Loans for various occasions:
Home Loans - Auto Loans
- Personal Loans
- Check List
Home Loans
Who can avail of a house
loan?
When
can I make an application?
How
do I obtain a loan ?
Are
there any conditions that I have to fulfill to avail of a
house loan?
What
is the maximum I can borrow?
How
will the HFC decide the loan amount I am eligible for?
Which
property can be financed?
Can
I get a loan for commercial property like office,
etc.?
Can
I get a loan for renovation?
Can
I get a loan for a plot?
Does
the agreement for sale have to be registered?
Can
I get a loan for properties held on Power Of Attorney basis?
What
is `margin' in the loan?
Who
is a co-applicant?
Who
can be my co-applicant?
What
are the various costs to be paid to the finance company to
avail of a house loan?
Which
interest rate structure is better – daily-, monthly- or annual
reducing, and why?
Can
I get the benefit of reduced interest rates in the intervening
period?
What
is the security for the loan?
Who
can avail of a house loan?
Anyone who
is in permanent service or engaged in a profession or business
with regular income for servicing the loan. You could be
a:
a) Salaried Individual
b) Self-employed
individual
c) Partnership firm
d) Private limited
company
When can I make an
application?
You can apply immediately once
you decide to purchase/ construct a dwelling unit. Some HFCs
also assist their clients in locating the property through
their dedicated in-house teams. In the meanwhile, till the
applicant has identified the property, he can get an
in-principal approval, which is valid for 3 months (for
locking in the interest rates at which the loan can be taken).
This is, however, subject to the property being found
acceptable to the finance company to which a valid mortgage
can be created.
How do
I obtain a loan ?
In order to obtain a loan, one
has to apply in the prescribed form available at the
respective offices of the HFCs or you can also download it
from their respective sites. Along will the application fee,
you will have to pay a non-refundable processing fees at 0.3-
1% of the loan applied for. Further, on your acceptance of the
loan offer, HFCs charge another 0.5-1% of the loan sanctioned
as the administrative fees. Some HFCs also charge a commitment
fee at 1% per annum on the undrawn amount of the loan,
commencing 9-12 months from the date of acceptance of
the loan, till the loan is fully availed of.
Are there any conditions that I have to fulfil
to avail of a house loan?
An individual has to
fulfil the following basic conditions:
a) The age of the
individual at the time of applying for the loan should
not be less than 21 years, and not more than the
retirement age at the end of the loan tenure. For
self-employed persons, it can extend to 65 years
b) Should
be employed for the last 3 years
c) A professional (Doctor/
Engineer/ CA etc.) with an established practice of three
years
d) A businessman with sound financials for the last 3
years
e) A resident of the city where the HFC has a
collection center
What is the maximum I can
borrow?
You can avail of a maximum of 80-85%
of the cost of the property, including stamp duty and
registration charges. However, it is also linked to your
paying capacity. Usually, the instalment-to-income ratio
(IIR) ranges between 25-50 per cent of the person’s
total income. The loan amount is also limited by the upper
ceiling on the loan amount HFCs can lend.
How will the HFC decide the loan amount I am
eligible for?
The loan amount will be
determined on the basis of your repayment capacity,
which, in turn, depends upon your income and other factors
such as your age, qualifications, number of dependents,
stability and continuity of the income. Besides the proposed
owners in respect of which you are seeking financial
assistance will have to be co-applicants. However all
co-applicants need not be co-owners. Income of the spouse can
also be clubbed if he/she has been made the
co-applicant.
The HFC can consider all the income
accruing to you on a monthly basis, i.e. all the recurrent
credits (basic salary, HRA, other allowances but not the LTA
and medical), any rental income that you are getting and the
savings in rent payment which might accrue to you on account
of your moving from a rented dwelling to self-occupied
property. In short, the calculation will be as per your net
cash inflows, less expenses and commission for the salaried
class, and as per your profit-and-loss account for the
self-employed or a private company (Net profit + 2/3rd
depreciation+ directors’ remuneration).
An
example : An individual has a salary of Rs. 3,00,000 p.a.
Taking all factors into consideration, an HFC decides that the
individual has an annual repayment capacity of 1/3 of his
income, meaning Rs. 1,00,000. This would work out to EMI
capacity of about Rs. 8300 per month.
Once the EMI
capacity of the person has been estimated and the tenure of
loan repayment is known, the HFC decides on the amount of the
loan it can provide to a person. This is done with the help
of a EMI table. In this case let’s take the repayment
schedule as a period of 10 years. Going by his EMI capacity of
Rs.8300, this individual can go for a loan of about Rs.5 lakh
for a period of 10 years. Here the EMI works out to Rs. 8145
per month at 14.5% compound interest rate on the annual rest
on a loan of Rs.5 lakh.
