Reason to transfer your Home Loan

Why Should You be Choosing a Home Loan Balance Transfer?

Three years ago, Bharat Rajagopal, an IT professional from Bengaluru, had taken a Home Loan of Rs.30 lakh from a bank. The loan came with a tenure of 20 years and a fixed interest rate of 10.5% per annum. Since it was a fixed rate of interest, he was unable to save up on interest when the bank reduced its Home Loan interest rates in the coming months. The bank turned down his requests to convert his Home Loan to a floating interest rate every time. Bharat decided to apply for a Home Loan Balance Transfer. He chose an alternative lender – a non-banking financial company (NBFC) – offering a lower rate of interest and better services on Home Loans. The lower Home Loan interest rate meant his EMI payments were lower as well.

Falling Home Loan interest rates has prompted many borrowers like Bharat to opt for a Home Loan Balance Transfer. However, a lower interest rate should not be the only reason to transfer your Home Loan. Here is all that a Home Loan Balance Transfer entails:

  1. What is a Home Loan Balance Transfer?

When you transfer your existing Home Loan to another bank or NBFC or lender, it is called a Home Loan Balance Transfer. Applicants may opt for an alternative lender because of lower interest rates, better service, special offers or privileges, and top-up loan facility.

  1. What are the Benefits of a Balance Transfer?

There are a number of advantages towards transferring your Home Loan. You should apply for a Home Loan Balance Transfer when you want:

  • A Lower Home Loan Interest Rate– If there is a fall in market rates and you’re still paying higher Home Loan interest rates, you may transfer your existing Home Loan.
  • A Longer Repayment Tenure– If existing Home Loan provider is not allowing you to extend your loan tenure, it may be time to shift the loan to another lender willing to do the same.
  • A Top-up Loan– New loan providers may be more open to giving you a top-up loan.
  • Better Services– You may get assistance from a new lender with a Home Loan Balance Transfer.

However, you must check all the terms and conditions involved before going ahead with a Home Loan Balance Transfer. Use a Home Loan EMI Calculator too before you proceed.

3.Why is Home Loan Balance Transfer a Popular Financing Option?

People who opt for a Home Loan Balance Transfer often do so because they have been bogged down by the high interest rate on their existing Home Loans. The lower Home Loan interest rates from a new lender translates to reduced interest pay out and more savings. Poor service from an existing Home Loan lender can be the driver behind the decision too. Applicants also transfer their Home Loan if their existing lender does not provide special offers or privileges despite having a good repayment record. Another valid reason for a Home Loan Balance Transfer is if your existing lender does not have a top-up loan facility. Top-up loans are a good bet if you require finance over and above the existing Home Loan amount. You can use the loan amount renovating your home renovation, buying consumer durables or even for meeting sudden expenses.

4.What You Need Remember Before Applying for a Home Loan Balance Transfer

Did you know that in the initial years of your Home Loan, the interest component of the EMI is much higher than the principal component? Therefore, if you opt for a Home Loan Balance Transfer in the in the early stages of your existing Home Loan, the interest component of your EMI will come down considerably. This will allow you a reduced interest pay out.

What happens when you apply for a Home Loan Balance Transfer in the later stages of your Home Loan? Since you have already repaid a major chunk of the Home Loan interest, you may end up paying a higher interest. What is more, you may also have to pay extra fees which otherwise are applicable on new Home Loans, such as processing fees and legal charges.

You should always bear in mind that when it comes to a Home Loan Balance Transfer, there will be a transfer of the original documents between your previous and new lenders. This means there is always a chance your documents might get lost or misplaced. Therefore, make sure you verify the list of documents being transferred.

5.Do You Have to Pay Any Fees for Home Loan Balance Transfer?

It varies from lender to lender. Some lenders might charge you a processing fee when you opt for a Home Loan Balance Transfer while might be willing to waive it off if your loan repayment record is good. You might also have to pay 0.5% of the loan amount or a hefty fee to your existing lender for permission to close your Home Loan account. Your lender may do this to recover the expenses come up from maintaining your loan account and to support the losses to some extent.

6.How Does the Home Loan Balance Transfer Application Process Work?

