Calculating the EMI of your car loan

For most of us, the first big loan we ever take is usually a car loan. Affording a car has become easy thanks to these easy, minimal documentation car loans. Like the name suggests, car loans are sanctioned only for the purpose of purchasing a car. Since these loans are smaller in amount as compared to say a home loan or a business loan, the loan periods are relatively of shorter durations than the aforementioned loans and the loan amount also tends to be comparatively smaller.

Factors to consider before applying for the loan
Before applying for a car loan, you must check whether it fits into your budget. You must consider aspects like the amount you require, the tenure your need and the interest rate you can afford. You can find out everything about this, before even applying for a loan, simply by using a car loan EMI calculator that is available on most lender websites.

What does an EMI calculator look like?

An EMI calculator tool, typically has the following three factors

Principal: You must input the principal amount of the loan you wish to borrow e.g. ₹500,000, after considering the amount you can pay as down-payment.

Tenure: Input the details of the tenure you wish to repay the loan in e.g. 5 years. Car loans generally range from 1-7 years.

Rate of Interest: Finally, you must input the rate of interest you can afford. Unlike home loans, car loans usually have fixed rates of interest which means, you will be charged a flat, single interest rate throughout the tenure of the loan, (5 years for example) regardless of the conditions of the market. Your Equated Monthly Instalments (EMI) while remain the same, month on month until the loan is repaid.
Monthly EMI: After inputting these details in the EMI calculator for car loan, you will find that you will have to pay a monthly EMI of ₹10,624.

Availing the best interest rates on the car loan
One thing you must keep in mind to be eligible for good rates of interest is that you need to have a good credit score. Before meeting with a bank to apply for the car, it is a good idea to obtain a report of your credit score. You can also find websites that help you find your credit score, the links for which are also available on your car loan EMI calculator web-pages. Your chances of being offered great terms of the loan as well as lower rates of interest, along with a big loan amount are heightened, if you can show a credit score of 750 points and above. In case your credit score is less than 750 points, you could wait to improve the score and then apply for your loan which can decrease the chances of your loan being rejected.

Taking a loan against gold- how it works

Often in life, we find ourselves in dire need of instant funds. It could be to pay for our children’s higher education or to meet hospital expenses of a loved one. What do you do in such a situation? One way to go is to take a personal loan, but the process could take some time. In such a time, you can let that gold sitting idle in your bank locker to come to your rescue.  A loan against gold is a great, hassle-free and quick finance option as your gold serves as collateral. You require minimum documentation. Banks can sanction your loan amount depending upon factors like the purity of gold, its form (jewellery, biscuits, coins or bars) etc. Here’s what you should consider when taking a loan against gold.

Where can I get a gold loan?
You can get a gold loan from various banks like SBI, Axis Bank, HDFC Bank, ICICI Bank etc. Alternately, you can also visit financiers like Mannapuram and Muthoot.

The Quantum of the loan: Two factors are taken in account by banks and financiers while sanctioning the amount of the loan. The first is that you can get an amount depending upon the security that you deposit in the form of gold. Gold in coins, bars and biscuits is preferred over jewellery, since the value of the latter can be diminished owing to making charges. Typically, you can get a loan for 60% of the value of your gold, after valuation. The second factor is the individual’s repayment capacity as banks need to access how long it would take for you to return the bank’s money.

Documentation and charges: You can either procure a gold loan online, or visit the bank. Keep in mind that not all bank branches are designated to provide gold loans, so you may have to visit a specific branch. You can make your case stronger by providing all the necessary documents as listed on the loan application form. You would be asked to provide your address proof, identity proof, PAN card and photograph. Banks will charge you a fee for both, processing the loan and for valuation of gold.

Depositing gold: When you submit the application along with the specified documents, the bank will draft up an agreement stating the terms of the loan, which would include the monthly instalments, the rate of interest and the tenure of the loan. The bank will evaluate your loan and disburse it accordingly. It will also keep custody of your gold until the entire loan is repaid. Gold loans are mostly offered for a period of 12 to 18 months.