Some HFCs have a plain vanilla
deals for professionals such as CAs, doctors, MBAs and
architects: it is 1-2 times the gross receipts. It also
depends on the purpose for which the house loan has been
taken. It can be for purchase, construction, extension or
renovation of the house property. It is also dependent on the
tenure that the person requires the loan for.
Which property can be
financed?
The
property chosen by the applicant has to be acceptable to the
HFC. Also, the age of the property should not be more than 25
years.and the title to the property should be clear and
unencumbered.
Can I get a loan for commercial property like
office, etc?
Yes, you can get a loan for
commercial property, but in that case, the loan-to-property
value ratio is much less than in the case of a residential
property.
Can I get a loan for
renovation?
Yes, you can get
a home improvement loan to undertake internal and external
repairs and other structural improvements. And improvements
that will increase the life of your home, contribute towards a
better living environment and at the same time add to the
value of your home. But you have to bring an estimate from
your architect. Some of the home improvements you can
undertake are waterproofing and roofing, internal and external
painting, etc. But the maximum loan amount and the maximum
loan tenure allowable is much less than in the case of
loan for purchase or construction of house property.
Can I
get a loan for a plot?
Yes, you can get
a loan for a plot; again, in this case, the loan-to-value
ratio will be less than in usual cases.
Does the agreement for Sale have to be
registered?
The Union Cabinet has
decided to make registration of immovable property compulsory
and restrict this to the area where the property is located.
This attempts to streamline the system, curb `malpractices'
and black money generation, and plug huge revenue leakages
that would affect not just benami purchases but also transfers
on power-of-attorney basis, a common practice in cities like
Delhi.
Can I get a loan for properties held on Power of
Attorney basis?
After the measure
taken by the Union Cabinet to make the registration of
immovable property mandatory, housing finance companies would
not be able to grant a loan for the property held on Power of
Attorney basis.
What is
`margin' in the loan?
Finance companies
do not finance the full value of the house. The financing is
done for 80-85% of the value of the car. The remaining
portion has to be invested by the person availing of the
finance. This is called `margin' money and there is always a
clause in the loan agreement that says that the disbursal
would be subject to the customers’ equity.
Who is a
co-applicant?
The home
finance is taken either in a single name by an individual, or
jointly, where there could be more than one person seeking the
home finance. If there are more than 1 persons seeking
finance, then they are co-applicants.
Who
can be my co-applicant?
If you are an
individual, your spouse, parents and children can be your
co-applicant and their income can be clubbed with your income
to enhance the amount of loan you are eligible for.
Furthermore, the co-owner of the property has to be the
co-applicant, but the co-applicant need not be the co-owner of
the property.
If you are a partnership or private limited
company, any one of the directors or partners can be your co
applicant.
What are the various costs that have to be paid
to the finance company to avail of a house
loan?
The various
charges involved in availing of a housing loan are:
a) Interest cost: The
interest the finance company charges for providing finance
b) Processing,
overhead and administrative charges: These are one-time
payments made for initiating the process of housing loan.
They are generally taken as a percentage of the loan
amount, subject to a maximum and minimum amount
c) Pre-payment charge:
These are the charges that are levied for pre-paying the
loan
d) Commitment
charge: This charge is levied on the un-drawn amount of
the loan. The period for which it is levied, commences after a
breathing period of a few months from the date of sanction.
The charge is levied after this period till the borrower
withdraws the funds.
Which interest rate structure is better –
daily-, monthly- or annual-reducing and
why?
In the annual reducing, interest
is calculated on an annual basis on the outstanding, at the
beginning of the year. In this case, EMI becomes 1/12th the
equated annual installment. In the monthly reducing, principal
repayments are credited at the end of every month and interest
is calculated on the outstanding principal at the end of every
month. In the daily reducing, principal repayments are
credited at the end of every day. The borrower is definitely
benefited in the case of monthly rest because he pays interest
on the reduced principal every month, as compared to
interest on the outstanding principal at the end of the year,
in case of annual rest; the difference between daily and
monthly rest is very negligible.
Can I get the benefit of reduced interest rates
in the intervening period?
Yes you can, but only if you have
opted for the floating rate being offered by some of the big
HFCs.
What is the security for the
loan?
The security for the loan is the first
mortgage (equitable/registered) of the property to be financed
by way of deposit of title deeds. Further, you might be called
upon to furnish guarantee of one/ two individuals acceptable
to the HFC. Loans to allottees of flats/ houses of development
authorities or members of co-op housing societies can be
considered on the basis of tripartite agreements, and in
respect of property under construction, interim security may
be required. It may be in the form of assignment of LIC
policy, pledge of marketable shares and other such
investments.