You will need to submit a letter to your current lender requesting for a Home Loan Balance Transfer. In many a case, the lender might slash the Home Loan interest rates to retain you as their customer. However, you may have to re-book your Home Loan at a lower interest rate or pay a one-time switch fee. You have the option to either opt for this offer, or insist on a Home Loan Balance Transfer if you are getting a lower rate from another lender, and your bank hasn’t been responding to your requests. When you apply for a Home Loan Balance Transfer, the lender will provide you a consent letter or a NOC that will mention the outstanding balance of your existing Home Loan. You need to submit this letter to the new lender you have chosen who will sanction your Home Loan balance to the previous lender and get a Home Loan closure letter. Your previous lender will hand over the documents to the new lender and cancel all your post-dated cheques or ECS.

7. Which Documents Do You Need to Submit for a Home Loan Balance Transfer?

If you want to get a Home Loan Balance Transfer, you need to prepare well in advance. Here is general list of documents for a Home Loan transfer which lenders will ask you for:

  • Copy of the property documents
  • Information regarding the outstanding Home Loan amount
  • Foreclosure letter of the Home Loan

There is an additional set of documents that you have to submit when applying for a Home Loan Balance Transfer. These vary, depending on whether you are a salaried professional or a self-employed individual.

For Salaried Candidates

  • Certificate of employment
  • Copies of your salary slip
  • TDS certificate
  • Bank account statements and the latest Form 16 issued by your employer

For Self-Employed Individuals

  • Copy of audited financial statements
  • Copy of the partnership deed in case of a partnership firm
  • Copy of Memorandum of Association (MOA) and Articles of Association (AOA)
  • Profit and loss account details
  • Income tax assessment details

8.Are You Eligible for a Home Loan Balance Transfer?

There are plenty of lenders in India who offer options for Home Loan Balance Transfer. Make sure you do your research about their Home Loan interest rates, as well as their eligibility criteria. Knowing whether you meet the eligibility criteria before you apply for a Home Loan Balance Transfer will save you time and frustration.

Following are some common eligibility requirements for a Home Loan Balance Transfer that must be satisfied:

  • You must be an Indian national
  • Your age must fall between 28-70 years
  • If you are a salaried individual, you must have a stable monthly salary
  • If you are a self-employed individual, your business must be at least 5 years old
  • Details that indicate steady employment and income
  • Solid credit score without any history of loan defaults or late EMI payments

9. How Easy is it to Apply for a Home Loan Balance Transfer Online?

The Internet has made almost every part of our lives easier. Nowadays, you can apply online for a loan as well. Lenders like Bajaj Finserv allow you to submit a Home Loan Balance Transfer application online. This means you don’t have to make trips to the lender to collect the application, and submit the filled in form and documents. There is arguably no other way to save time when it comes to transferring your existing Home Loan. Whether you apply online for a Home Loan Balance Transfer while traveling or while watching a movie, you can do it whenever the time is convenient for you. Unlike a hard application for traditional loans, applying for online Home Loan Balance Transfer is as easy as it can get. All you have to do is visit the lender’s website, fill in the online application form, select your loan amount and tenure, pay a secure fee and upload your documentation.

Apply for Home Loan Online Check your Home Loan Eligibilty

Win a gift card worth Rs.7,000 with every CA Loan

Win a gift card worth Rs.7,000 with every CA Loan

If you are a chartered accountant and looking for a loan, we have a great news for you. Bajaj Finserv has come with an exciting offer for Chartered Accountant (CA) loans. If you apply for a CA loan before 20th March 2017, you will get an assured gift card worth Rs. 7,000.

If you are considering taking a chartered accountant loan, you should definitely avail this offer. A CA loan is also known as Business Loan for Chartered Accountants and is specially tailored to address the needs of practicing Chartered Accountants or consultants working at private or government organizations. This is an exclusive professional loan that helps Chartered Accountants scale up their operations and expand their businesses.

Apart from the multiple benefits on offer, you also stand to gain by applying for a professional loan for CA from Bajaj Finserv at present. Take a look at the features and benefits of these loans.

Features & Benefits of Chartered Accountant Loans:

Availing of a chartered accountant loan from Bajaj Finserv gives you access to a wide range of benefits. These loans for professionals come with maximum amounts provided up to Rs.35 lakh. This is the highest loan amount provided by any Indian online loan provider. This gives you greater leverage in terms of getting higher amounts if your earnings match the eligibility criteria.