Default in loan repayment: For whatever reasons, in case a person defaults in repaying the loan against gold within the stipulated tenure, the bank can assume custody of your gold. As per the terms mentioned in the loan agreement, the bank has the rights to sell of your gold to recover its dues.

5 questions to ask before applying for a Car Loan

In the recent years, owning a car has become easy thanks to the increased purchasing power of the general public along with facilities for loans. In just a matter of minutes, a bank can approve your car loan. But before you finalize a car model, and visit the dealer, you must spend some time analysing figures and asking the right questions. A little research can help you determine what exactly you would be paying for the car. Here are five important questions to ponder on before you bring that dream car home.

What interest rate will I be charged?

The first thing you need to get acquainted with is the interest rate charged by your bank for the loan. Several banks like Axis Bank, HDFC bank, ICICI bank and others, offer car loans at low rates of interest. If you already have an existing relationship with the bank; that is you have an account with the bank and/or have paid off any other loans taken in the past, you can avail a loan at a relatively lower rate of interest. Ideally, you can get a loan for cars for anywhere from 8.5% to 12.5% per annum. 

How much amount will my bank finance?

The smart thing to do is to pay 20% of the total price of the car as down payment and get a loan for the remaining 80% amount from the bank. Several banks also offer 100% finance but following the 20% rule helps reduce the loan amount, while you can fall back on 20% of your income easily to pay the EMIs. High monthly EMIs can strain your finances.
What will be the final price I must pay for the car?
While you can procure an auto loan for a low rate of interest, you may end up paying heavy fees for processing, documentation, foreclosure, default payments, later charges and even pre-payment, thus increasing the final price you pay for the car. You must check all aspects of the final amount including principal loan amount and tenure in order to get the lowest rate of interest.

What is the ideal tenure of the loan and how much should my EMIs be?

The first thing you need to understand is that such loans last longer, which I why you must have a regular source of income to pay the EMIs. Planning your finances smartly is essential. Try avoiding higher amounts of EMIs, just to procure low interest rates. Also try and avoid opting for the longest tenure because it only increases the interest payable on the actual loan amount. Instead choose a balanced EMI with a sensible tenure.

What fees are included in my loan?

Besides the interest, you must pay several fees against your car loan, which you should get clarity on while getting your loan sanctioned and while paying the debt off. You will ideally pay for documentation, credit reports, registration certificate, stamp duty, part pre-payment and several other charges. Comparing additional fees and charges of different banks is important before choosing the lender.

IMPS – Its functionality, benefits and usage

In the last few years, the Indian government has launched several payment systems that facilitate immediate transactions. As the time went by and net-banking became advanced, customers could start making payments using their mobile phones. One such popular payment system launched by the government, and facilitated by the National Payment Corporation of India is the IMPS or Immediate Payment Service, which is one of the most secure methods of fund transfer. Available 24*7, IMPS facilities are offered by almost all big banks in India such as Axis Bank, HDFC Bank and nationalized banks like State Bank of India and Punjab National Bank among others. Let’s look at the functionality, benefits and uses of IMPS fund transfer.

How does IMPS work?

The IMPS system uses a customer’s mobile number and/or Aadhaar card number in order to connect with a bank account. If you choose IMPS to send money to any bank account, the system first connects you with your bank account using your registered mobile number. Unlike other payment methods such as RTGS or NEFT, IMPS does not directly transfer funds to the beneficiary’s account directly. Instead, funds are transferred from your bank account to your mobile number, after which the money is transferred to the beneficiary’s mobile number. The money is finally credited to the beneficiary’s bank account. All of this is done in real-time, within a few minutes.

