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Home Loan

Home Loan Sanction Letter- Meaning, Process, Contents

Buying yourself and your family a new home is probably one of the heavenly experiences. However, with the increasing prices of properties, it is difficult to buy a home with all your savings. So, a home loan is a more convenient and affordable option for this. Having a home loan is not an easy job, especially when you have to go through paperwork, make sure that you are eligible enough, and submit your legal documents. Out of all the documents, a home loan sanction letter is one of the most important ones. A home loan sanction letter is a piece of document in your pile that you get from your lender after your loan is approved. It is imperative to have this document with you while getting the loan agreement letter. You must have this document throughout the loan tenure and post that for future reference. Keep scrolling through this article to know more about the home loan sanction letter. In this article, you will know about the home loan sanction letter, its features, the process of getting it, and some important facts related to it. [B-01] What is a Home Loan Sanction Letter and What is its Significance? A home loan sanction letter is a piece of document that you get from your lender after the loan is sanctioned. It carries the consent of the lender and therefore shows that you are eligible for the loan and have been verified by your lender. After you get permission from the lender through a home loan sanction letter, you can further move to the process of claiming the disbursal of the loan amount. A home loan sanction letter is also the document that shows that you and your lender have mutually agreed to the terms and conditions of the home loan. After you submit all your legal documents including your application form to the lender, the lender verifies them all and gives you the sanction letter. Besides that, this letter consists of other important information, features, and conditions regarding the home loan. You will get to know about all of that in the coming section of the article. What are the Contents of a Home Loan Sanction Letter? A home loan sanction letter consists of the following information regarding the home loan: Loan Amount and Loan Tenure: A home loan sanction letter consists of the loan amount you have applied for. It also contains the tenure of repayment within which you are bound to repay the loan to the lender. Interest rate: A sanction letter of a home loan also has the type of interest rate that has been applied to the loan. It might be either a floating rate of interest or a fixed rate of interest, whichever you opted for. It also mentions the rate of interest that the lender has charged you and the base rate at which the rate of interest is to be calculated. EMI details: A home loan sanction letter also has information regarding the EMI details of the home loan. It shows the pre-EMI and EMI amounts that you have to pay through monthly instalments. Validity of the sanction letter: It also has a validity period until which the loan sanction letter is valid. Terms and Conditions: After all that, in the end, there is a list of the Terms and Conditions of the home loan. These terms and conditions are important as they show that you and the lender have agreed to them. What is the Process of Getting a Home Loan Sanction Letter? Now that you have known what a home loan sanction letter is and what it contains, now it is time for you to know the process of getting one. The process is quite similar to getting a home loan. Filling out the Application Form: The first step for you to get a sanction letter for a home loan is to fill out all the details that are given in the application. All your basic details with the documents to prove them are needed while filling out the application form. Loan Processing: After you apply for a sanction letter, you might face doubts regarding filling out the form. In that case, you can reach out to the bank officials through the toll-free number of the bank or go for a chat assistant. Verification: After you fill out the application form and submit all your documents, the lender goes through all the details and verifies them before sanctioning you the letter. These details include your credit history, credit score, income, type of job, etc. Loan Approval: After you are completely verified by the lender, you are approved for the home loan. To show consent in the written form, you are given a home loan sanction letter. You now have to keep this document’s lifetime for future reference. [B-02] Summing It Up As important as it is to have a home loan sanction letter, it is equally important to understand that this letter is not the loan agreement letter. A loan agreement letter states that the lender has agreed upon giving you the loan, which is the final letter before loan the amount is disbursed. A sanction letter for a home loan is often an initial approval from the lender’s side. You have to show this letter while getting the loan amount in your bank account. In case you have come this far, it is evident that you like reading about these topics. If that’s the case, you must visit Piramal Finance. In addition to that, it has plenty of engaging content on all types of loans, different investment schemes, financing tips, etc.