Existing customers also stand to gain with special pre-approved offers which are provided on a periodic basis. These offers can be availed with a really competitive and low Chartered Accountant loan interest rate. Thus, if you are already a Bajaj Finserv customer, you can expect further benefits from time to time! You can easily access your loan account details and other information through the Experia Customer Portal courtesy Bajaj Finserv. You can also carry out online transactions for your account without a hitch! All you need to do is log in with your user id/mobile number/email and password.

Moreover, the processing of CA Loans is hassle-free, because:

  • Online loan application
  • Online loan approval in few minutes
  • Money in bank in 72 hours
  • Minimum documentation
  • Loans up to Rs.35 lakh

Why take a CA Loan from Bajaj Finserv?

A Chartered Accountant Loan from Bajaj Finserv also come with some mega benefits which make things more convenient for customers. You can choose between multiple flexible repayment tenures ranging between 12 and 60 months. This gives you more convenience in terms of repaying your loan in easy EMIs.

You are also not required to provide any collateral for availing of the CA loan from Bajaj Finserv. This means that your other assets can be kept free instead of being pledged as security. Additionally, you do not have to provide any guarantors for taking your loan as well. This ensures maximum peace of mind and convenience alike!

‘Line of credit’ facility

This facility basically involves a specific credit limit being allotted to you for a particular duration. You can use this credit as per your needs and at your convenience. You only pay interest on the particular amount that is used by you. You do not have to pay interest on the total credit assigned to you by Bajaj Finserv.

These loans are sure to benefit you in the long run since you just pay interest on the amount used and hence you save greatly on overall interest costs. Also, you can pre-pay the loan whenever you have any additional funds and anytime at your convenience.

Apply Now and Win Assured Voucher

Opting for the Bajaj Finserv CA Loan Scheme offers several benefits to professionals who need to scale up their practices and expand their operations. Additionally, as mentioned, if you get your chartered accountant loan approved between 13th and 20th March, then you can expect to win an attractive gift card worth Rs.7,000. Choose the Chartered Accountant Loan from Bajaj Finserv and give wings to your professional aspirations.

To apply for a CA loan from Bajaj Finserv, simply click here.

Finance Your Dream Wedding, Take A Vacation and More With A Personal Loan

Experts advise prudent investments to plan for a secure future, and some of us follow that advice diligently too. But what if life throws up a moment where you need to access funds urgently? A medical emergency for a family member, where you need to manage the costs of hospitalization or treatment, or urgent home repairs? What do you do if you do not have liquid funds to meet these expenses?

What about an impromptu travel plan to an exotic destination? Or education at a top university abroad for your child? Should you put your big plans on hold because of the lack of funds?

The simple answer is no!

While it is not easy to plan for unexpected expenses, accessing finance to manage them is – by using a Personal Loan. Instant approvals, flexi loans, pre-approved offers and attractive interest rates make Personal Loans the preferred means of financing for people all over the country.

What is a Personal Loan?

A Personal Loan is an unsecured means of financing – it requires no collateral or guarantor. You can use it to meet any expense that you want to manage – health costs, a travel plan, home repairs, or even a second car. You can use it to meet expenses of a lavish wedding too! Not only do you get to access a lump sum amount in one go, you have the benefit of repaying it at your convenience in easy instalments.

Advantages of Personal Loans

As long as you assure the lender that you will not be using the funds for speculative activities, criminal activities or gambling, you are free to use the capital the way you want.

Of all the loans available today, getting an approval for your Personal Loan application is perhaps the easiest. A good CIBIL score and a stable income usually spells approval.

As an unsecured loan, the lender does not have any asset to hold against your loan amount. To make up for the risk, the lender charges higher interest – usually between 12% and 22%. But don’t worry, if you have a valuable asset to keep as security, your lender may reduce the interest rate applicable.

Uses of a Personal Loan

Travel: Many people are finally waking up to the idea of taking a Personal Loan for travel. The thrill of visiting an exotic location, the food, the memories – there are few adventures that resemble travel. But travel, especially international travel needs money. Bajaj Finserv offers holiday loans so that you and your loved ones never miss out on a travel plan for the lack of financing. Simply apply for a travel loan, submit your documents, and receive the money in your bank in just three days!