Auto Loans
Your first step would be to decide which car you have set your sights
on and how much will it cost you.Then make up your mind as to whether
or not you are willing to put up a fairly large amount upfront.Once
that is done, calculate how much you are willing to put aside every month
as loan repayment. By then you will be all set to zero in on a scheme.
UNDERSTANDING THE
EMI
The EMI is term used for the money that you will
have to pay every month to the auto financier. Since you will be paying
one installment every month, the 12 installments at the end of the year
are together referred to as equated annual installment (EAI).
Once you
and the auto finance company decide on the loan amount and the repayment
tenure, the EMI is fixed for this time-frame.
Though it is an unequal
combination of principal repayment and interest cost, it remains constant
all through. The EMI payments at the start of the loan are heavily tilted
towards interest payments and principal repayments are towards the end of
the loan tenure. Hence, you end up paying more since the principal gets
repaid only at the end of the tenure.
INTEREST RATE
CALCULATION
The rate of interest will be calculated
either on a monthly reducing basis or on an annual reducing basis. Monthly
reducing basis means that the principal amount you pay every month is
deducted when calculating the interest rate for the following months.
Annual reducing basis means that the total principal repaid by the end of
the year is deducted when calculating the interest rate for the next year.
Calculations on loans are also done on a daily reducing balance. But
this is mainly done on credit cards whereby whenever a payment is made,
the principal is immediately deducted. So if the payment is made on
January 15, the interest rate adjustment takes effect from the very next
day. In the case of monthly reducing balance, it takes place the next
month and in the case of annual reducing basis, the next year.
The most expensive loan will be one that is calculated on a flat rate
of interest, though its interest will appear the least. Don't be fooled.
For example, if you take a loan of Rs 85,000 to be repaid in two years,
the financier may quote a flat rate of interest at 9 per cent. On an
annual reducing basis, it would work out to 11.77 per cent and 16.41 per
cent on a monthly reducing basis.
So when companies just give you a rate of interest, ask them the method
of computation. The thumb rule: the more frequently computed the better.
LOANS
If you take a
loan, you are the owner of the car since the financier has already
purchased it on your behalf. You have to repay the loan in the form of
equated monthly installments (EMI). Incidentally, a loan is identical to
the down payment scheme (see below). While the latter is the term used by
non-banking finance companies, or NBFCs, the banks refer to it as a
'loan'.
HIRE PURCHASE (HP)
SCHEMES
Here, the customer pays an EMI, part of which
goes towards repaying the principal and part towards hiring the car.
Therefore, he buys the car bit by bit. Some accountants state that under a
HP agreement, the customer becomes the owner of the car, while others say
that he owns it only at the end of the repayment tenure.
This grey
area should not pose a problem for the self-employed since all interest
(as banks call it) or hire charges (as non-banking finance companies term
it) paid can be written off as an expense and depreciation can be claimed
too. What you have to come to grips with are the three schemes: margin
money, advance installment and security deposit.
• Margin money or the down payment scheme
requires the customer to hand over 20 per cent to 25 per cent of the
amount as a down payment with the balance 75 per cent to 80 per cent being
financed by the hire purchase company.
• Security deposit scheme requires the
individual to place a refundable security deposit of 20 per cent to 25 per
cent of the loan amount. The company claims to finance the entire amount.
On this refundable security deposit, you get a rate of interest which is
fixed by the company, usually around 14 per cent (generally a couple of
percentage points less than the cost of borrowing) and compounded either
half-yearly or annually, all at the company's discretion.
• Advance installment scheme, too, has the
company financing 100 per cent of the amount but the customer has to pay
around five or six installments in advance. Under this scheme, since the
down payment amount is increased, the EMIs are reduced.
LEASE
This one is
targeted at corporates. The lessor (financier) is the owner of the car.
Since he is the owner, he claims depreciation on the car and takes rent
from the customer. At the end of the period, which is three years, he will
sell the car to the customer at a predetermined residual value. Though the
entire lease payout can be written off as an expense, you, as an
individual, do not get any depreciation on the car.
ZERO PER CENT
FINANCE
These are often linked to certain models with
repayment tenures up to a year or a maximum of 18 months. This takes place
when the dealer or manufacturer offer discounts which can be passed on to
customers.
100 PER CENT
FINANCE
There are no schemes which offer 100 per cent
finance. The advance installment schemes and the security deposit schemes
may be advertised under this head, but the fact that you are parting with
some money as a security deposit or have to pay a couple of EMIs upfront
shows that there is no such thing as 100 per cent finance.
