the eligibility criteria, you can increase the chances of getting your loan application approved. Moreover, it is also important to check the tenure and interest rate of the home renovation loan before applying to ensure that it aligns with your financial capacity.

08-11-2023

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What is Flexi Loan and Benefits Of Flexi Loan

The Flexi loan is one of today's most popular loan options. You are sanctioned a loan amount where you can withdraw funds as many times as you want within the limit. Unlike a traditional personal loan, you do not get the full amount disbursed immediately in your account with applicable interest. Understanding Flexi Loan A flexi loan is just an overdraft facility. The limit is set, and interest is levied only on the amount you withdrew and not on the complete loan amount sanctioned. You can use the funds for any purpose and also repay the loan as you please. This is a great option for people looking for a flexible personal or home loan option. Benefits of Flexi Loan A flexi loan allows you to use your money when required without filing multiple loan applications. This is one benefit to mention. Have a look at the several benefits that the Flexi loan offers to its borrowers: Interest-Only EMIs:Loan repayment is a matter of concern. With a Flexi loan, you can pay interest as well. Paying off the loan, therefore, becomes easier. Withdraw When NeededThe amount of loan you are sanctioned need not be withdrawn at once. You can withdraw it as per your business investment plans and pay interest only on the amount withdrawn. You can use this amount to repay your debts or pay your home loan EMI. Flexibility in RepaymentYou have the flexibility to repay the loan amount when you want. You can also make no-charge part pre-payments. Low EMIThe option to withdraw funds from the Flexi loan as and when required lowers your monthly EMI. Refrain From Multiple ApplicationsWith traditional loan options, you must file multiple applications for each requested loan amount. However, with a Flexi loan, you can withdraw as many times as you want from the amount limit without submitting multiple applications. It saves hectic paperwork. Instant ApprovalOne of the most essential benefits of a Flexi loan is you get its approval and money in your account within 24 hours. So, it helps you in executing your instant business plans. Documents Required for Flexi Loan at Piramal Finance Just like when you apply for a home loan, Flexi loans require the borrowers to submit a few documents for verification. You can easily apply for a Flexi loan at Piramal Finance by presenting the documents listed below: PAN Card ID ProofAny Aadhaar Card, Driving License, Passport, or Voter’s ID Card. Address ProofAny of – ID proof with the permanent address, telephone bill, water tax, electricity bill, post-paid mobile bill, or property tax receipt. Property Document Sales deed or the letter of allotment NOC from the builder/housing society, possession certificate, detailed construction cost estimation Bank account statement Occupancy certificate in case of the constructed apartment Eligibility criteria for Flexi Loan at Piramal Finance There is a basic set of eligibility criteria that an applicant must fulfill to apply for a Flexi loan at Piramal Finance. Salaried and self-employed individuals have different sets of eligibility criteria. These are as follows: For Salaried Applicants Particulars Criteria Age 21 years to 70 years Employment Type Government InstitutionPrivate SectorPublic SectorMNCs or Related CompaniesPartnership FirmsProprietorship ConcernNGOs or Related Organisation For Self-Employed Applicants Particulars Criteria Age 23 years to 70 years Employment Type Self-Employed Professional like Doctor, Architect, etc.Business OwnerProprietorsPartnersPartnership Firms, etc. [B-02] Bottom Line Applying for loans and fulfilling your financial requirements have become easy with the easy-to-avail Flexi loan options. At Piramal Finance, you can easily apply for a loan online from the comfort of your home or office.

08-11-2023

How To?

How does a home loan EMI calculator help?