08-11-2023

Schemes

ECLGS - Emergency Credit Line Guarantee Scheme

As small businesses shut down in economically stressful situations, a slowdown of trade and commerce affects the livelihood of people. The government introduced a scheme to reduce stress and help build their trade again. Emergency Credit Line Guarantee Scheme (ECLGS) provides 100 percent coverage to banks and other institutions that lend to these businesses identified by the Kamath Committee. Read on to know more about ECLGS including its features, the purpose of the scheme, and eligibility. [B-01] What is Emergency Credit Line Guarantee Scheme (ECLGS)? The Indian government announced ECLGS in 2020 as a part of the Atma Nirbhar Bharat Package. Their objective is to aid MSMEs (Micro, Small & Medium Enterprises) to resume business and build their business that suffered during the pandemic. As per the scheme, Member Lending Institutions (MLIs) have been assured a 100 percent guarantee in case of non-repayment of the loan. After being introduced in May 2020, ECLGS was extended multiple times to include more sectors and increase the borrowing limit. In February 2022 it was extended till March 2023 to implement the announcement made in the Union Budget 2022-23. Also, the guarantee cover was expanded by Rs 50,000 crores to increase the total limit of the scheme from Rs 4.5 lakh to Rs 5 lakh crore. As of August 5, 2022, loans of about Rs 3.67 lakh crore were disbursed, as per government data. While earlier the scheme aimed at reviving SMEs and MSMEs, the finance ministry recently enhanced the ECLGS loan amount eligibility for domestic airlines, from Rs 400 crore to Rs 1,500 crore. Purpose of the Scheme The scheme aims to help MSME borrowers with the capital required to restart businesses affected by the pandemic. Who are eligible for ECLGS? Below, we have listed the eligibility criteria for ECLGS and it has been divided into points for better understanding. The components in the scheme includes ECLGS 1.0, ECLGS 1.0(Extension), ECLGS 2.0, ECLGS 2.0(Extension), ECLGS 3.0, ECLGS 3.0(Extension), and ECLGS 4.0. 1. ECLGS 1.0 As on February 29, 2022, the scheme provides fully guaranteed credit to business enterprises and individuals for specific business purposes. Their total outstanding credit across lending institutions should be up to Rs. 50 crore. 2. ECLGS 1.0 (Extension) Under this section, businesses that have availed financial aid under ECLGS 1.0 as of March 31, 2021, are eligible for the scheme. 3. ECLGS 2.0 As on February 29, 2022, borrowers belonging to 26 sectors identified by Kamath Committee with loans above Rs.50 crore to Rs.500 crore and due up 60 days are eligible for the scheme. However, it is also mandatory to meet other terms of the guidelines. 4. Under ECLGS 2.0 (Extension) As on March 31, 2021, those who have taken aid under ECLGS 2.0 as per the revised date are eligible for the scheme. It’s also mandatory to meet other terms of the scheme. 5. ECLGS 3.0 As on March 2021, those belonging to travel and tourism, leisure, catering, sporting, civil aviation, hospitality, floricultural products, and handling supply chains with due up to 60 days are eligible for the scheme. 6. Under ECLGS 3.0 (Extension) Businesses that have taken assistance as per ECLGS 3.0 or businesses that qualify under ECLGS 3.0 as on March 31, 2021, or January 31, 2022, are eligible. It is also mandatory to meet other terms of the scheme. 7. ECLGS 4.0 Under this section, hospitals, medical colleges, and units involved in providing liquid oxygen, oxygen cylinders, etc. are eligible. As of March 31, 2021, they should have taken a loan from a lending organization with a due up to 90 days. They are eligible for the aid of up to Rs 2 crore to set up Pressure Swing Adsorption for on-site oxygen-producing plants. An exception has been allowed if their credit card or savings account does not exceed 1 percent of the total loan amount. under ECLGS 1.0, ECLGS 2.0, and ECLGS 3.0, businesses or entities which had NPA or SMA-2 status as of February 29, 2020, are not eligible. Under ECLGS 4.0, accounts that had NPA status as of March 31, 2020, are not eligible. However, there will be an exception if the borrower’s savings account is not more than 1 percent of the loan. Under ECLGS, the overdue must be regularized before assistance is provided. Also, MLIs should ensure the process they follow covers the overdue. Other Eligibility Criteria The business requesting financial aid must have their GST number. However, MSMEs or enterprises that do not need GST registration do not fall under the category. ECLGS 2.0, ECLGS 3.0, and ECLGS 4.0 will be on an ‘Opt-in’ basis. The loans don’t need to be covered under NCGTC or CGTMSE Scheme. There will be no guarantee fee for credit facilities provided under this scheme. Similarly, there will be no processing fee or prepayment charges. The charges for documentation or other charges will be based on the extant guidelines of the bank. [B-02] Conclusion While the above-mentioned are the norms of the current structure of the scheme, the Management Committee for the ECLGS Fund will be the deciding authority about any changes to eligibility, criteria, guarantee fee, rate of interest, and tenor of GECL. There is no guarantee fee for credit facilities provided under this scheme. Similarly, there is no processing fee or prepayment charges. Documentation and other charges will be as per the guidelines of the bank. There will be comprehensive insurance for the securities charged to the bank should be taken depending on the bank clause.

