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07 Feb

Systematic Investment Plans – SIP vs. Equated Monthly Installment – EMI

A lot of investors consider SIP as EMI’s. This creates an insight that SIP is amazing like an EMI (Equated Monthly Installment). This is incorrect. Somewhat nothing can be further from the truth. Youth of today is more interested into the EMI, be it for a smart phone or a vacation or a fancy laptop. Whereas a SIP, is the best form of asset.

EMI (Equated Monthly Installment) is consumption and at times obvious use, and SIP is an investment.

Given below is the relative study on SIP vs EMI:

Nature of the Scheme: SIP is the systematic investment of the investor’s money in the form of stocks or equity funds for a fixed period of time. Though it gives late satisfaction as the return is coming after a sure span of time, it is a great implement for wealth creation.

In case of EMI, you pay interest to a financier to finance a product you wish to own. In case of a SIP (Systematic Investment Plans) you make a periodic investment from your own money to create wealth or meet one or more of the financial objectives that may be significant to you.

EMI comes with a load in mind while SIP doesn’t.: EMI (Equated Monthly Installment) is a fixed outflow of cash for a fixed period of time. Any default or delay leads to penal interest and default may lead to harassment and anxious calls from the financier and his revival agents. This creates stress. Sometimes the expenses for an exacting month increase and it becomes hard to pay the EMI. This may reason sleepless nights. EMI can never be compromised at the cost of other expenses, no matter how important.

SIP (Systematic Investment Plans) is totally dissimilar. Even if you miss a month or 2, your investment stays whole and the mutual fund company doesn’t not incriminate you even a single rupee. You can expediently stop your SIP any time and even add to or decrease the amount.

Investment Discipline: SIP helps to create and support the asset regulation. You may complete your wishes for important financial objectives like owning a house or your child’s higher education. However, an EMI doesn’t create any long term asset quite you are able to afford a product you may like or need. Another thing is that the EMI can be disastrous if used for personal loans or for overseas vacation which may be high-priced especially in times of financial misfortune like losing a job etc.

Hence, though EMI plays an significant role when you can’t wait to purchase incredible that you may need, in SIP you can buy the same product or maybe something better but at a later date and in a more systematic manner.

07 Feb

Personal Loan: Fallacy to be Avoided when Applying

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Personal loans can be taken for any reason and usually getting a personal loan is not too hard or awkward, but that does not denote that you can be informal when applying for them.

Focusing only on Interest Rates: While interest rates are unstated to be the most important feature in any loan one cannot disregard other aspects too. When comparing loans or considering options look at aspects like processing fee, tenure for which loan is offered, pre-payment clause, late payment and other charges, turnaround time, eligibility criteria, etc.

Not Comparing Enough: Today there is a surplus of financial institutions offering all types loans. While bearing in mind all options is not possible or practical one does need to compare between a few options to get a contract that is most feasible. There are online portals obtainable that let the applicant compare not only personal loan interest rates in India offered by various Financial Institutions (FIs) but also list out comparisons based on your exact necessities so that you can evaluate other loan aspects too.

Not accepting all aspects Before Signing the Dotted Line: While the FI representative will like to make things easier for you by just marking the places where you require signing but that’s not the way to go about it. Before signing the dotted lines read the fine print and appreciate it. Once you sign the papers, whether you have unstated all that was written in the loan agreement or not you are vault by the terms and conditions.

Borrowing More than You Can Handle: Unlike many loans, there is no LTV (loan to value) ratio for a personal loan; so you can take a loan as high as your eligibility criteria. However forever bear in mind that a loan is a legal responsibility that desires to be repaid timely. Though the lender will think various aspects before sanctioning a loan, you as an applicant are more aware of your liabilities and financial condition. Do not borrow more than you can handle.

Not looking for option Sources of Funding: Though applying for a personal loan is easy; these loans are comprehensive at high rates. Before you apply for a personal loan do think other sources of personal finance. These sources make more sense in the conditions when the applicant has a low credit score or is looking for a tenure that does not fit within the personal loan range. The alternative sources might be accessed at lesser interest rates also; the options that can be considered are loans against fixed deposit/shares and securities/ property/gold/insurance policy, loan from employer or borrow from PF (Provident Fund)?

Borrow sensibly and avoid the above mentioned mistakes so that you do not be sorry your decision.

02 Feb

How to Estimate EMI on Personal Loan?

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Personal Loan
Tags: EMI, finheal, finheal.com, Personal Loan, personal loan interest rate
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Suppose that due to some urgent necessity, you borrow Rs 3 lacs from the bank. The personal loan interest rate in your case is 15% and you are paying an equated monthly installment (EMI) of Rs 10,400 per month for a period of 3 years. Whether this amount is correct or not, how much interest is being paid every month, how much principal is being repay every month are some questions, for which you don’t have answers.

So it is in your benefit to understand how banks estimate your loan EMIs.