Everybody dreams of having a home of their own. A home loan from Piramal Finance (PCHF) can help you fulfill that dream. However, many people seem apprehensive about the EMI they must pay for their home loans. Keeping that in mind, Piramal Finance has a home loan EMI calculator. This helps you know about your monthly EMI before opting for a loan. Let us know more about Piramal Finance’s EMI calculator. How can you use the Home Loan EMI Calculator? Here is how you can calculate your home loan EMI with Piramal Finance. Step 1: Visit the official website of PCHF Visit Piramal Finance’s official website. Click on the Calculator tab and select Home Loan EMI Calculator. Step 2: Enter the loan amount The next step is to enter the loan amount you want to borrow. Step 3: Enter the tenure Your loan tenure is the period of time for which you wish to take the loan. Enter your loan tenure in the EMI Calculator. Step 4: Enter the rate of interest Finally, you need to enter the interest rate as mentioned in the Piramal Finance website. It usually starts from 10.5% onwards. Once you enter all the details, the home loan EMI calculator will show you the EMI you must pay monthly. What affects your home loan EMI Primarily, three factors can affect your EMI. Principle amount—The higher the amount you borrow, the higher your monthly installment (EMI) will be. Interest Rate – Your home loan interest rate is directly proportional to the amount you pay for your EMI. The higher the rate of interest, the higher the EMI you have to pay.If your loan's interest rate is fixed, you will pay the same amount every month. However, if your loan has a floating interest rate, you have to pay a low EMI if the rate goes down and a higher EMI if it goes up. Repayment tenor – Your monthly EMI is inversely related to your loan tenor. This means that the longer your loan tenure, the lower your EMIs are. However, it is important to remember that a longer tenor also means higher interest rates. How does a home loan EMI calculator help? Having a home loan EMI calculator can help you in many ways. Helps you choose a home: The EMI of your home loan is very much dependent on the principal amount you borrow. Once you’re going through the catalogue of potential homes, you can use the EMI calculator to estimate the EMIs by entering the value of your potential home. You can look for better options if the EMI amount is too much. On the other hand, if you find that Piramal Finance’s low interest rates make the monthly EMIs affordable, you can look for bigger and better homes. Know what you’re signing up for: Once you have a rough estimate of the value of your new house, you can use the EMI calculator to know the monthly EMI you might have to pay. This will help you implement a better financial plan to save up for the EMIs. Choose a comfortable repayment tenor: Piramal Finance has a flexible loan tenor structure. This means that you can choose the tenor of your loan, depending on what you’re comfortable with. If you want to pay less on EMIs, you can choose a longer tenor and vice versa. [B-02] Why take a home loan from Piramal Finance A home loan can fulfill your dream of owning a home. Here is why Piramal Finance is the best place to get a home loan from. Quick and simple application process: The application process for a home loan is the simplest at Piramal Finance. All you need to do is fill in the form with your details and submit the required documents, and a dedicated relationship manager will contact you to guide you through the process. Minimum documentation: You need only submit proof of your identity, address, and income along with the property documents. For large loan amounts, you need only submit proof of your identity, address, and income along with the property documents.

08-11-2023

Tips & Advice

Under Construction Vs Ready To Move Home - Which One Is Better For You?

