Why the demat account should be your first account for investing?

Demat account stands for de-materialized account. This account is similar to your bank account; the only difference is that instead of money, it holds your stocks and other financial instruments in paperless or digital format. Earlier the trading of shares and mutual funds or other financial instruments were done on paper and you needed to retain a copy in order to prove your claim as an investor. Thanks to the internet which has paved the way for the demat account, now you can hold all your investment online.

If you are planning to invest in stock market, the first thing you need is to open demat account along with a bank account and a trading account. Companies into banking and broking generally offer you all the three accounts combined together known as a 3 in 1 account. You need to open demat account with a depository participant (DP) via your bank or other financial institutions, the two DP registered under SEBI are National securities depository limited (NSDL) and Central depositories securities limited (CDSL).

The need for having a demat account and its advantages:

In order to deal in securities in the Indian stock market, it is mandatory for you to open a demat account with depository participants (DP). Once you have the demat account registered under any of the depository participants, you are all set to buy and sell stocks and securities at will. Investing in stocks and securities through a broker and having a personal demat account gives you far more freedom and advantages, such as:

• It is the most convenient way of dealing in securities as all the transactions are carried out online. You are able to buy and sell securities from anywhere on the go.

• It ensures immediate buying and selling of securities as all the transactions are done electronically.

• It saves you a lot of time and hard work as compared to paper transfers as you don’t have to keep track of huge paperwork.

• The risks associated with paper securities such as bad delivery, fake securities, delays and thefts are totally eliminated.

• There is no limit for purchasing and selling of securities. You can even buy and sell one security at a time.

• The transaction cost is very low compared to paper securities as you don’t have to pay any stamp duty.

Because of the above mentioned points, a demat account is very much helpful especially for new investors, who are totally unaware of the workings of the share market. It allows you to be free from stress by providing maximum freedom while choose transactions according to your needs.

What are the do’s and don’ts of internet banking?

Internet banking is a system which allows individuals to perform their banking activities at home via the internet. Some online banks also have a physical presence while others are online only. A customer can perform all routine transactions like account transfers, balance inquiries, make payments and even apply for loan or credit cards. The most important feature of this mode of banking is that it enables a person to conduct your banking activities from the comfort of his home and at any time of the day.

Some people are skeptical about using internet banking and this is not without cause. In spite of all the advantages, there are quite a few drawbacks of this mode of banking. Unscrupulous people may try to trick you and steal your money from account if you are not careful. However, the primary advantages of banking over the internet are as follows:

• You do not have to physically visit a branch but can do your banking from anywhere and at any time of your liking. The account is accessible 24 x 7.
• You can use a wide range of devices for conducting your business activities. For example- mobiles, tablets, computers, laptops or anything else that supports internet.
• All the transactions are updated immediately and this allows you to have access to your account information without going through the hassles of documentation.

There are, however, a number of dos and don’ts that you need to keep in mind while banking over the internet. They are:

• It is highly recommended that you choose a safe and secure password for mobile banking. You should not use family name, pet name, date of birth or any such commonly known names as your password.
• Do not provide account information if you receive any random e-mails asking for such. Do not divulge any information even if it is stated in the mail that it has come from a bank or any other government entity.
• You should always visit your bank’s banking site directly and avoid accessing the site through other third party link or e-mail. You should verify the domain name before you log in.
• You should log out of your internet banking site as soon as you are finished with your business. You should not close the window without logging out.
• You should avoid using public Wi-Fi and you should also install a suitable firewall and security antivirus to protect your computer and its contents.

While using your mobile to do banking,

• You should never save your log-in details or your password.
• Always keep your phone locked to prevent unauthorized use and also report loss of phone immediately to the bank.
• Never download apps from shabby websites and always log out of your account.
• You should keep a tab on your account balances regularly.

Inculcate these habits if you are banking over the internet and keep potential harmful elements at bay.

The difference between invest and protection

Whenever you think of the term insurance, the first thing that comes to your mind is protection. The insurance industry has evolved pretty quickly from insuring life to goods and services, and now there are companies that re-insure the insurance companies. Insurance is basically the promise of being compensated by a company in case of death, damage, loss, illness or theft in return for the monthly premium you pay. At present anything and everything is being insured by insurance companies.

The different types of insurance policy in India are endowment policy, term insurance, whole life insurance, children policy and annuity plans. People in India are getting more and more familiar with insurance and are using it for multiple reasons. The first and foremost part of insurance is that it is a protection against uncertainty, but many people are also using it as an investment.