Personal Loan EMI Calculator – Finheal

As you already know, equated monthly installment (EMI) is a fixed monthly amount that you require to pay every month till the loan is cleared off. The biggest benefit of EMI is that you know accurately how much you require paying every month. This helps in good planning of your personal finances in advance.

Now the EMI calculations depend on following 3 factors:
Loan Amount
Interest Rate
Loan Tenure

There are several personal loan EMI calculators available online that you can use to calculate you’re EMIs. Or you can even use a simple formula in MS Excel software.

The function that needs to be used in Excel is PMT. The formula specific to personal loan EMI calculation is as follows:

= PMT [(Annual Interest Rate)/12, Number of EMIs, Loan Amount]

So for instance, the EMI for a principal amount for Rs 3 lacs borrowed at 15% interest for 3 years (36 months) is Rs 10,400.

Now each EMI includes contributions towards both principal and interest on the loan amount. To know more about each part, what is required is a Loan Amortization Schedule. It is a tabular representation of loan repayment schedule along with all details like break up between the interest and principal component of each EMI. One quick look at the agenda tells exactly how the loan is being repaid and how much is the exact exceptional left to be paid.

In the initial stages of the loan, the interest part forms the main portion of the EMI. But as you progress along, the portion of interest repayments reduce and principal repayment increases.

Since we are talking about Personal Loan, it is significant to note that personal loans interest rates are usually fixed. So the EMI payment remains constant throughout the tenure. In case of floating rate loans, the EMI payments also differ with change in rates.

01 Feb

Is Business Loan Eligibility Still Relevant?

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Documents to be submitted while Applying for Business Loan

Firms have to gather the business loan eligibility criteria and submit the following documents to their lender:

Application Form

Applicants have to submit a duly-filled application form.

Self-Attested Know Your Customer (KYC) Forms

Passport-sized photograph of every applicant and co-applicant
Residence/address, proof of proprietors/partners/directors, whichever applicable
Residence/address, proof of guarantors and security providers
Entity proof: Shops and Establishment certificate/ Partnership deed/ Certificate of Incorporation, whichever applicable
Self-attested PAN card copy of an entity, directors/ partners/ proprietors, whichever applications as well as of guarantors and security providers

Financial Documents

Income Tax Returns of the previous year, along with computation of income and copy of acknowledgment
Profit and Loss Statement and Balance Sheet of the last two years
Tax audit reports and Statutory Audit report
Last year’s provisional and sundry creditors and debtors list
Proof of business continuity: ITR/Trade license/Establishment/Sales Tax certificate
Memorandum of Association (MOA), Articles of Association (AAO), Power of Attorney, or any other document required by the lender

Bank Statements

Primary account bank statements for the previous six months

These are the minimum documents required by lending institutions. The requirements may vary from bank to bank. In most cases, the process of submitting documents is simple. However, if you have neglected to file still a single document, getting a loan approved would be not easy. Therefore, carefully check the documents before applying for a business loan.

The firm has to also give documents connected to the reason of taking the loan. If the enterprise is borrowing a loan for a new project, the documents to be submitted include project report stating the cost of the project, sources of finance and future projections, all along with justified details. Approval letters from the government for power, pollution and building plan has to be submitted, too. If the company seeks funds to purchase assets, the related documents to be submitted are invoices of the assets to be purchased, conveyance deed/allotment letter in case of land property as well as architect certificate confirming the cost of the structure to be constructed.

Nowadays, lending institutions have modified their lending programs to suit the monetary requirements of organizations. Many lenders have an online presence, thus making the application process simpler. They also provide business loan quotes and have a business loan calculator online. This assists businesses in verdict how much they can afford and how much has to be paid in EMIs periodically. Such benefits go a long way in making loan application process simple and hassle-free.

31 Jan

What you require to identify: Loans against Property

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Sending children abroad for education or finance a business requires an ample amount of money, and this amount is not usually willingly accessible for everyone. The most ordinary ways to acquire funds is to take a loan. The loan could be a personal loan for the requisite amount or you could take a loan out on your property.
A loan against property (LAP) is a loan given or disbursed against the mortgage of a property. The loan is given as a definite percentage of the property’s total value, typically 40% to 60%. This loan falls under the secured loan category where the property is used as security. These loans can be taken for a variety of reasons such as financing your business, meeting family obligations such as marriages, purposes of higher education, funding medical treatments or your personal reasons.
The loan can be in use out of your self-occupied or rented residential property. This could be a house or even just a plot of land. To be eligible to apply for a loan against property, banks must approve the following fields of the applicants:

Your income, savings, debt obligations
Cost/value of the property mortgaged
Repayment track record for other loans, credit cards, etc.

While most banks have other criteria as well, these three are ordinary among them all. The interest rates on loan against property range from 12% to 15.75% and the tenure is for 15 years.

A loan against property is one of the most excellent ways to raise money. The only disadvantage of this kind of loan is that if the borrower is not capable to pay back the loan, the bank takes possession of the property which was used as collateral. So, before taking this kind of loan, one should take into account how dependably they would be able to pay back the loan.

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