What is loan ?
Like this, it is an act or an act in which money, property or any other material goods are first provided to a needy person, then in future when that money is withdrawn from that person then he will get the money Along with that, he also has to return interest or interest and other finance charges. Only this amount is called loan amount.
What are some important concepts related to loan: –
Income: The main concern of lenders (who provide loans) is your repayment capacity. In such a situation, fulfilling the income requirement of the bank is the most important thing for any loan applicant. Therefore, the higher the income, the easier it will be to apply for large loans for a long time.
Age: On the side of a person who still has more working-age left (I’m not talking about new jobs), they will be easier to approve a long-term loan than an adult person or one. fresher k.
Down payment: This loan is a share of the applicant towards the payment for which he has applied for the loan. For example, if you have purchased a car worth 10 lakh and the bank has promised you Rs.8 lakh, the ones that have saved Rs.2 Lakh are called Down Payment. This is paid by you.
Tenure: This is called the time limit that you are given to complete the loan. If you are not able to repay it within that time frame, then you have to be fine for this and your colletral things can also be confiscated.
Interest: This is the amount of interest that the person taking the loan has to provide along with the princiapal amount. Interest rates vary from one loan to another. At the same time, sometimes from one person to another because it also depends on their credit scores.
Equated Monthly Instalments (EMI): This is called the monthly repayment amount that the borrower has to return to the bank within the pre-determined time frame. In an EMI, the principal + interest is put together and it is divided equally in that time frame.
Benefits of loans
Let us know about the features and benefits of loans.
1. Having Financial Flexibility: Loans provide you with financial flexibility. It provides financial help in your time of need. While taking a loan, it also provides you with some degree of financial freedom and at the same time handles your daily expenses properly, while at the same time it does not make your planned budget here and there.
2. Easy availability: All types of loans are mostly approved within 48 hours, the condition is that if you have already submitted all the necessary documents. Therefore, they can be easily obtained.
3. Getting the amount needed: Based on your income and financial history, you get the money you need.
4. Having convenient tenure: At the time of taking loans, you can choose how much time you can repay the loan within the time limit. Most of the time, loans are available from 12 months to 60 months.
5. Fired in Tax Benefits: According to the Income Tax Act of 1961, you get the facility of tax benefits in almost all types of loans.
Type of loan?
Home Loan
Most people have to take a loan to buy or build a house. Home loan interest rate is also lower than other loan.
You also get tax benefits on the payment of a home loan. While taking a home loan, take care of some of these things as well. In this post, you can learn about various home loans from State Bank of India.
What are the options for interest rates on home loan?
The interest rates on a home loan can be fixed or flexible. In fixed interest rates are fixed in advance and in flexible it varies.
What is the marginal cost of funds based lending rate (MCLR)?
This is a new method devised by banks to fix interest rates on home loans. Earlier, banks used to set interest rates based on the base rate. Now, loans are available only at the rate based on MCLR.
In MCLR mode, banks fix MCLR rate every month for one day, one month, three months or six months, one year, three years. After this, banks decide the interest rate by adding spread components.
For example, the MCLR rate of a bank for a year is 8% and its spread is 0.5%, then the interest rate on the home loan will actually be 8.5%.
In case of MCLR based interest rates, banks can reset it in a year.
In this round of decreasing interest rates quarterly, half yearly reset option is better, on which your bank should be ready. If interest rates start to increase, then in this case you may suffer loss.
What is the base rate and what to do if your home loan is linked to it?
All home loans taken after 1 July 2010 (but before 1 April 2016) are linked to the base rate. In this case, banks have the freedom to calculate the cost of funds according to the average fund cost or according to the MCLR.
What are the prices involved during a home loan?
When you take a home loan, you do not just pay the loan installment. Although this does not apply in every case, but there are many expenses involved with it.
There can be a processing charge of up to one percent of the home loan amount, which is sometimes waived by the banks. In case of more expensive property, two valuations are done and the loan is done at the lower valuation.
It is called the lending bank technical evaluation fee. The lending bank employs another firm to check the documents of the person taking the home loan. Its cost is also included in the processing fee, some charge it separately.
What is the monthly installment (EMI) of a home loan?
The amount you pay to the bank every month has both interest and principal, it is called Equal Monthly Installment or EMI.
How can a Home Loan Repay?
There are many ways to repay a home loan to the bank. The outstanding loan amount can be repaid to the bank by electronic clearance system (ECS, ECS), you can ask your employer to deduct this amount from salary and repay it directly to the bank or give post dated check from salary account.
How does the amount of home loan change?
The principal that you pay every month along with interest is also there. This principal is subtracted from your actual principal. In fact, every month your interest amount decreases and the principal amount increases. Most of the banks adopt monthly reducing balance based approach.
Can you close a Home Loan ahead of time?
You can close it even before the period for which you have taken a home loan. If you are in floating interest rate then no charge is taken for this, while banks can charge in fixed rate.
What is the part prepayment of a home loan?
Apart from the regular installment, when you deposit any amount in a home loan account, it is a partial payment. This reduces your principal amount, which reduces the interest component in your installment amount.
This can reduce the duration of your home loan, and in fact you save the amount paid as interest.
Do banks issue documents for the installment paid every year?
Every year banks send such a document to you. This statement helps you to know about home loan. Many banks also provide the facility to download it online.
How to get insurance for a home loan?
It is always better that you cover the risk of this home loan. For some reason, it can be a big relief for your family if you are not there.
For this you can take a pure term plan or take a mortgage insurance plan. Both single and regular premium options are available in such plans.
PropertyLoan
If you have a house or property, you can take a loan from the bank by pledging it. But keep in mind, if you are unable to pay the loan, the bank can sell your property.
If you need a loan and have gold jewelery at home, then you can take a loan by mortgaging those gold jewelery. You will get a loan of 60-75% of the value of gold in jewelery.
Note that gold loans are of short duration. If you are unable to pay the loan, then the bank or gold loan company will sell your jewelery and recover your loan.
PPF Loan
If you have a PPF account, you can also take a loan from your PPF account. Note that you can only take a loan for some part of your deposit. You can only loan from the third to the sixth year. Son there are many bonds in PPF loans.
Car Loan
You can take a car loan to get a car. You can also take a car loan to buy an old car. The loan period is usually 3-5 years.
Education loan
If you need money for higher education, you can take education loan or education loan. The interest rate on education loan is also low and you get tax benefits on the payment of education loan.
You do not even need to pay interest while studying. After completion of studies, you can start paying the loan.
Loan against Securities
Here, if you have shares, bonds or mutual fund units, you can take a loan by pledging them. You will get a loan of 50-60% of the value of your securities.
Note that if the value of your stock starts falling, the bank can recover its money by selling your investment. And yes, you cannot sell your investment before paying the loan.
According to me, taking such a loan is stupid. It is better that you sell your investment and use the money.
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