The outbreak of the COVID-19 pandemic has made us realise the importance of owning a house. Apart from being a valuable asset, it is also an investment for the future. One advantage that COVID-19 has brought with it is that the home loan interest rates today have dropped, and interested people can buy a property of their own. While moving into your own house is a great achievement, there are many things that will need your attention before you finalise a deal. One of the biggest decisions that the owner needs to make is whether to go for an under-construction house or a ready-to-move-in place. Both properties have their own benefits and drawbacks, and therefore, it is totally up to the owner which one to prefer. However, to choose one of them, it is very important to know both of them first. Understanding Under Construction Home Under-construction houses, as the name suggests, are houses that are still not built. They are generally located in areas that are not well established, and therefore, these houses' prices tend to remain 10-15% lower than ready-to-move properties. However, this factor may vary according to the house's location and the builder's plan. Buying an under-construction house will allow you to plan everything in and around your house, and all of this, combined with low home loan interest rates, is the best deal to have. Understanding Ready to Move Home A ready-to-move house is built, and you can move in whenever possible. A ready-to-move home has many benefits that a buyer may find very attractive. First of all, a buyer gets to see what he is going to pay for, how the surroundings are, neighbours, whether the house is furnished as per his/her taste or not, etc. Secondly, there is no waiting period associated with ready-to-move houses, and therefore, it is preferred by buyers who wish to invest quickly. Under-Construction Vs Ready to Move Home – Things to Consider Each of these aforementioned houses is best in its own way. However, taking out a home loan and buying your own house is not an everyday job, and here are some key points you should consider. Estimate your budget and then look at which house matches your expectations as well as your budget Select the location looking at your daily travel routes Make sure the property has all the important documents and licenses needed for the deal Read all the documents carefully before applying for a home loan. Under-Construction Vs Ready to Move Home Parameters Under Construction Home Ready to Move Home Formalities Less documentation is required as compared to ready-properties There are a lot of documentation procedures and other legal processes to be completed Price Comparatively cheaper than the ready-to-move houses but depends upon the location Generally, on the higher size Risk levels Low chances of risk. The buyer’s due diligence is important There is a high level of risk as the property may have been sold to more than one owner in the past. Due diligence of the buyer is mandatory Ease of selling It is often difficult to sell an under-construction property Ready-to-move properties are easily sellable. Source of income It will take time before one can actually use the house as a source of income Ready-to-move houses can be quickly put on lease, and the money can be used to pay the EMI of the home loan. Payment As the property is still under construction, the full amount might not be demanded at once but would be paid in intervals The buyer would be asked to pay the whole amount at once [B-02] Conclusion Buying a house is an important phase in everybody’s life and should never be done in a hurry. No matter how occupied you are, you must understand the features of both properties to choose the one that suits you best. After you select your dream house, move on to the next step, i.e., home loan. If you need a home loan, visit your lender's online portal and read about the loan features, interest rates, and other important information. Fill out the form quickly, submit it, and await your home loan approval.

08-11-2023

Tips & Advice

Top 6 Common Real Estate Scams Which Home Buyers Can Avoid.

Before the onset of the early 2000s, homeownership was viewed more as a necessity rather than an investment one can make. However, as property prices skyrocketed, real estate investing opportunities became crystal clear. With real estate finance companies and private players jumping at the opportunity, so did the potential for real estate scams. Here are six such scams and how to avoid them. 1. Rental scams: Owning a house is still a dream for many, making renting the next best option. With properties being listed online, it has created a feeding ground for scamsters who list properties that don’t exist to extract a security deposit. Alternatively, the bait and switch is also a popular method, wherein you are convinced to pay a premium for a low-quality location. To avoid rental scams, do not make any payments online without further interactions, and it would be best to visit the property before you sign any agreements. 2. Title Scams: Venturing into real estate finance can be tricky, and oftentimes, you might find that someone is selling you a house they don’t even own. Scamsters could sell you a house using false documents and transfer the ownership without the real owner’s permission. It is easy to see why this can cause problems for the owner and buyer. With a push to dematerialize property ownership certificates (like how stocks are stored in Demat accounts), there should be little room for ownership disputes going forward, but always ensure you are on the lookout for this. 3. Broker Side Scams / Wire Fraud: If you are looking to venture into real estate finance or buy a home, you might look for an agent to go through. In the absence of a trusted broker, there are several ways you could be convinced by a fraudulent broker to transfer money. Remember that your broker’s job is not to create a disconnect between buyers and sellers but to facilitate seamless interactions. 4. Faux Foreclosure Relief: Often, homeowners cannot pay their loans and are about to have their homes foreclosed on or seized by the bank. Scammers prey on this fear, offering real estate finance options, such as altering the loan agreement terms or postponing foreclosure in exchange for a fee. Read the terms of your agreement carefully, and do not trust anyone over the phone unless you can verify their identity. You should only interact with your bank through official channels. 5. Commercial Real Estate Fraud: This is especially tricky because institutions like real estate finance companies are involved. If you are venturing into real estate investing, you could come across this scam, where loan amounts are spent towards unapproved objectives. You should get your loans exclusively through trusted vendors such as Piramal Finance. 6. Moving Fraud: From loan flipping to fudging real estate loans, India has seen many homeowners on the receiving end of the devious and deplorable actions of homeowner scamsters, and you must watch out even when you have to move furniture. A moving company might move your furniture based on a quote, only to raise the price after moving all the furniture to corner you into paying extra. Alternatively, an even more disgraceful form of the scam involves moving companies taking a deposit and/or collecting the furniture, only to disappear with a single track. Ensure you get multiple quotes from your movers and packers, try to rely on recommendations from friends and family, and do not pay any additional amounts, no matter how much they insist. Generally, companies that ask for large cash deposits are red flags. [B-02] Conclusion India still finds itself steeped in real estate scams, with many loopholes in the law. However, you can avoid six of these scams with a little due diligence. Ensure you double-check all agreements and quotes (you can use the Piramal Finance EMI calculator to get a rough estimate so you know you are not getting scammed with high EMI rates) and get your loans through reputable vendors only.