WHAT HP SCHEMES TRANSLATE TO IN
FIGURES
Amount you wish to pay upfront: Minimum
Repayment
tenure: Shortest
Since you are looking at paying the least
upfront, whether in the form of a deposit or advance installments, check
out these options. The least outgoing will be from the security deposit
scheme and the down payment scheme. The security deposit scheme works out
to be the cheapest. But this depends on the interest being offered on the
security deposit scheme. If it is much lower than 14 per cent, the benefit
will drop.
|
|
Security
deposit scheme |
Advance
installment scheme |
Down
payment scheme |
|
Cost
of car |
Rs
1,00,000 |
Rs
1,00,000 |
Rs
1,00,000 |
|
Repayment
tenure |
2
years |
2
years |
2
years |
|
You
pay |
Rs
15,000
(15%
of cost) |
Rs
18,896
(4
advance EMIs) |
Rs
15,000
(15%
of cost) |
|
Financier
pays |
Rs
1,00,000 |
Rs
1,00,000 |
Rs
85,000
(85%
of cost) |
|
EMI |
Rs
4,861 |
Rs
4,724 |
Rs
4,179 |
|
Annual
rate of interest (flat) |
8.33% |
6.69% |
9% |
|
Annual
rate of interest (annual reducing) |
10.92% |
8.79% |
11.77% |
|
Annual
rate of interest (monthly reducing) |
15.25% |
12.35% |
16.41% |
|
Total
EMI outgoing |
4861
x 24 = Rs 1,16,664 |
4724
x 24 = Rs 1,13,376 |
4179
x 24 = Rs 1,00,296 |
|
Total
outgoing |
1,16,664
- 3,600 = Rs 1,13,064 * |
Rs
1,13,376 |
1,00,296
+ 15,000 = Rs 1,15,296 | *
Since Rs 15,000 is returned with an earning of, say, 12 per cent per
annum, you pay Rs 1,16,664 - Rs 3,600 (interest earned) = Rs 1,13,064.
Amount you wish to pay upfront: Maximum
Repayment tenure:
Shortest
So you do have ample amount of money. You would like to
put as big an amount at the start. And you want to finish repaying the
loan as soon as possible. Your options will be limited to the security
deposit and advance installment scheme. The down payment scheme won't be
valid here since they won't permit you to pay around 30 per cent of the
amount as a down-payment. The cheapest deal will be the security deposit
scheme, assuming that they offer a similar rate of interest and not a very
low figure. However, be prepared to pay more by way of EMI.
|
|
Security
deposit scheme |
Advance
installment scheme |
|
Cost
of car |
Rs
1,00,000 |
Rs
1,00,000 |
|
Repayment
tenure |
2
years |
2
years |
|
You
pay |
Rs
30,000
(30%
of
cost) |
Rs
27,684
(6
advance EMIs) |
|
Financier
pays |
Rs
1,00,000 |
Rs
1,00,000 |
|
EMI |
Rs
4,803 |
Rs
4,614 |
|
Annual
rate of interest (flat) |
7.63% |
5.37% |
|
Annual
rate of interest (annual reducing) |
10.02% |
7.08% |
|
Annual
rate of interest (monthly reducing) |
14.04% |
10% |
|
Total
EMI outgoing |
4803
x 24 = Rs 1,15,272 |
4614
x 24 = Rs 1,10,736 |
|
Total
outgoing |
1,15,272
- 7,200 =
Rs
1,08,072 * |
Rs
1,10,736 | * Since Rs 30,000
is returned with an earning of, say, 12 per cent per annum, you pay Rs
1,15,272 - Rs 7,200 (interest earned) = Rs 1,08,072.
Amount you wish to pay upfront: Maximum
Repayment tenure:
Longest
You don't mind parting with huge amounts upfront, but
you also don't want to repay the loan in a hurry. You don't mind doling
out the EMIs over three years (generally, auto financiers put the cap at
three years, but some are even willing to go up to five). Since you are
looking at putting down a huge amount at the start, the down-payment
scheme won't be valid here since they won't permit you to pay around 30
per cent of the amount as a down-payment. If the interest rate offered on
the deposit is sufficient, then the security deposit scheme is the
cheapest.