Benefits of IMPS

Both, senders and receivers can reap several benefits by using IMPS transfer such as

• Money is sent in real-time and credited into the beneficiary's account within a matter of seconds
• This method of fund transfer is as safe and secure as it is efficient
• There is no minimum amount of money that you can transfer. You could transfer as little as ₹1 up-to ₹200,000 per day, depending on your bank
• The facility is available 24*7, even on public holidays and bank holidays
• Customers can make both intra-bank and inter-bank transfers using IMPS
• You can use IMPS on your mobile phones, for internet banking and even in ATMs
• You needn't know the beneficiary's account number or bank IFSC code. The money can be transferred using only the beneficiary's Aadhar card, mobile number and MMID
• Receive instant debit and credit confirmation via SMS

Usage and services

You can use IMPS to avail several services and to transfer funds using mediums like mobile phones; smart phones and basic phones. You can also use your bank's net banking facility or your ATM card to avail IMPS services. Apart from transferring funds using mobile number and MMID (mobile money identifier), Aadhar number and bank account and IFSC code, you may also choose from the following services for IMPS fund transfer

• Funds transfer via UPI; a mobile app based payment method
• Merchant payments – Use MMID to pay retailers
• USSD banking (*99# Banking) – It gives you the facility to transfer funds through your feature phone
• QSAM – dial *99*99# to know the Aadhaar number and bank account link status

United Payment Interface – the features and key drivers

With the arrival of the age of net-banking and mobile apps, the methods of making payments have so evolved that you can transfer and receive money in your bank account in a matter of minutes. Systems like IMPS, RTGS and NEFT were initiated years ago to make banking convenient. But nothing holds a candle to the world’s most advanced payment system; the United Payment Interface, a revolutionary payments system initiated in India.

Understanding the term

Developed by the National Payments Corporation of India, United Payment Interface or UPI is an instant, real-time payment system that facilitates inter-bank transactions. It powers multiple bank accounts into one unified mobile application (of participating banks) and merges various banking features such as fund routing and merchant payments into one application.  Regulated by RBI, this digital payment system is available 24*7. Every participating bank provides their own UPI app available for download on Android, iOS and Windows platforms. UPI deposits and withdraws funds from your chosen bank account whenever you request a transaction. Simply put, you can link all your different bank accounts into one application and conduct seamless transactions between them.

Features of UPI

Thanks to the UPI interface, users can avail numerous services and carry out the following transactions
• Sending and receiving fund
• Raising requests for funds
• Users can use another government initiated app, the BHIM app to make payments to merchants via QR codes (as in PayTM)
• Paying for several services such as cabs, restaurant services etc.

UPI interface key drivers
The main goal of implementing the United Payment Interface was simplifying the process of transactions and providing a single interface across all banking segments. The key drivers used to achieve this end include:

Simplicity: The idea behind UPI is to receive and make payments as easily as you make a call on your mobile phone. Just like making calls, accounts holders should be able to send and receive funds from their cell-phones, with the help of an identifier, excluding the hassle of other account details. Users can “pay to” or “collect from” a specified payment address like Adhaar card, mobile number, RuPay card etc., with a single click.

Adaptability: Since the potential user base was intended to be scalable and of use to billions, it became necessary to have an adaptable application. The UPI interface is designed to allow gradual adoption across smartphone users along with the ability to make use of information available across various payment players and phones. People using advanced phones can send money to those using basic phones and vice-versa.

Security: Security is always a major concern for users of advanced banking technologies like making a UPI payment. This interface provides end-to-end security as well as data protection. Important data like personal banking details are not revealed, reducing any chances of misuse. Added authentication features provide security against risks like phishing.

Apart from these factors, the UPI interface is also cost-effective and innovative.

Know the different savings bank accounts

The most basic type of bank accounts used by people across the world is a savings bank account. Savings accounts are the primary business products of every single bank and are easily available in every bank, whether it belongs to the public sector, or private sector. Along with the regular types of savings accounts, the Indian government has also introduced sponsored savings accounts, most of which are meant or people with lesser incomes or for those residing in rural areas. Here are some of the best savings bank accounts in India in which you can consider keeping your savings in.

Basic/regular savings account: A regular savings account offers a limited number of facilities and charges minimum fees. You can continue depositing as much amount as you please, over a period of time in this account. All savings accounts require you to maintain an average daily balance and you are penalized if you fail to meet this requirement.