08-11-2023

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Importance Of ITR For Availing Business Loan

As someone who is either wanting to start a business or invest in business, a business loan can be a good option. This can help you with much needed business capital and fulfil your business objectives and goals. However, a business loan requires several necessary documents and conditions. One of them being, your ITR (Income Tax Return) form. We will be understanding the importance of an ITR form to avail a business loan. Before we start, let us know what exactly is an ITR form, an Income Tax Return form is a form that contains information related to a person’s taxes and income to be paid during the year. This is submitted to the Income Tax Department of India. [B-01] So Why do you need an ITR form for a Business Loan? Shows that you are financially responsible: Filing your income tax return within a government set date is a rule prescribed by the government. This is mandatory for people who are earning a particular amount of income. Filing the return reflects on your sense of completing a duty towards your nation and is an example of you being a good citizen. ITR is one of the important documents: A business loan requires several documents such as a balance sheet and profit & loss account. Along with these, it is also required to submit the filled ITR form of the last three years. These are part of the compliance and help in strengthening your loan case even further. Helps the lender understand your business: An ITR form lists your income from your business, interest earned from your savings and fixed deposits or an income from any secondary source. It also includes any interest that you might have paid for a loan. Overall, it gives a glimpse of your financial conditions and insight into your business. This will help your lender understand your financial position and assess your eligibility for an amount for your business financing. To calculate your income: An ITR form helps your lender to calculate your net income. This is done considering all the elements of an ITR form. On the basis of this income, the lender may decide how much loan amount is to be given or whether a loan amount is to be given or not when you apply for a business loan. Though we have listed the significance of the ITR for a business loan, there are many out there who don’t have an ITR form. So does that mean that you cannot get a business loan without an ITR? Fortunately, that is not true. You can get a business loan without an ITR. At Piramal Finance, you can get a business loan without the hassles of an ITR. The relevant documents required for a business loan at Piramal Finance are: Application form with a recent photograph Proof of identity such as passport, driving license, Aadhar Card, or Voter’s identity card. Proof of Income in the form of 6 months primary bank statement Proof of residence like passport, Aadhar card, driving license, Voter’s Identity Card, or utility bills like telephone bill /electricity bill etc. You can opt for online business loans and make the most out of their digitally driven process for quick sanctions and smooth processes. Their comprehensive assessment allows them to give you the maximum possible loan amount. It offers loans up to 10 lakh rupees without any collaterals. [B-02] Conclusion An ITR is an important document when it comes to fulfilling your tax obligations and assessing your financial position. However, it is not mandatory for you to have a filled ITR form to avail a business loan. Piramal Finance offers you hassle-free business loans thanks to their prompt services and simpler programs at your doorstep without requiring an ITR form.