Weddings: While everyone wants a grand Indian wedding, they can be very expensive. From the décor to catering, clothes to accommodation, there is every likelihood that your expenses may go beyond your initial budget. But that doesn’t mean you should compromise. By choosing to avail a Personal Loan, you can arrange for easy financing at great interest rates to make your wedding the most memorable occasion of your life.

Medical emergencies: A health emergency can come in unannounced – and if you don’t have adequate insurance – severely hurt your finances. But a Personal Loan can be a convenient way to tackle the high costs of hospitalization or medical care. Not only do you have the freedom to access funding without collateral, the 72-hour disbursal guarantee means you don’t have to waste precious time waiting too.

Read Blog: Use a Personal Loan for Debt Management of Your Medical Bills

Buying a car: A Personal Loan can be an excellent means of financing If you are buying a used car. The Personal Loan eligibility criteria is often less stringent than that of a car loan. As long as you maintain a stable credit rating and have a plan to repay your equated monthly instalments (EMI), you can access a larger corpus at a more convenient rate of interest.

Read Blog: Take a Personal Loan for Used Cars to Meet the Cost

Clearing student debt: With access to a number of great universities abroad, students can afford a great education with an education today. But student debt is a common feature around us and there are few better ways to repay a student loan than by taking a Personal Loan. Choose fixed payments over a convenient tenure and manage your student loan better.

Managing a large purchase: Replace all the furniture in your apartment, buy the latest flat screen TV, or renovate your home. Put your credit card and the plethora of interest-related costs away. Choose a Personal Loan to manage a large purchase and repay the loan amount in easy installments.

Helps to be informed

Learn all there is to know about your Personal Loan before you set about with the application process.

It also makes sense to keep a track of other terms such as:

Eligibility: Use an online loan eligibility calculator to determine your credit-worthiness for the loan. This is the primary metric that banks and lenders use to analyze your application before approving it. You can also use a Personal Loan EMI calculator to determine your monthly EMIs.

CIBIL Score: The credit bureau associates your financial health with a score out of 900. 750 and above usually implies a smooth approval of your loan application.

Documents required

Depending on the city you reside in, lenders may have a minimum monthly salary criteria for applicants to meet. You are expected to submit a proof of income such as your salary slips for at least two months along with your identification proof and address proof. Some lenders may also ask for a bank account statement for three months as well a proof of employment.

Whether you’re looking to secure financing for travel or a wedding, consider a Personal Loan as a useful tool to achieving your financial objectives. But remember to conduct fair research before you go ahead and select a lender. Compare interest rates, tenure, top up offers and more before committing.

Bajaj Finserv, one of India’s best known NBFCs offers Personal Loans at attractive interest rates and suitable tenures. You can easily avail financing of up to Rs.25 lakh without leaving the comfort of your home. Simply visit the Bajaj Finserv website, and follow the simple steps to apply for financing.

Apply for Personal Loan Online     Check your Personal Loan Eligibility

Win Assured Travel Vouchers with Every Business Loan

Win Assured Travel Vouchers with Every Business Loan

Bajaj Finserv understands that establishing a business idea or expanding your existing business can be financially challenging. For entrepreneurs who have the vision to expand, Bajaj Finserv brings you Business Loan – where you can avail financing expand and take your business to new heights.

Here’s how you can use a Business Loan to expand your business:

  • You can rent out a larger office space
  • Upgrade your machinery or equipments
  • Develop your infrastructure
  • Get more working capital for your business

The best part is these loans are unsecured loans and you don’t need any collateral to get a business loan. Also, we encourage women entrepreneurs and SMEs to take a business loan to expand their businesses.

If you apply for a Business Loan between 8th March to 19th March, you will get an assured travel voucher of Rs.7,000. And everybody who applies for a Business Loan between the above mentioned dates are eligible for a lucky draw, and the winner will win travel vouchers worth of Rs. 1,50,000.

Here’s what this special Business Loan offer can get you:

If you take a Business Loan of or above Rs.10,00,000, you will get you an assured travel voucher worth Rs.7,000.

If you take a Business Loan of less than Rs.10,00,000, you will get you an assured travel voucher worth Rs.5,000.