The sole purpose of insurance is to cover your/ your family’s expenses in case of any mishap. There are different types of insurance policies that give you economic protection and also cover your risks in case you meet with an accident. Insurance policy covers your expenses and also encourages you to save money. Moreover, it gives you a sense of comfort and eliminates dependency. The most common insurance policy among Indians is life insurance which is further classified into whole life insurance and term insurance. Contrary to this some people also use insurance as an investment. Most people usually are unaware of how insurance can be used as an investment. Mention below is some of the points of how insurance can be used as an investment:

• Insurance gives a you a tax deferred growth that is you don’t have to pay any taxes on the interest, dividends and capital gains from the insurance until you withdraw the proceeds.

• There is no fixed term on life insurance which means you can keep it as long as you want and keep on getting earnings as long as you want.

• Insurance policy can also be used as collateral in buying a property on seeking a loan. This gives added advantage to policy holders as they not only earn from it but also use it as fluctuating capital.
There is always a debate when it comes to using insurance policy as an investment or protection.

Taking all the above points into consideration, it is always beneficial to use insurance as a protection as by disturbing the insurance amount and premium may lead to early expiration and also deprive you of some of the benefits that you have.

Why the festive season is the best time to purchase a car with a car loan?

Buying a car has become more of a status symbol than being just a necessity. Banks are offering loans at competitive rates to lure customers into availing these loans. Furthermore, many people look forward to buying a car during the festive season. This is due to the fact that both banks and non-banking finance companies usually lower their lending rates on car loans and even offer subsidies on processing fees. Some banks even offer 12-month loan waivers. In spite of its pros and cons, availing a car loan has enabled many people from middle-class backgrounds to buy their own car.

Some of the benefits of availing a car loan are as follows:

• Wider eligibility – Due to the presence of numerous financial institutions which are offering loans at competitive rates, more and more people are getting their loan applications approved. Anyone with a basic minimum source of income is getting eligible to get a loan to buy a car.

• The procedure to apply for a car loan has been simplified by banks to attract more customers. The documentation and approval processes may require less than a day.

• It is becoming more and more convenient for people to avail a car loan as banks are providing up to 95 % of the on road price of the car. This saves a customer the trouble of bearing the expenses of accessories, insurance and registration.

• The car can be treated as collateral in case of such a loan and eliminates the requirement of providing other property as additional security for getting a loan. Furthermore, the car loan lets the borrower be the complete owner of the vehicle and enables him to do whatever he/she pleases with the vehicle.

• The financiers allow the borrower to choose the repayment plan according to his/her capacity. If a borrower pays a higher margin amount, he can reduce the amount of the EMI that he needs to repay over the stipulated period of time.

• Finally, dealers of cars are ready to provide you with more benefits and thereby reduce their commission margin. This is because they are under pressure from their higher authorities to increase the sales volume and this actually benefits the customer.

The festive season in India is a period of time when many people all over the country buy houses, apartments, cars and other luxury items. Banks and financial institutions provide all sorts of perks to attract customers. And these are not always false promise. Lower interest rates sometimes enable a customer to buy a car at a price lower than what he would have paid had he bought the car during some other time of the year. A good credit standing and sufficient savings in your account place you in good stead to get a loan to buy a car.

Personal loan Interest rates: How does it impact you?

Personal loans also known as consumer loans is an unsecured loan which are given on the basis of the borrower’s credit history and the ability to repay the loan from his/her personal income. It is mostly taken on short term and the interest rates vary from bank to bank and person to person. Personal loan interest rates in India range from 11% to as high as 22%.

You can avail a personal loan in India of up to Rs 30 lakhs. The personal loan interest rate in India depends on many fixed and variable factors. Fixed factors are those which are set by the central bank that is the Reserve bank of India and must be followed by all the banks. They are:

• Repo rate – the rate at which the Reserve bank of India lends money to bank in case of any shortage. The repo rate is a tool to control inflation as the reserve bank of India lowers the repo rate if it wants to put more money in circulation and vice versa.

• Reverse repo rate- the rate at which the banks lend money to the reserve bank of India. It is a fiscal tool used to monitor money supply by the reserve bank of India.

• Cash reserve ratio- the percentage of money that banks has to keep with the reserve bank of India is called the cash reserve ratio (CRR).

• Statutory liquid ratio – it is the ratio between liquid assets (cash, gold) and the net demand and time liabilities (NDTL) that a bank has to maintain in order to meet urgent requirement of liquid cash to meet all the liabilities.