08-11-2023

How To?

How to Renew A Two-Wheeler Insurance Policy in India?

Renew your Bike Insurance Policy at home! Are you trying to renew your bike’s insurance policy before its expiry? You can follow these simple steps to renew your bike insurance policy at home. [B-01] WHY DO YOU NEED AN INSURANCE POLICY FOR YOUR TWO-WHEELER? Do you prefer riding a bike instead of driving in traffic? Most Indians prefer to use two-wheelers like bikes and scooters. Bikes are economical because they are cheaper than cars. You will also spend less on petrol if you use a bike. You can also buy an electric bike or scooter. If you live in a city, traffic can be a big issue. You can ride a bike more easily in traffic. You also don’t have to worry about parking. A bike needs less parking space. However, despite all the benefits, riding a scooter or motorcycle also has risks. India has more than 1200 road crashes daily. Two-wheelers are responsible for 25% of the deaths in road accidents. In cases of accidents, lack of insurance can cause a lot of problems. If you don’t have insurance, you will have to spend a lot of money on repair after an accident. Therefore, it is essential to be safe before riding a bike. You should always have an insurance policy. Buying a suitable insurance policy for your motorcycle keeps you and your vehicle safe. Here are three reasons why you should always buy or renew your bike insurance policy, 1) The Motor Vehicles Act (1988) makes two-wheeler insurance mandatory for everyone. If you have insurance for your bike, you don’t have to pay for causing injury to a person or damage to property in an accident. Instead, your insurance company will pay damages to the third party. 2) Driving a vehicle without insurance is illegal in India. Anyone found riding a bike without insurance will have to pay fines. You can also be jailed for up to 3 months. 3) An insurance policy protects you against any damages that might happen to your vehicle in an accident. The insurance policy also covers damages caused by earthquakes, floods, and fires. If your bike is stolen, you can also receive money for that. Are you worried about losing your money if you don’t claim any damages during the validity of your insurance? You earn the NCB or the No Claim Bonus if you don’t make a claim. The NCB is a discount you get during your insurance renewal for every claim-free year. Many companies offer bike insurance policies. You can find a policy that best suits your needs. You can also build an insurance policy depending on the damages you want to cover. Presently, there are three basic types of bike insurance policies in India : 1) Third-Party Liability-Only Cover: In these policies, your insurance will only pay for any damage, loss or injury caused to the third party. You will not receive any amount for the damages to your vehicle. You will have to pay for any damage to your bike yourself. 2) Standalone Own Damage Cover: This insurance policy provides for damages to the insured vehicle only. You will also have insurance in case of damage due to earthquakes, fires, floods and theft. But in case of an accident, your insurance policy will not cover the damages to the third party. You should always buy third-party liability coverage with these policies. 3) Complete Two-Wheeler Insurance: This kind of insurance policy will give you maximum benefits. They protect your vehicle and pay for third-party damages. According to the IRDAI, it is now mandatory for bikes to have a 5-year insurance cover. A 5-year insurance plan is great because you don’t have to worry about renewal yearly. However, it is essential to keep the expiry date of your policy in mind. You should always renew your bike insurance before expiry. You can renew your insurance by following these simple steps: 1) Check your insurance expiry date You can visit the VAHAN website. Check your expiry date by following these simple steps: 1. Visit the VAHAN website and click on the menu tab. 2. Go to “Know Your Details” and enter your vehicle number and the verification code. 3. Click on ‘Search Vehicle.’ 4. You can check the expiry date under the ‘Insurance Up to’ column. 2) Go to the insurance company’s website You have to visit the official website of your insurance company. Search for the “Two-Wheeler Insurance Renewal” option. You can also renew your policy using an app if the company has a mobile app. You can log in to the app with your details and follow the earlier mentioned steps. 3) Fill up the renewal form You will have to fill up a form to renew your insurance. You have to provide your current policy number, registration date, model, engine number etc., in the form. Please keep the necessary documents nearby before filling up the form. You should carefully check all the information before submitting the form. 4) Select your insurance policy You have to submit the form after filling it up. After checking the information, you should submit the form. Companies have different types of two-wheeler insurance policies. You have to select a policy that fits your need and budget. You can check the premium amount after this. Then, proceed to payment. Multiple payment options like net banking, UPI, and credit/debit card are available. You can choose any mode of payment to pay the premium. You should always download the payment receipt. 5) Download your insurance policy. Download your insurance policy after payment. You should always keep your insurance documents with you while riding your two-wheeler. The insurance card or papers is also identity proof. You should never provide personal or bank details to any company. The insurance company does not ask for these details. You can contact the customer helpline if you have any problems while renewing your insurance. It is your responsibility to renew your bike insurance on time. You should always wear a helmet before riding the bike and follow traffic rules. [B-02] A financial expert like Piramal Finance offers you accurate and authentic information on insurance policies and renewal-related information. We will suggest what’s best for you and help take care of your personal loan requirements if any.