08-11-2023

Personal Loan

Difference Between Two-Wheeler Loan and Car Loan

Owning a vehicle is a dream many people nurture. Having your own vehicle means that you can commute at your leisure and convenience. However, the cost of two-wheelers and cars is rising every year. Thanks to several loaning facilities available in the market, you can easily apply for a vehicle loan to realise your dream of buying a car. Once you decide to own a vehicle, you need to decide whether you want a two-wheeler or a four-wheeler. There are loan facilities available for both kinds of choices, but it is imperative to know what both of these choices entail in terms of a loan. Due to recent improvements, loan applications are now processed quickly and easily. You can choose from a variety of plans and options, especially when it comes to automobiles. The majority of applicants end up postponing their application procedure since they are ignorant of the difference between a two-wheeler and a car loan. To choose the one that is best for you, you should understand how they differ from one another. This article attempts to explain and highlight the main differences between a two-wheeler and a car loan. [B-01] Two-Wheeler Loans Versus Car Loans Compared to a car loan, a two-wheeler loan is very different. Even though both two-wheeler loans and car loans are classified as vehicle loans, the lender sees them as two different investments, thus there are some variances between the two. Bike prices are typically lower than car prices. Due to its affordability as a means of transportation and the rise in fuel prices, motorcycle use has increased among the general public. Additionally, COVID-19 and the rise in home delivery jobs have raised the demand for motorcycles and decreased default rates. Because of all these variables, getting a loan for a two-wheeler is easier than getting a loan for a car. How Do Two-Wheeler Loans Differ From Car Loans? Though both are vehicle loans, two-wheeler loans and car loans differ from each other in the following aspects: Compared to a car loan, a bike loan has distinct eligibility requirements. The repayment period of a bike loan is also shorter than that of a car loan. Though the interest rates are not fixed, the bike loan interest rate is different from the vehicle loan interest rate. It varies depending on the lender. Typically, a car loan is sanctioned for a significantly larger loan amount than a two-wheeler loan. These differences are further explained in a detailed manner below: Eligibility Criteria In comparison to a two-wheeler loan, a car loan has more stringent eligibility requirements. Your credit history, past repayment behaviour, history of prior loans, defaults, level of income stability, etc. will all be examined by the lender if you apply for a car loan. Nevertheless, it is simple to obtain a bike loan. You may easily apply for a bike loan because the procedure is straightforward. Repayment Tenure A bike loan has a shorter repayment period than a car loan. When compared to a car loan, which can last up to 5 years, a bike loan typically has a payback period of 2—3 years, though this can vary depending on the lender and be extended. The age of the vehicle at the time of purchase plus the loan’s term shouldn’t be greater than 10 years (in special cases, 12 years). Rate of interest A two-wheeler loan often carries a lower interest rate than a car loan. Despite this, there are several circumstances in which the interest rate for the bike loan may be higher. The same lender may charge varying interest rates for two-wheeler loans to various bike manufacturers. The financing rates on premium motorcycles are lower than those on regular vehicles. Two-wheelers loans have a different interest rate structure than car loans. Similarities Between Two-Wheeler and Bike Loans Loans for a motorcycle and a car are comparable. You can reasonably understand how to apply for a motorcycle loan, provided you have the right information about the various aspects of the loan process. Additionally, knowing the distinctions and parallels between loans for two-wheelers, cars, and even used cars will help you make the best choice. Automobile and bike loans have numerous differences, but they also have many similarities. For the most part, the same documents are needed for loan processing. Salary stubs, evidence of income, bank statements, proof of residency, identity proof, PAN cards, etc. are the primary documents needed. Both automobile and bike loans are secured loans. How to Get a Motorcycle Loan? After comparing the two types of loans—two-wheeler and four-wheeler—we can now look at the motorcycle loan application process. Of course, the loan application process is handled in a somewhat different way by each lender. The fundamental steps that must be taken to obtain a two-wheeler loan are similar. To learn more about how to apply for a motorcycle loan, read the following pointers: Complete the loan application with personal information and bike information. Determine your eligibility and the repayment period. Get your loan approved. Get your loan acceptance letter from the lender next. Go to the store where you want to buy your dream bike and buy it. [B-02] Summing it Up Car and bike loans differ, although they are nonetheless comparable in many ways. If you’re thinking about buying a bike, you should first look into the lenders who are providing the greatest interest rates on the market. Concerning loan tenure, interest rates change. So, make an effort to appropriately adapt the loan term for the bike. Purchasing a car has a similar process. Visit Piramal Finance’s website to know more about vehicle loans and other products and services offered by them.