Salary accounts: Popularly known as “zero balance accounts”, salary accounts can only be held by salaried individuals. Employers open salary accounts for their employees and deposit monthly remunerations directly into these account. You also get higher interest rates on money deposited in this account. If there is no salary credit for more than 2-3 months, this account changes to a regular savings account.

Joint accounts: A savings account operated by more than one holder is regarded as a joint account. With joint accounts, transactions like issuing cheques or withdrawing money can be done by either account holders. Debit cards holding the name of each account holders are also issued separately for all joint holders. Joint accounts are the best savings bank accounts in which you can add up-to 4 family members.

Savings account for minors: If your child is under the age of 18, you can open a joint savings account with him. The account can only be opened if one of the joint holders is an adult and a parent/guardian to the minor. The account transfers to a joint account when the minor turns 18.

Women’s savings account: Like the name suggests, this type of account can be opened only by women. Women can reap several benefits from this account such as discounted rates on other products offered by the bank, complementary personal insurance cover, higher interest rates etc.

Savings account for seniors: Individuals over the age of 60 can open savings accounts that offer certain benefits, not available to basic account holders, through the savings account for seniors. Features like higher rates of interest, special term deposit and offers and waiver on minimum balance requirement make this account especially ideal for retired persons living on pensions.

Pradhan Mantri Jan Dhan Yojana Savings Account: As per government directives, most leading banks offer this savings account which allow a maximum of 4 withdrawals per month and come with the Rupay Debit Card. You needn't maintain a minimum balance or pay any annual fees with this account. Additional benefits include free insurance cover of ₹30,000 and accidental cover of ₹100,000.

How to choose a consumer durable loan

We live in a smart world. A world of smart phones, smart televisions and smart home assistants, that can switch on lights, fans, and televisions on a single verbal command. But many of us struggle with coming up with the finances for such appliances. If you don’t have enough money to purchase these fancy gadgets, you can always opt for a loan. All you have to do is apply for a consumer durable loan by choosing from a range of financers. Also, consider the following factors before applying for the loan.

Consider the available options: You must first decide on the loan amount and the maximum amount you can allocate towards loan repayment before approaching a bank. Since you intend to use the money to purchase consumer products, ensure you opt for a consumer durable loan and not a personal loan, as the later can cost you more. Most durable dealers are tied up with financiers. Remember that financing costs may vary from dealer to dealer.

Criteria for selecting a lender: Before you finalize a lender, you must find, the minimum and maximum duration of the loan, and the down-payment amount. Also read the document t closely to understand the the total cost of the loan, repayment period and interest calculation method.

Effective finance cost: Remember that the effective finance cost differs from the rate of interest. The total cost of the consumer durable loan includes the interest charged along with the upfront service charges, processing fees and pre-payment charges in case you choose to prepay the loan. You may be charged either a flat amount or a percentage of the loan amount for the paperwork, all of which is profited by the financier. E.g. if you take a one-year loan for ₹20,000 at 15 per cent, paying ₹250 as upfront charges, your effective finance cost will be 16.25 per cent if we assume a flat interest charge.

Calculation of interest: Make sure that you are not charged on a flat basis. Most banks allow you to pay only the outstanding balance of the loan, and not on the full amount. Interests are calculated on daily, monthly, quarterly and annual basis. The most beneficial one is the daily reducing balance method since you only pay for days that you actually use the funds.  E.g. if you take a loan on January 25, and have to pay your first instalment on 7 February, in the daily reducing balance you pay interest only for 12 days.

Prepayment policies: If you decide to pre-pay your loan at some point, you are more likely to be penalized, which is why you must think about the loan tenure well in advance. You needn’t lock yourself in a longer tenure unless it is absolutely necessary.

Service quality: Consider important factors like time taken for paper work, processing the papers and getting the cheque, and easy methods of prepayment. Some banks even send over a representative to enhance your service experience, while other can make the entire process tedious, so select wisely when opting for a consumer loan service.