08-11-2023

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What are the prepayment charges on a business loan?

When you are under heavy financial debt, it seems reasonable to get done with your business loan as soon as you can. However, these come with certain penalties. The lenders give out the loans for a certain tenure, thinking about the business loan rates and how much they would benefit from it. A loan prepayment would disrupt their income flow. So, they try to make up for this loss of income by charging you prepayment fees. Even though the business loan rates may be fixed, you will gain a certain amount of money post-prepayment. This is because if you pay before the tenure, the charge is not going to amount to the total interest for a few years. It may also give you extra flexibility and stabilize your cash flows in the future. Usually, the prepayment charges vary from 2% to 5%. This may depend on the lender. Read more below. [B-01] How is the prepayment charge calculated? Businesses usually plan to repay their loans when they have huge cash inflows without worrying much about the prepayment charges. The prepayment charge is not calculated on the down payment or the amount repaid. It is calculated on the loan amount outstanding. In the case of SME loans, the prepayment charge will vary from lender to lender. In most cases, the lenders set up a lock-in period in which you cannot repay your business loan. For example, if your loan has a complete tenure of 10 years with a lock-in period of 3 years, you cannot repay it until the three years are over. How Much Are the Prepayment Fees? If you are repaying your loan in full at once, you will be charged around 4% of the outstanding loan amount and the principal repaid in the past 12 months as EMI. However, these charges will mostly be less than the interest you will have to pay for the rest of the loan tenure. If you are paying a maximum of 25% of the outstanding amount of your business financing, you will not have to pay any prepayment charge. However, you would have to pay the GST charges on it. When Should You Prepay Your Loan? Apart from the worry of prepayment charges on your business loan, you have to evaluate the cash flows that your business would require at the moment before you decide to repay your loan. For instance, if your business is of a fluctuating sales nature, like a restaurant or a bookstore, you have to keep money ready in case of uncertain events. If you have a business that has a stable nature, then you can repay your loan on time. Another instance where you can consider repaying your loan before the due date is when your business has become a lot more successful than when you took the business financing. This would imply that you have had a lot of cash inflows and have enough of it to repay your loan and free yourself from all debts. This will also have a positive impact on your existing credit score. When Should You Not Prepay Your Loan? It would not make sense to try to repay your business loan before time if you have not fulfilled the purpose that you took the loan for. If your business has not gained the stability you expected, you should not opt for the prepayment option. It would be wise to focus on the growth of your business and then repay your loan. If you are worried about your credit score, timely payment will not affect it negatively. Interests on a business loan are tax-deductible under the Income Tax Act. If you opt to repay your loan before time, you will lose all the tax benefits that you could have gained. The worst thing that could happen will be that your business will move to a higher tax bracket than it already was. Will The Remaining Interest Be Waived? If you choose to close your business loan before time, you will be free from all the remaining interest payments. This is one of the main reasons why people opt to prepay their loans despite having prepayment charges to pay. [B-02] Key Takeaways Getting a loan for business financing is a good option, but read the terms and conditions properly. Take a close look at the lock-in period and the prepayment options and charges that will be levied. Even though the terms of repayment are flexible, calculate the prepayment charges before deciding to prepay it. The documents required for the prepayment of a loan are the loan documents, identification proof, and bank statement that shows the principal and interest repayment. Also, the proof that shows the approval of the lender for prepayment is important.