08-11-2023

Credit Score

Difference Between Credit Score and Cibil Score

If you’ve ever applied for a loan or credit card, you’ve likely come across the terms credit score and CIBIL score. Many people use them interchangeably, which often leads to confusion. So, is credit score and CIBIL score same? The answer is not exactly. While both relate to your creditworthiness, there are some important differences you should understand. Credit Score vs CIBIL Score What is Credit Score? A credit score is a three-digit number that reflects your creditworthiness. It is calculated based on your credit history, repayment behaviour, credit utilisation, and other factors. The score typically ranges between 300 and 900, with a higher score indicating better credit health. Multiple credit bureaus in India generate credit scores — such as CIBIL, Experian, Equifax, and CRIF High Mark. Hence, the term credit score is a general category that includes scores from any of these bureaus. What is CIBIL Score? A CIBIL score is a type of credit score generated by TransUnion CIBIL, one of the major credit bureaus in India. When people refer to the CIBIL score, they are specifically talking about the score given by TransUnion CIBIL based on your credit information report (CIR). So, while all CIBIL scores are credit scores, not all credit scores are CIBIL scores. Difference Between Credit Score and CIBIL Score Let’s break down the key differences in the table below: Feature Credit Score CIBIL Score Definition General term for your creditworthiness rating Specific credit score by TransUnion CIBIL Issued By Multiple bureaus (CIBIL, Equifax, Experian) Only by TransUnion CIBIL Score Range 300–900 (varies slightly by bureau) 300–900 Usage Used by all financial institutions Widely used and most recognized in India Data Source Based on credit report from the issuing bureau Based on Credit Information Report by CIBIL Uniqueness Can vary depending on the bureau Fixed calculation method by CIBIL Reputation in India All are valid, but may vary in weightage Most popular and trusted score in India Hence summarising the above table, credit report is a generic term that refers to your overall creditworthiness whereas CIBIL report is a specific credit score given by TransUnion CIBIL. Furthermore, classifying the difference as follows. Issued By Credit Score: Can be issued by any authorised credit bureau in India such as: CIBIL (TransUnion) Experian Equifax CRIF High Mark Each bureau may calculate the score slightly differently based on their own models. CIBIL Score: Is exclusively issued by TransUnion CIBIL. It is not a general term — it refers only to their calculation of your creditworthiness. Difference Between Score Range Both types of scores typically range from 300 to 900. Higher score = better credit health. While CIBIL and other bureaus use the same range, the actual score may differ slightly for the same individual due to different scoring algorithms. Credit Score Vs CIBIL Score Usage Credit Score: Used broadly by financial institutions and lenders. Depending on their preference, they might refer to the score from any bureau. CIBIL Score: Most commonly requested score in India. Many banks and NBFCs have long-standing partnerships with CIBIL, making it the go-to score for most evaluations. Difference Between the Data Source Credit Score: Based on the credit report maintained by the respective bureau. Each bureau pulls data from lenders, credit card companies, and financial institutions to build their report. CIBIL Score: Based on your Credit Information Report (CIR) maintained by TransUnion CIBIL, which is updated monthly with your credit activity from member institutions. Method of Calculation Credit Score: Since each bureau uses different scoring models, your score may vary from one bureau to another, even with the same data. CIBIL Score: Uses a specific and consistent algorithm by CIBIL, so there’s only one CIBIL score per person at a time. Reputation in India All bureau scores are valid and accepted, but some lenders may give preference to one over the others. CIBIL Score: Has the strongest brand recognition in India. It was India’s first credit bureau, and over the years, it has become the most trusted and widely accepted credit score. How Can I Check my CIBIL Score? You can check your CIBIL or credit score online for free from various platforms. Here's how: To check your CIBIL score: Visit Piramal Finance CIBIL score page. Enter your mobile number and captcha. Click on ‘Get Your Free Credit Report’. Verify the OTP sent on your mobile number. Enter your PAN card details and basic personal information. View your CIBIL score and report. To check your credit score from other bureaus: You can also check credit scores from other bureaus through Piramal Finance like: Experian India Equifax India CRIF FAQs What is a good CIBIL score? A CIBIL score of 750 or above is generally considered good. It improves your chances of getting loans approved at better interest rates. What is a good credit score? Just like the CIBIL score, a credit score of 750+ from any bureau is considered healthy and creditworthy by most financial institutions. What is considered while getting a loan – credit or CIBIL? Lenders consider both terms — but what matters is the credit report from a recognized bureau, most commonly CIBIL. Factors include: Repayment history Loan utilisation Credit mix Recent credit inquiries Length of credit history