Whether you are a self-employed professional, self-employed non-professional like traders and manufacturers, private limited company, or a partnership, you can easily avail a Business Loan from Bajaj Finserv.

So apply now and avail this exciting limited period offer.

Apply for Business Loan

Tax Benefits on Joint Home Loan

Gain Tax Benefits on Your Joint Home Loan

Buying a house is one of the major goals in your life. However, with the increase in loan options such as joint Home Loans, more people in the country are able to realise their dreams. This is because a person can pool in funds with their spouse or another family member to repay the EMI amount. It is even possible to afford a bigger house. But perhaps the biggest benefit of a joint Home Loan is that it offers higher tax benefits.

Here’s how you can take advantage of your joint Home Loan:

  • Tax Saving under Section 80C

Under section 80C of the Income Tax Act, each co-borrower can claim a tax deduction on the principal component of the EMI. The maximum deduction allowed is Rs 1.5 lakh per annum. However, it is important to note that this exemption includes contribution towards other investments such as life insurance premium and Public Provident Fund (PPF). The income tax rules also stipulate that this deduction is available only a fully constructed property. Further, this property has to be a self-occupied one. It is best to check your eligibility in order to avail this benefit.

  • Tax Benefits under Section 24(b) of the Income Tax Act

A big advantage of a joint Home Loan is that you can claim tax deduction on the principal as well as the interest component of your EMI. If your property is self-occupied, you can get an exemption of up to Rs 2 lakh per annum on the interest component. This is irrespective of whether you give the property out for rent or stay in the house yourself. However, in order to be eligible for this deduction, the construction of the house must end within five years of the loan commencement. Otherwise, the benefit reduces to Rs 30,000 per annum.

  • Tax Benefits under Section 80EEE

You must have heard of the phrases: “icing on the cake” and “cherry on the top” but what about “cherry on top of the icing on the cake”? While such a phrase does not exist, it is very relevant in this situation. As a first-time borrower, you can avail an additional tax benefit of Rs 50,000 on interest repayment under Section 80EEE of the IT Act. This deduction is available for both the borrowers. However, conditions stipulate that the property value should be Rs 50 lakh or less. In addition, the loan amount should not exceed Rs 35 lakh. Make sure you meet these criteria in order to benefit from this deduction.

read this post: to understand Tax Benefit on Home Loan

Things to Keep in Mind

Joint Home Loans are beneficial to the borrowers in many ways. However, there are a few important things to bear in mind before you apply for the joint Home Loan. The co-applicant for the joint home should have a regular income. This is because you will want to split the EMI payments between yourselves. But since the income of both parties might not be equal, it is best to divide ownership of the property based on the income levels of each person.

It is also necessary for the co-borrowers to have separate life insurance policies. In case of the demise of any one party, this helps to reduce the burden on the other party.

The Bottom Line

If you are planning to buy a house, make sure to review all your options. Whether you are married or not, a joint Home Loan can be a very good option. It helps the borrowers to share the burden of EMI payments. And the tax benefits are simply too good to ignore. If you are not convinced, simply take out your phone and calculate the total tax savings you will have over the entire loan tenure. Just imagine the additional money you can channel towards other investments.

Transfer your Home Loan Online Home Loan Balance Transfer Calculator

A Handy Guide to Personal Loans

A Personal Loan is an amount given by a lender to an individual to use for personal benefit. The borrower needs to pay this off within a specified time. Since these loans are unsecured ones, the lender considers them risky. Personal Loans also require minimal documentation. That is why they are known as signature loans as well.

If you need money right away, a Personal Loan may be your best bet. Well-known financial lenders place a priority on processing Personal Loan applications quickly. Besides, you can use the money to meet any personal demand. This could be a medical emergency, for example. Or you might need to pay for immediate repairs of your house.

Eligibility criteria for Personal Loans

Both banks and non-banking finance companies (NBFCs) offer Personal Loans to customers. The lender tries to ensure that you are creditworthy. It will check your credit score and see whether you have defaulted on repaying loans in the past. It is advisable that you procure your CIBIL score before approaching the lender.

Lenders have different criteria for extending the loans. For example, a person living in Mumbai or Delhi would need to have a higher income level than someone in Dehradun. This is because the cost of living is higher in a big city. So, the lender would look at the effective value of your earnings as well. This would help them gauge your repayment ability.