|
|
Security
deposit scheme |
Advance
installment scheme |
|
What
the car costs |
Rs
1,00,000 |
Rs
1,00,000 |
|
Repayment
tenure |
3
years |
3
years |
|
You
pay |
Rs
30,000
(30%
of
cost) |
Rs
19,992
(6
advance EMIs) |
|
Financier
pays |
Rs
1,00,000 |
Rs
1,00,000 |
|
EMI |
Rs
3,439 |
Rs
3,332 |
|
Annual
rate of interest (flat) |
7.93% |
6.65% |
|
Annual
rate of interest (annual reducing) |
11.48% |
9.68% |
|
Annual
rate of interest (monthly reducing) |
14.43% |
12.22% |
|
Total
EMI outgoing |
3439
x 36 = Rs 1,23,804 |
3332
x 36 = Rs 1,19,952 |
|
Total
outgoing |
1,23,804
- 10,800 =
Rs
1,13,004* |
Rs
1,19,952 | * Since Rs 30,000
is returned with an earning of, say, 12 per cent per annum, you pay Rs
1,23,804 - Rs 10,800 (interest earned) = Rs 1,13,004.
Amount you wish to pay upfront: Minimum
Repayment
tenure: Longest
If you are looking at paying up the minimum
amount upfront and looking at the longest repayment tenure, this is what
it will amount to. So you pay the least upfront amount on the advance
installment scheme.
|
|
Security
deposit scheme |
Advance
installment scheme |
Down
payment scheme |
|
What
the car costs |
Rs
1,00,000 |
Rs
1,00,000 |
Rs
1,00,000 |
|
Repayment
tenure |
3
years |
3
years |
3
years |
|
You
pay |
Rs
15,000
(15%
of cost) |
Rs
13,668
(4
advance EMIs) |
Rs
15,000
(15%
of cost) |
|
Financier
pays |
Rs
1,00,000 |
Rs
1,00,000 |
Rs
85,000
(85%
of cost) |
|
EMI |
Rs
3,500 |
Rs
3,417 |
Rs
3,027 |
|
Annual
rate of interest (flat) |
8.67% |
7.67% |
9.4% |
|
Annual
rate of interest (annual reducing) |
12.51% |
11.12% |
13.53% |
|
Annual
rate of interest (monthly reducing) |
15.69% |
13.98% |
16.92% |
|
Total
EMI outgoing |
3500
x 36 = Rs 1,26,000 |
3417
x 36 = Rs 1,23,012 |
3027
x 36 = Rs 1,08,972 |
|
Total
outgoing |
1,26,000
– 5,400 = Rs 1,20,600
* |
Rs
1,23,012 |
1,08,972
+ 15,000 = Rs 1,23,972 | *
Since Rs 15,000 is returned with an earning of, say, 12 per cent per
annum, you pay Rs 1,26,000 - Rs 5,400 (interest earned) = Rs 1,20,600.
Personal Loans
Personal Loans
What is a Personal Loan?
A Personal Loan is an any purpose loan which you can use for what you want, where you want, how you want.
What do I need to pledge or do I require to provide any security?
It depends on various financial institutes policies.Genarally nothing but still can be LIC policy/NSC/Fixed Deposits/ or anything.Some time you may require couple of guarantors too.
Am I eligible for a Personal Loan?
Yes,
Salaried or Self Employed Professional
Age 25-58 yrs. 25-65 yrs.
Income Min Rs. 1,20,000 pa (gross) Min Rs. 80,000 pa (generally)
Eligibility : Doctor, Engineer, MBA, Architect, CA or all professionals
Residence Min 2 years or owned residence Min 2 years or owned residence (generally)
Work Experience Post Grad: 3 years (generally)
Graduate: 5 years 3 years (Generally)
What loan amount can I avail?
Usually,You can get a loan ranging from Rs. 20,000 to a maximium of Rs. 3,00,000.
What is the tenure?
You have the option of repaying the loan over a term of 12, 18, 24, 30 or 36 months.
What are the costs of the loan?
Usually,the Interest Rate shall be 21% reducing balance or 11.9% flat rate. There shall be no hidden charges, no annual fees, you only pay a nominal processing fee of 2% of the loan amount.
What is the installment for various tenures?
At above rates,the installment for various tenures have listed below for a loan amount of Rs. 1lca . Based on the loan amount you would like , you can arrive at your EMI
Tenure 12- 18- 24- 30- 36
Installment per Rs. 1,00,000 of loan 9310- 6520- 5140- 4310- 3770
How long will it take to process my loan?
Once completed application form with the requisite documents ,proposal can be processed within 5 to 25 working days.
Can I pre-pay the loan?
Usually,You have the option of pre-paying your loan at any time during the tenure of the loan. A pre-payment fee of 2% will be payable on the amount being pre-paid. However, part pre-payment of the loan is not allowed.
How do I get a loan?
Contact: Hong Kong Bank/ICICI Bank/Kotak Mahindra Finance/Apple Finance/Ceat Finance or any othe finance companies/banks/institutions.
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