08-11-2023

Home Loan

Home Loan Document List For Self-Employed Individuals

Understanding the intricate details of the home loan process can be overwhelming, especially for self-employed. But it doesn’t have to be. This is a comprehensive guide to documents required for home loan for self-employed individuals. It will provide you with all the information you need to make a well-informed decision about obtaining a loan. [B-01] Documents Required for Home Loan For Self-Employed Home loan applications have a lot of documentation requirements. There are, however, a couple of documents that are usually required in every loan application. These documents include the following: Credit Report: A credit report is a document that has all the details regarding your credit history and credit score. A credit report will show your credit history and give a general idea about the amount of risk you pose to the lender. Credit reports are generally needed for most kinds of loans and are used to determine the interest rates of a loan. Statement of Financial Information: The Statement of Financial Information (SOFI) is a document in which you provide details about all your assets, liabilities, and income. This document is needed for many types of loans and can be used to decide on the terms of your loan. The lender will use this document to check if you have enough money to repay the loan without being a risk to them. These are the documents you can submit: Income Tax Returns with calculation for the last two years P&L and Balance Sheet with all annexures (must be audited and certified by CA) Account statement for the current account for the last six months Your savings account statement for the last six months Proof of Other Financial Obligations: Lenders will also want to see proof of your financial obligations, such as any existing debts you have. To prove your debt obligations, you’ll need to provide: Mortgage statement Car loan statement Any other loan statements Identity Proof: This is yet another important document required for home loan. This document includes one or a few of the following: Voter Card Aadhar Card Passport with validity Driving License Credit Card with photo Government-issued Photo ID card Identity verification letter with a photograph from a recognized public servant or figure (less than a month old) Address Proof of Residence: You will also need to submit proof of your address to the lender. You can submit one or more documents from the following list: Voter Card Aadhar Card Valid Passport Letter from a recognized public authority or public servant verifying your residential address Latest Utility bill Rent agreement on stamp Paper Bank Statements reflecting your address of any commercial nationalized bank Credit Card Statement (not older than 3 months) Life Insurance Policy Copy of Sale of the property (residence), if you own it Address Proof of Business: Apart from address proof of your home, the same for your business is also a document required for home loan. You can submit a copy of any of the following: Shops & Establishment Certificate Trade License Certificate SSI Registration Certificate PAN Card/ Sales Tax/ VAT Registration Certificate Partnership Deed (for firms) or MOA for companies Export-Import Code Certificate or Factory Registration Certificate Professional qualification Certificate and Degree Certificate for Professionals SEBI Registration Certificate The registration number issued by ROC Tips for Preparing Home Loan Documents It is important to submit complete, accurate, and genuine documents while applying for a home loan. Here are a few things you can do to prepare the complete and accurate documents required for home loan: Gather all the relevant documents: Collect all the documents that are relevant to your loan. If you don’t have the documents, then you will have to take them from the previous business or homeowners. Make sure to request genuine and legal documents from the previous owners. Submit original documents: Make sure to submit original and genuine documents. Don’t submit photocopies of the documents since the lender will reject these documents. Scan documents and store them in a secure place: Make a scanned copy of all the documents and store them in a secure place such as a cloud storage or a password-protected folder. You can also store them on an offline hard drive. How to Choose the Right Home Loan for You Pick the right type of home loan by keeping the following things in mind: – Budget: Before applying for a home loan, make sure that you have a budget that is realistic and tailored to your specific situation. Credit Score: Make sure to check your credit score before applying for a loan. If your credit score isn’t very high, you can consider applying for a loan with a lower interest rate. Rate: Choose a home loan that has a lower rate when compared to all other loan types. Make sure to check the different types of interest rates that each loan type has to find the best one for you. Term: A home loan term is the length of time for which you take the loan. Make sure to choose a long-term home loan since short-term loans have higher interest rates. Repayment: Choose a home loan that has a flexible repayment plan since most self-employed individuals may face difficulties in making monthly repayments due to their fluctuating incomes. Down Payment: Choose a home loan that has a low down payment since having a high down payment can make it difficult for you to apply for a loan. [B-02] Conclusion Instant Loans and Instant Funds are a quick, simple, and stress-free solution to supplement your current Home Loan. Given this, it’s an excellent solution for covering any unexpected or urgent monetary demands.