Considering all the above factors and the base rate which is also set by the Reserve bank of India to ensure transparency and low cost funding for personal loans, different banks have different variable factors which determine your loan amount and the personal loan interest rate. They are:

• Credit history – it is the sum total of all your credit taken earlier in terms of loan or credit card and the repayment of that credit. So if you have never defaulted in your repayments then you have a good credit/CIBIL score which will make you eligible for lower interest rates.

• Nature of employment – the nature of your job also determines the amount and the interest, whether you are salaried or self-employed. If salaried, then the status of your organization and if self-employed then the nature of your business.

• Bank-customer relation – if you apply to the same bank where you have an account, the bank generally gives a lower rate as you are an existing customer.

Smart facts you need to know about the education loan

Education loan as the name implies is a loan given by financial institutions for educational purposes which covers all your fees, travelling, hostel, books, equipments, etc. Education loan in India is given for graduates and post graduates courses mainly, however the PhD and doctoral programs are also covered by some banks. The education loan India ranges from 2 to 22 lakhs depending on many criteria.

Though it is very evident from the name that it is a loan for education, it does not necessarily mean that it is given totally on student merit. For loan amounts above Rs 7.5 lacs you need to have collateral in order to avail education loan.

Education loan India is one of the cheapest loan available in India because of the large number of students present and it is one of the fastest growing sector in India. What is the eligibility for education loan? What is the interest rate? Listed below are few of the facts that you need to know before applying for an education loan:

• It is borrowed in the name of a student but it must have a co-borrower or co-applicant which can be your parent, spouse or siblings.

• The monthly income and credibility of the co applicant and guarantor in case of loan amount above 4 lakhs is also taken into consideration.

• It can be offered for both studying in India as well as abroad. The amount varies from bank to bank in both the cases.

• Loan amounts up to 4 lakhs does not need to have a guarantor or collateral. However, a guarantor is needed in case of the loan of above 4 lakh and up to 7.5 lakhs. After 7.5 lakhs loan is given only against collateral.

• Repayments period is generally between 5 to 7 years and start after 6 months to a year after the completion of the course.

• Interest rate of education loan India ranges from 1% to 3%. However, after adding the cost of operations or the marginal cost, it falls in the range of 11% to 15%.

• Your loan amount to be sanctioned depends on the course against which the loan is sought and also the quality of the college in which you have applied.

Before applying for education loan you need to make yourself clear about the fact that the education loan will not cover your 100% expense. But still it is of great help for deserving and needy students as it nearly covers all your expense for education.

Factors that can affect your home loan rates

Home loans, either secured or unsecured are given by banks and financial institution for the sole purpose of building and purchasing houses. Most often than not a home loan is given for the long term and the interest rates ranges from 7% to 10% depending on the borrower and the lender. The eligibility criteria also differ from bank to bank. At present, the home loan India sector has grown exponentially and is expected to grow further.

The eligibility criteria for home loans and it’s interest rates are regularly revised by the Reserve Bank of India from time to time. There are several financial tools that affect your home loan interest rates, both fixed and variable. The reserve bank of India monitors and effectively applies these tools to control the economy.

Fixed factors are mandatory for financial institutions; they dictate the terms and policies for home loans in India. These factors are as follows:

• Base rate – it is the minimum rate set by Reserve bank of India for home loans in India. It is set to ensure transparency and low cost of all available home loan funds.

• Repo rate – it is the rate at which the Reserve bank of India lends money to a financial institution in the event of any shortfall. If the Reserve bank of India wants to put more money in circulation, it lowers the repo rate and vice versa. Hence it is a tool to regulate inflation.

• Reverse repo rate – it is the rate at which the Reserve bank of India borrows money from financial institutions. It is a tool to control the money supply in the economy.

• Cash reserve ratio (CRR) and the Statutory liquid ratio (SLR) – CRR is the amount of money that a bank has keep with the RBI. The SLR is the ratio between liquid assets (cash, gold) and the net demand and time liabilities (NDTL).

Apart from these fixed factors that dictate the interest rates for home loans India, there are other variable factors that affect the home loan rates such as:

• Prime lending rate (PLR) – it is a reference rate set by banks taking into consideration their cost of operations. So the PLR is directly proportional to the home loans rate.

• Down payment – The lump sum amount you pay initially which is treated as collateral affects your home loans rate. High down payment leads to low-interest rates and vice versa.

• Credit Score – your income level and your credit rating makes up your FICO score which is calculated by banks to evaluate your loan amount and home loan rate.

• Shorter loans – you can cut down the tenure of your loan say from 20 years to 10 years and by doing so it will bring down your home loan rate.