08-11-2023

Guide

What happens if you can not make your business loan payments?

With top lenders offering facilities like business loans instant approval, affordable interest rates, and so on, businesses can easily secure funding these days. However, uncertainties are part and parcel of running a business. So, paying loan instalments might not seem so easy when your business hits a low phase. What happens in such a situation? What can you do to recover? Here are the answers to all your questions. [B-01] What happens when you’re unable to make business loan payments? Missing a single payment or being late to pay is called loan delinquency. On the other hand, a loan in default is all about missing a number of payments over the course of time. But whether a loan is in default or delinquent is completely dependent on your lender’s policy. In any case, you might face the following consequences of not making business loan payments: Decrease in credit score When you miss the instalment on business loans, the lender duly reports it to the credit agencies. Thus, your business’ credit score drops, which makes it even more difficult for you to get loans in the future. Paying the penalty for the loan As you are unable to make the payments, the lender will charge a hefty penalty fee. In addition to that, they might even increase your rate of interest. This will make it even harder for you to make the payments. Foreclosure or legal action The further action taken by the lender depends on whether you have taken a secured or unsecured loan. In the case of a secured loan, such as a business loan against property, the lender has the right to take authority over your asset. If it is an unsecured loan, expect to be charged a late fee. You will find a more detailed description further down below. Regardless of what the consequences are, there are tough times when you have no way to make the payment right away. So, what to do in such a situation? What to do if you are about to miss a loan payment? Rather than surprising the lender with a missed payment, try to get them to help you. If you are sure that you won’t be able to make the next payment, get in touch with your lender and let them know. The lender of an online business loan might offer you a few solutions, such as: allowing you to make a partial payment for now renegotiation of the terms of the loan extending the due date of making payments without any penalty fee temporarily pausing payments to give your business the time to bounce back There is no reason to think that the lender is out to get you. Instead, be upfront and let them know the reason why you can’t make the payment. Your lender will help you find ways to get the loan payments right back on track as per the schedule. Not paying a secured loan vs. an unsecured loan: The consequences A secured business loan is something that you get by pledging a financial or physical asset as collateral like a savings account, your house, jewelry, and so on. But an unsecured loan does not have any collateral backing it up. So, if you default on a secured loan, the lender will seize the assets that you put up as collateral for that loan. If you had put up your house, the lender will take possession of that. In case you have pledged your business equipment, they will seize your equipment to recover their losses. For unsecured loans, lenders usually start by charging hefty penalty fees. When you do not pay that as well, they might decide to sue the business and collect the money. If they sue your business, they can seek compensation for a host of things, right from that outstanding balance to the penalty fee, interest, and so on. [B-02] Is it possible to recover from the business loan defaults? As more loan payments are missed, the lender naturally becomes increasingly aggressive in their collection effort. As mentioned before, they might be ready to negotiate a settlement to get their money back. But this should only be considered as a last resort. After all, the process of settlement means keeping you in financial distress for a longer duration. Of course, the credit score for the business has already taken a hit. The best thing you can do is to have a repayment plan in mind when you apply for a loan. In this plan, make room for emergencies and financial distress. What do you plan to do in case your business registers low revenue for some time and you still need to make loan payments? If you still face a time when you can’t make a payment, talk to the lender directly about it.

08-11-2023