08-11-2023

Home Loan

Difference Between a Land Loan and Home Loan

Are you looking to buy your dream home or acquire a piece of land in a prime location in the city for investment purposes? One of the quickest ways to put your ideas in motion is by getting a loan. This article discusses land and home loans to help you make an informed choice. If you want to buy a property, you will likely cross paths with these two types of loans. But how to differentiate one from the other? Let us explore and understand. [B-01] Home Loan Vs Land Loan Home and land loans typically have the same terms and conditions and the application process. However, a few fundamental differences exist between the two. Definition You can avail of a home loan for ready-to-move properties, properties under construction, to be self-constructed. Land loans, also known as plot loans, are offered for purchasing a plot of land. However, the plot must specifically be for residential use. Eligibility Criteria Both resident and Non-Resident Indians can avail of home loans. In contrast, a land loan is strictly offered to Indian citizens only. Plot and home loans are offered to salaried and self-employed individuals based on the following criteria: Age Source of income Credit Score Repayment capacity Property Location You can take a home loan for property outside the municipal area. However, any land inside a village or industrial area does not qualify for a land loan. In this case, the plot of land must reside within the municipal limits. In addition, the land in question must be demarcated. Tenure The tenure for home loans is exceptionally high, extending up to 30 years. In contrast, the tenure for land loans is 15 years. However, this is the maximum tenure. Lenders like the State Bank of India provide a tenure of 10 years for land loans. Interest Rate Interest rates on home loans tend to be the lowest in the market. On the other hand, the interest rate on land loans is typically 0.5% to 1% higher than on home loans. Tax Benefits Principal repayment and interest payment for home loans qualify for tax deduction under Section 80C and Section 24B of the Income Tax Act. Contrarily, land loans do not come with tax benefits. Loan to Value The loan to value (LTV) is the percentage of property value a lender can lend to the borrower. The LTV of land loans differs from that of home loans. The LTV can be as high as 90% for home loans. However, in the case of a land loan, a borrower can get only up to 75% of the property value. This limit applies only to loans meant specifically for land purchase. The lenders may fund higher if the borrower avails of a land purchase and construction loan. Remember that 75% is merely the upper limit. Most lenders are conservative in terms of the loan amount and valuation of the property. So, expecting approval on a lesser amount would be wiser. Summary Category Home Loan Land Loan Eligibility Criteria Both resident Indians and NRIs can apply for the loan. Only Indian citizens can apply. Objective The loan is meant for the purchase or construction of residential properties The loan is given for buying a plot of land. Tenure of the Loan Maximum tenure is 30 years. Maximum tenure15 years. However, the upper limit may vary from one lender to another. Benefits of the Taxes The principal amount and interest are both tax-deductible under the Income Tax Act. No tax benefits. Location of the Property No restrictions. Plots in industrial or rural areas do not qualify for the loan. The land should strictly be located inside municipal limits. Maximum Loan-to-Loan Value Up to 90%. Up to 75%. Rate of Interest 7.25 – 7.50% per year. 8.0-10.0% per year. Composite Loans Do you belong to the unique category of borrowers who want to purchase a plot and build a house on it? In that case, go for a composite loan. These loans are given by lenders to buy a plot and construct a house within a specified timeline. Before applying for such loans, note that the time limit is crucial here. Typically, borrowers must begin construction within 3-5 years. However, the period varies from one lender to another. Moreover, the construction-specific part of the loan is disbursed only when you complete the foundation work. A composite loan attracts the same interest rate as home loans. However, you may have to pay slightly higher interest till you do not begin construction. [B-02] Conclusion The application and repayment procedures are the same for home loans and land loans despite their differences. Both have their specific benefits and purposes. The article above has listed down crucial information to help you determine which one suits your needs. However, remember that your credit score is vital for both loans.

08-11-2023

Other

How to Finance your Home Renovation?

Have you just bought a new home or an apartment put on resale? Congrats! But hold on! Do you have enough money to revamp the place? It would be unfortunate if you bought a new house and were left crunched for funds to turn it into a beautiful home, wouldn’t it? A home renovation loan is a solution to this problem. This article will walk you through options to fund your home remodelling work. Here are several basic methods to secure funding for remodelling your home. [B-01] What is a Home Renovation Loan? Banks provide home renovation loans to people who need financial assistance to restore or repair their houses. You can use the funds to improve the decor of your house, such as redoing the flooring, tiling, plastering, painting, and also renovating areas such as the kitchen, living room, and bedroom. The paperwork process for a home renovation loan is simple and the interest rates are similar to housing loan rates. A home renovation loan is a good option to arrange funds for house repair. Yet, many people borrow credit lines for this reason, which might be an unfair or time consuming process. Even though a personal loan may be obtained in a week or two, the payout of a home repair loan may take longer. If you already have a house loan, your chances of getting a home renovation loan are better. You may also claim tax perks after taking out a home repair loan. However, home renovation loan interest rates at various banks might range from 10.25% to 11.00%. So seek choices that are both cost-effective and provide the most value. Ways to Finance a Home Renovation While a home renovation loan is a way to finance the renovation, let’s also take a look at some other options. Here are the top ways to finance your home renovation: Using One’s Savings If you have been planning to renovate your home for a while, there are chances that you may have considered setting aside some money regularly for achieving this goal. If you have enough money saved to support the repair work without risking your investment objectives, utilising your savings for a house repair is a smart choice. One way to plan this is to set aside some money as a fixed deposit (FD). Getting a Personal Loan Some lenders and banks offer personal loans that can be used to renovate your house. You can get a personal loan based on your monthly income. It is an unsecured loan and you can use the personal loan amount as you see fit. However, the loan duration and interest rate may vary from bank to bank. Also, some banks charge a fee for pre-paying a loan. It is important to carefully read the terms and conditions when availing such a personal loan. Taking out a Construction Loan If you are going to build yoru dream home from scratch, a construction loan can be of assistance. A construction loan enables you to draw cash from the loan when your bills come, whether for a minor expansion or a total knock-down rebuild. This saves you money since you only pay the interest on the progress fees paid until the loan is completely drawn. Property loan You may get a loan against your house to do house repairs. The majority of banks and credit unions provide this loan. Banks will lend up to 80% of the property’s worth. The interest rate on loan against property is lower than that on a personal loan. You can choose six months or more to pay back the loan based on your needs. This loan also provides tax savings. Using a Credit Card You can use your credit card to purchase materials for your home repair projects. Based on how much your credit limit is, you can also withdraw money to use for your home renovation. You can split your whole spend into easy EMIs and return it in a year or less based on your financial plans. Using a credit card enables yourepayturn the loan in advance without incurring any charges. However, this does not provide you with any tax benefits. Property Extension Loan Banks and other financial institutions provide property extension loans. This loan may be used for repair and property expansion. The interest rate may differ from one bank to the next. You may choose a tenure that meets your needs. This loan is also tax deductible. Use of Equity in the House If you are an eligible customer of yoru bank, you can use the equity in the house to top up (raise) or redraw the house renovation loan. Top-Up Loan Topping up your house loan may be a viable option if you’re planning repairs, merging debts, or just needing more money. You can obtain more on your current home loan without taking out a new loan. You may get help with a cheaper interest rate than other loans, such as a personal loan. Mortgage Loan Banks lend you money by taking your gold, jewels, and assets into debt. This is another way to get funds for your repair job. A mortgage loan, however, has a higher interest rate. You must pay 9.50% and 11.25% interest on your house and top-up loans. Yet, you will be charged a higher interest rate for this loan. [B-02] Conclusion Are you familiar with the saying, “Home is where the heart is”? This place, called home, is where a person’s life is rooted. Therefore, it is natural that one may want to spend on renovating it from time to time. A planned home renovation helps you revamp your house with minimum financial burden. Using a home renovation loan or other methods is a great way of funding the repair and redesign of your house. For more such interesting articles and financial products, visit Piramal Finance website.