Your age also affects your eligibility. Certain lenders offer Personal Loans only to people in specific age groups. This age range may vary from one lender to another. If you have passed retirement age, for example, getting a Personal Loan may be difficult. But this simply means that you will have to look for specialised loans for pensioners.

The tenure for a Personal Loan ranges between 12 and 60 months. Lenders let you choose the tenure as per your wish. Then repay the loan in equated monthly instalments (EMIs). You can get loans for amount up to Rs 25 lakh or even more, depending on your eligibility.

Loan approval happens speedily. Most banks and NBFCs sanction loans within 72 hours. But the approval time could range from an hour or two-to-seven business days. The time taken for loan sanction varies from one lender to another. It also depends on the particulars of your application, including the loan amount.

Documents required

  • Application form and two copies of a recent photograph
  • Copy of passport, voter ID, driving license, PAN card, or Aadhaar card
  • Utility bill (not more than three months old) or passport
  • Property documents, maintenance bill, or electricity bill
  • Bank statement for the last three months
  • Salary slip for the last three months or a current salary certificate with the latest Form 16

Interest rates on Personal Loans

Personal Loans usually attract a higher interest rate. This is because lenders consider them to be risky. Personal Loan interest rates could vary from lender to lender. Typically, they start from about 11.49% and go up to 24%. Some lenders may even charge more. So, it makes sense to shop around before finalising a deal.

Types of Personal Loans

  • Wedding loans: A wedding is a life event. It requires intense planning and the expenses can go through the roof. A wedding loan will take care of the costs—right from jewellery shopping to paying off the caterer.
  • Home renovation loans: The home is where your heart is, goes the saying. But it can often be an expensive proposition to renovate your home. These loans are especially tailor-made for such needs.
  • Travel loan: Holidaying is becoming expensive by the day. As new horizons beckon, the wanderlust in you would love to go places. Personal Loans for travel are now part of the portfolio of most lenders.
  • Debt consolidation loans: A debt consolidation loan helps you to combine many different liabilities under one umbrella. Consolidation makes it easier for you to manage your liabilities. Instead of many EMIs, you pay just one. Besides, you can avail reduced interest rates as well.
  • Higher education loans: Education is costly and not easily available to everyone. Therefore, education loans are very important. Almost all banks in India offer education loans and the demand has remained steady.

These represent just a few types of Personal Loans. And there are many more. A visit to the website or office of any lender will show you the different types of loans they offer. Remember, the names could be different but the asset class remains the same to a lender—namely, Personal Loan.

Low rejection rate

Personal Loans have the lowest rejection rate in the industry. This is a major advantage for people who need funds urgently. For instance, say you have a default history and a low CIBIL score. You can still qualify for a Personal Loan. The disclaimer in such cases will be that you will have to pay higher interest to avail the loan. That is because you are already in a risky category from the lender’s point of view.

Busting the myths

Myths and half-truths have surrounded Personal Loans for long. Here are some of the common ones:

Only for the salaried class: A common misconception is that the Personal Loan is only for the salaried class. Nothing could be further from the truth. A number of banks and NBFCs extend Personal Loans to the self-employed as well. However, the eligibility criteria may be different for such borrowers.

No tax benefits: This is another common, but mistaken, grouse against Personal Loans. Under Section 24(b) of the Income Tax Act, you can claim tax benefits for a Personal Loan.

  • Expenditure on a residence: Say, you take a Personal Loan to buy a property or home for residential purposes. Or you might use the money to build a home. Perhaps you use the loan to carry out renovations or repairs in your home. In all these cases, you can claim tax benefits on the interest paid. The deduction is capped at Rs. 2 lakh for a self-occupied house. There is no upper limit for a property that you rent out.
  • Purchase of asset: You could use the Personal Loan to buy assets. These could include shares or jewellery, for example. The deduction would apply when you sell the asset. The interest paid on the loan would add to the cost of acquisition. This would reduce the capital gains and the tax payable on it.
  • Business expenses: When filing your returns, you can claim benefits on the interest paid on the loan. The interest paid would qualify as a business expense. This would bring down your taxable income.