08-11-2023

Guide

Difference Between Repo Rate Vs Reverse Repo Rate

The bank will charge interest when you borrow from them. Consequently, if you deposit money, the bank pays interest. But have you ever wondered how banks fund themselves? The answer is simple. Banks either utilise deposits or borrow from the central bank – the Reserve Bank of India (RBI). For these transactions, the RBI implements a tool called the Liquidity Adjustment Facility (LAF). Under this arrangement, banks can borrow from or lend money to the RBI through the repo and reverse repo agreements. The interest rate levied on these transactions is the Repo Rate and Reverse Repo Rate. This article explains the main differences between these two terms. What is the Repo Rate? The Reserve Bank of India (RBI) charges interest on loans borrowed by commercial banks. This rate is called the repurchase agreement rate or Repo rate. Typically, commercial banks secure loans from the RBI by pledging various government securities as collateral, such as treasury bills and bonds. The repo rate is nothing but the lending rate charged by the RBI. The repo or repurchase agreement allows the RBI and commercial banks to repurchase securities at a pre-determined rate. These agreements are set in motion when banks must maintain liquidity in uncertain market situations. The RBI uses the repo rate to control inflation. So, let us now understand how the repo rate works. How Does Repo Rate Work? The RBI uses repo rates to regulate money moving through the market. It increases the rate when inflation strikes. Banks borrowing money from the RBI during inflation pay a high interest due to a raised repo rate. This severely affects the bank’s capacity to borrow from the RBI. The end customer feels the impact of a repo rate increase in two ways: Banks increase the rate of interest on deposit accounts to increase the cash at their disposal. Thus, investors can enjoy higher interest on fixed-income instruments. To combat the repo rate hike, banks further increase the interest rate on loans, making them costlier and thus less sought after. With fewer loans to disburse, banks manage to retain greater liquidity. The decrease in liquidity lowers demand in the economy, reducing inflation levels. Repo Period The RBI has stated that the repo period can be ‘overnight, open, or flexible.’ Overnight repo does not extend beyond a night. However, the situation gets complicated if the term is predetermined and agreed upon in advance. This type of repo is known as the term repo. In this case, either side may request to stop the repo at any moment with one or two days’ notice. Term repo typically lasts for one week. However, there is no maximum limit on repo tenure. Current Repo Rate The current repo rate is 5.90%. The RBI increased the repo by 50 basis points in September 2022. What is the Reverse Repo Rate? Commercial banks deposit money with the RBI and earn interest when they have surplus funds. This interest paid by the RBI is called the reverse repo rate. In other words, the reverse repo rate is the rate at which the central bank borrows from commercial banks. How does the Reverse Repo Rate Function? RBI often applies the reverse repo rate during inflation. This increases the rate, prompting banks to park more money with the RBI and earn higher returns. As a result, the banks have less money to extend in the form of loans. Thus, the liquidity in the economy decreases. Current Reverse Repo Rate As of November 2022, the reverse repo rate is unchanged at 3.35%. Repo Rate Vs Reverse Repo Rate Parameters Repo Rate Reverse Repo Rate Definition The rate at which commercial banks borrow from the RBI. The rate at which the RBI borrows from commercial banks. Liquidity A hike in the repo rate drains excess liquidity from the economy. When the reverse repo rate goes up, the liquidity in the market increases. Objective Repo rate helps control inflation. A reverse repo rate helps manage the money supply. Interest Rate The repo rate tends to be higher than the reverse repo rate. The interest rate is lower than the repo rate. Mechanism of Operation The RBI lends funds to commercial banks against securities pledged as collateral. Commercial banks deposit surplus funds with the RBI and earn interest on their deposits. Current Rate The current repo rate is 5.90%., The current reverse repo rate is 3.35%. [B-02] Conclusion The repo and reverse repo rates are vital tools for managing the economy. However, we must remember that the repo rate will always be higher than the reverse repo rate. Further, the difference between these two rates determines the RBI's financial income.

08-11-2023

Personal Loan

Go Green: Paperless Personal Loans with Piramal Finance

Much has changed over the years in terms of how people access and use loans. Instead of waiting for days, most people today want fast and simple answers to their money needs. The era of digital platforms in the finance sector has made this easier. The government is already doing its share to digitise the economy. It is focusing on developing a cashless system. Piramal Finance’s paperless instant personal loans are one instance of how this sector is growing. People in the digital era want fast answers to money issues. Loans given by Piramal Finance meet these needs. These loans assist them in solving the money crisis. Many experts predict that the future of client finance will be online. Let’s talk about how paperless personal loans are helping to alter lending firms. [B-01] Features of Paperless Personal Loans with Piramal Finance Here are the features of paperless personal loans that you must note: No asset is needed. Users do not need to pledge security or assets to get a loan from Piramal Finance. This makes these loans a good choice for many people. Tenure of flexible repayment. Piramal Finance loans allow you to repay the loan according to your financial capacity. You may choose a payback period of 12 to 60 months. Huge loan amount. Piramal Finance offers large loans of up to Rs. 25 lakh to meet your money needs. Other Offers. Your needs are a priority at Piramal Finance. Piramal Finance’s loans are tailored to these specific demands and aims. Simple online access You can monitor your loan account online, check your current loan balance, and even arrange partial payments since the process is fully paperless. Before asking for a personal loan, research and compare loan rates, and look for hidden prices or charges. Piramal Finance places a premium on openness, and all charges are disclosed upfront. You may apply for an online personal loan on Piramal Finance now that you know the whole process of getting a loan. Perks of Paperless Personal Loans from Piramal Finance A lending platform aims to test your creditworthiness by assessing your data online. Getting a loan via digital lending platforms is faster and easier than going to a bank. Here are some of the benefits of a paperless personal loan: It is trouble-free. Getting paperless personal loans is easy. There is no need for lots of paperwork, many visits to the bank, or filling out and signing page after page. With a few mouse clicks, you may apply for a loan from the comfort of your own home. It takes less time. The entire process, from approval to disbursement, is done online. You may save energy and time by not having to visit the bank often to submit papers. The loan is granted quickly and with minimal human interaction. It protects your data. Digital lending sites are subject to strict security testing and must comply with bank-mandated security measures. Hence, the technology ensures that all data on the site stays private and secure. You must first match the eligibility rules to get a loan without papers. Eligibility for Paperless Personal Loans with Piramal Finance Following are the eligibility requirements for paperless personal loans with Piramal Finance: You must be a paid employee. You must be an Indian national. You must be between the ages of 23 and 58. You must have a clean credit history and an above-average credit score of 700 or higher. Use the loan calculator to assess your eligibility when applying for a loan. All you have to do is enter your net revenue and the EMI you can afford. You will have all the needed data. Make sure you have a soft copy of the papers available to expedite your digital rapid loan form process. Documents required by Piramal Finance Paperless personal loans are simple and quick to apply for. Yet, to get the loan money, the user must provide some papers to the firm. These papers ensure that the user is a real borrower capable of paying the loan amount. Users must provide digital copies of these papers and allow the firm to verify them. Users may now e-sign papers, making the process easier. The following papers are needed for online loans: ID Proof PAN card, Aadhaar card, driver’s permit, voter ID, and any other official ID with your picture and name are accepted as proof of ID. Proof of Address For a paperless personal loan approval, you can show that you live in the area with your utility bills, passport, ration card, or voter ID. Proof of Job Your work ID card acts as proof of employment. Money Records You must also supply your bank records, Form 16, and the last two months’ pay stubs. How do paperless loans function? Many firms today find it relatively simple to receive and verify digital applications. You no longer need to visit a branch office to finish loan applications. You may do this from any place and simply ask permission. The process is mainly the same for all banks in the market, and the stages are as follows: Go to the lender’s official website. Fill out the online form with your data. Provide digital versions of all vital paperwork. The bank will get the papers and check their validity. If the paperwork is approved, the loan is sent to the user’s bank account. [B-02] Conclusion Paperless personal loans provide various perks for both lenders and users. By eliminating the time-consuming process of paper filing, you can save a lot of time and receive the loan amount quickly. Most of the country’s main banks offer pre-approved loans to current clients. Pre-approved credit does not need any papers since the user profile is already present with these banks. The ease of paperless personal loans has already become popular in India, and it’s expected to develop much more in the future. Check out similar blogs on Piramal Finance and explore their products and services.

08-11-2023