Exorbitant interest rates: The truth is the rate of interest for a Personal Loan typically ranges from 11.49–24%. This may seem high. But compare the rate with credit cards where interest rates can be much higher. These days, it is easy to get a Personal Loan. There is no need to pledge any collateral either. So, if you need cash on short notice, it is always better to opt for a Personal Loan.

The bottom line

A Personal Loan can come in handy whenever you need money urgently. They are easy to get but expensive to pay. Borrowers stand to benefit with these quick and easy loans. The interest rate is manageable and you need to submit only a few documents. Besides, you do not have to use the loan amount in any one specific way. While the merits are many, bear in mind that the penalties are heavy if not repaid in time.

Apply for Personal Loan Online     Check your Personal Loan Eligibility

Home Loan MCLR for a Better Deal

Thinking of a Home Loan? Consider MCLR for a Better Deal

Sanket Chandra had taken a Home Loan to buy a house near his office. But gradually, he realised that the interest rates were too high and he was paying more interest than his colleague, Sahil Jha.

Sahil had taken a similar loan, yet seemed quite relaxed about his loan repayment. Sanket, on the other hand, found it hard to make ends meet. Sanket wanted to find out the key differentiator. He finally asked Sahil.

Sahil told him that this was because he opted for an MCLR-based Home Loan. Sanket, meanwhile, remained on a base rate-based loan.

So, what is the difference? Let’s find out.

What is MCLR?

MCLR stands for the Marginal Cost of Funds-based Lending Rate. The MCLR is the new benchmark interest rate for Home Loans set by the RBI for lenders. It is usually dependent on the Marginal Cost of Funds; the Cash Reserve Ratio (CRR), lenders’ operational costs, and tenor premium (which is an extra charge that lenders charge for longer loans).

How is MCLR Different?

The MLCR is based on the current cost of funds. For example, ABC Bank lends money from depositors, the RBI and other banks. Deposit rates are now lower than it was at the same time last year. Even the rate at which banks lend from the RBI or each other is lower. This means the ‘cost of funds’ is lower for ABC Bank. Thus, its MCLR is lower too.

Base rates, meanwhile, are based on the average cost of funds over a period of time, say a quarter. So, this way, the Base rate does not fluctuate as much. It, thus, may not be reflect the falling interest rates immediately.

A home taken on the MLCR can, thus, be cheaper than a Home Loan taken on the Base rate.

Thinking of a Home Loan? Consider MCLR for a better deal

How is it Beneficial for the Borrowers?

MCLR is profitable as it transfers the change in the repo rate almost immediately. This means, your Home Loan costs can fall easily when the market interest rates fall. This means, your EMIs can fall too, easing your financial burden. This can then improve your credit score. This makes it a transparent and more efficient option as compared to a Base rate system.

Here are few things you need to know as you consider the MCLR for your Home Loan:

    • Linked to the Floating Interest Rate

Every time you apply for a loan, your lender would offer you two options – fixed interest rate or floating interest rate. If you choose fixed, you get a fixed interest rate for the entire tenure. However, if you choose a floating interest rate, your interests get influenced by the changes in the market. MCLR affects the floating interest rates. These include Home Loans, Loan against property and Business loans. However, if you opt for a fixed rate loan, then you can refinance your loan after a certain time to avail a lower interest rate.

    • Reset Clauses Differ from Lender to Lender

According to the RBI guidelines, all the financial institutions need to submit different MCLR rates for different tenures. This includes overnight, one month, three months, six months, one year, two years, and three years. These are the reset clauses and depend on the tenure of the loan. This ensures your loan interest amount is revised after the given period. For example, if you have a loan with a tenure of 15 years and your lender has a reset clause of one year; your interest rate could be revised every year.

    • EMIs Can Remain Unchanged

If in an MCLR Home Loan, your interest rate changes, your Equated Monthly Instalments (EMIs) can remain unchanged. In this case, the change impacts the tenure of the Home Loan and not the amount of EMIs. Then, you pay off more of your principal amount in every EMI. This leads to a lower tenure. It, thus, helps you reduce your total interest cost. However, this is not a rule. You can opt to change your EMI as per the new interest rate. This means, your tenure will remain the same.

    • Portability to MCLR

If you already have a Home Loan with the base rate interest, you need not worry. You can always switch to MCLR by paying a fee to the lender. This fee is usually nominal, as compared to the benefit of the MCLR system. Calculate the new interest charges and fees before you switch. Ensure it is less than your present interest rate.

Home Loans can be quite a burden for anyone. But you can ease this burden if you choose your Home Loan wisely. With the introduction of the MCLR, borrowers can now benefit from every change in the repo rate that the RBI makes.

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Reverse Mortgage

What is Reverse Mortgage and How Does It Work?

Sanjay Das was a 67-year-old retired banker. He lived with his wife in their modest two-bedroom house in Kolkata. Their only daughter, Asha, lives in Australia. She does not wish to return to India. Earlier, the couple relied only on Sanjay’s pension, which was not enough. Finally, they opted for a reverse mortgage loan to supplement their monthly income. Asha was not interested in the property, so going for the reverse mortgage loan was an easy decision for them. They calculated the interest rate. Satisfied with it, they went ahead and opted for the reverse mortgage.

What is Reverse Mortgage?

Consider the reverse mortgage as the opposite of the traditional Home Loan. Here, a senior citizen mortgages a residential property. In exchange, there is a monthly, quarterly, annual or lump sum loan payment. He or she can borrow up to 60% of the value of the property. The mortgage continues until the death of the borrower or the spouse, whichever is later. The reverse mortgage scheme was launched in India in 2007.

What are the Benefits of Reverse Mortgage?

It has some great benefits. These are:

  • Income Booster: A reverse mortgage scheme works very well for elderly couples. They need not rely on their children. It is not uncommon to find elderly couples living alone these days. Most of them are independent and prefer paying their own bills. An extra income throughout the retirement period can, thus, prove to be very handy.
  • Corpus for a Medical Emergency: The chances of medical emergencies striking the elderly are higher. It helps to keep a corpus ready for such a time. The pay-outs from such a reverse mortgage can help build the corpus. They can undergo treatment without worrying about the finances.
  • Re-evaluation Every Five Years: The maximum mortgage tenure is 15 years but some banks also increase to 20 years. The house is re-evaluated by the lender every five years. This ensures that if the valuation has increased, the borrowers can increase the quantum of the loan amount.

What are the Disadvantages of Reverse Mortgage?

Unfortunately, reverse mortgage has some disadvantages. These are:

  • Lengthy Process: It needs lengthy application and documentation processes. This becomes difficult for senior citizens. This lengthy process often dissuades them from taking the reverse mortgage loan.
  • Rigid Terms: The terms and conditions of reverse mortgage are a bit rigid. For instance, the regular payments made against reverse mortgage are fixed. You cannot customize these to meet your differing needs at different points of life. Everyone looks for flexibility. But this is something a reverse mortgage lacks.
  • High Rate of Interest: The rate of interest in the reverse mortgage loan is on the higher side. So, if you intend to just pay for minor expenses like bills or such smaller things, you may want to consider other financing options with a lower interest rate.

Important Point to Know: When you reverse-mortgage your house, the bank holds the ownership documents. You continue to be the owner. However, the bank gets ownership of the house after the owner and his/her spouse passes away. This is an inherent trait of a reverse mortgage.

Can you Settle a Reverse Mortgage?

Yes. The lender usually settles the reverse mortgage after the death of the borrower or his/her spouse, whichever is later. Suppose your spouse passes away before you, you still continue to get the amount. Or vice versa. After you and your spouse, your children or relatives have the option to repay the entire borrowed money along with the interest to the lender. If they do this, the lender hands over the documents of the house to the kin. Else, the lender is free to sell off the property. It will first deduct the principal and the interest components. If there is any leftover sum, it hands the amount over to your legal heir. However, if there is a deficit, the lender bears the loss.

Also, you or your relatives can foreclose the reverse mortgage. They need to repay the loan amount for this.

The Bottom Line

So what is the verdict? Is a reverse mortgage a good option to go with? Broadly speaking, it is a good option for those who have retired from their jobs. It suits people who are free of responsibilities or have no next of kin. But, the interest rates associated with reverse mortgage are on the higher side. So, the borrower must be cautious about that. A reverse mortgage scheme is feasible if the terms and conditions are suitable.

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