How to get a loan against mutual funds?

Investments in mutual funds are crucial long-term securities. Depending on the type of fund you acquire, you may receive distributions of dividends, interest, capital gains or other income the fund earns on its investments. However, the financial crisis may attack any time. And it may not be a wise decision to withdraw the securities for financial aid.

Hence, most banks have initiated the facility of providing loans against mutual funds. The advantage of this initiative is that you don’t need to redeem your securities prematurely. The process is similar to an overdraft facility that banks offer.

You can avail loans against shares or mutual funds by approaching non-banking financial company (NBFC) or bank. The loan also ensures that your (Systematic Investment Plan (SIP) remains unaffected. For the bank to consider your credit request, you need to pledge your mutual fund units as security for the debt. The loan will be given based on the value of units in the folio and the tenure of your loan.

Eligibility and Documentation:

Individuals who are eligible for a loan against mutual funds include:

• Indian residents
• Non-residential Indian
• Sole proprietor
• Partnership firm
• Private limited company
• Member of a Hindu undivided family (HUF)

Note: Trusts and Minors are not eligible for loan against securities.

The following documents are required along with your loan application:

• Identity proof
• Address proof
• Signature Proof
• Proof of Income
• Bank Statement/Pass Book of last 6 months
• Latest statement of holding for mutual funds
• Pledge form for the creation of pledge
• Optional – Guarantor Form (Mandatory in case of joint holding
• If you are representing a company, you must submit your Income tax returns, an audited Balance Sheet and Profit & Loss Account for the previous two years.
Features and benefits of loan against mutual funds:
• You can get a loan up to 80% of the value of securities pledged
• You will be charged interest only on the actual loan amount you use. The interest rate will be calculated on the daily outstanding balance and debited to your account by the end of every month
• The loan process is transparent without any prepayment and foreclosure charges

How to apply for a loan against mutual funds?

Many online banking portals sanction loan quickly if you hold securities in the demat form. To avail the loan, simply log in to your Netbanking profile. Go to the Demat tab, click on Loan Against Securities, and select the shares that you'd like to offer as collateral from your Demat Account.

What are different types of savings account?

When you are building a financial plan for yourself, it is essential to be open and informed about all options. A savings account is one of the most basic and reliable financial products of all times.  With the introduction of the Jan Dhan scheme by the government, there has been a substantial rise in the number of savings account.

According to investment definitions, a savings account is an interest-bearing deposit account held at a financial institution that provides a modest interest rate, limiting the number of withdrawals. Often people open a savings account to keep money that you don't intend to use for regular expenses.
Here we discuss some of the common types of savings account that are available in the market:

1) Regular/Basic savings account:

This type of account is easy to open, maintain and offer quick access to your funds. There is no restriction on the amount to be deposited over a period. However, it is important to maintain a minimum balance in the account, and failure to do so can charge you to penalties.

2) Salary account:

A special account designed specifically for salaried individuals. A majority of employers deposit the employee’s monthly salary directly into this account. This type of savings account has a few additional benefits such as the “zero balance” feature, a free chequebook/draft every month or quarter and a higher interest rate on deposit amounts. However, the account changes to basic savings accounts if the account holder’s salary is not credited for 2-3 months consecutively.

3) Women savings account:

Only women are eligible for this savings account. The account features include discounts on shopping, cashback facilities on online products, insurance cover, higher interest rates.

4) Savings account for seniors:

Individuals over 60 years of age are eligible to open this savings account. The benefits for this account include a higher interest rate, a waiver of minimum balance requirements, free international debit card, insurance cover benefits and special offers on term deposits.

5) Kids advantage/Minor Account:

The minor savings account is for children below 18 years of age. You can open a savings account to secure their future. This account will help you build a corpus for your child’s security and teach them to manage money. In the minor account, usually, a parent or guardian has to be a joint holder. The benefits for this savings account include ATM/Debit card for children, Education Insurance cover Benefits and free netbanking.

With the power of the internet, you can easily apply online savings account with a bank to park your money. You can earn interest on the amount you deposit in your savings account and enjoy the flexibility. Prominent banks like ICICI, HDFC Bank, Axis Bank, Yes Bank, Kotak Mahindra Bank have developed 24*7 secure netbanking facility. You can efficiently conduct all bank operations without any hassles.

Planning to buy a home loan? Here is a checklist for you

Buying a home is considered a milestone in one’s life. But with real estate prices on the constant rise and financial crunches, many homebuyers are shifting to get home loans. Opting for borrowing is a step closer to fulfil your dream of owning a house.
Housing loans can be used for various purposes apart from buying your dream home. Some of them being the construction of a new house, renovation, purchasing a pre-owned house. Irrespective of your goal or profession, it is advisable to be aware of the loans you choose.

Following is a checklist for your reference to go through before you apply for home loan.

1) Income eligibility:
When banks decide to lend, they do it primarily on the monthly salary that you get in hand or your net income after tax and other deductions. You are expected to pay off the loan in EMIs. This monthly outflow is the primary factor that influences home loan.  It is advisable never to let your EMI exceed 40-45 % of your net monthly income.

2) CIBIL score:
Your credit score is one of the determining factors for your home loan. It is easier to get a home loan when you have a good credit score. Banks will consider your credit card usage, how you maintain your bank accounts, any cheque bounces, existing loans, existing uninsured loans, loan repayments, how many times you have applied for a loan or a credit card. If the results are satisfying, they will grant the loan sooner.

3) Interest rate:
Your home loan interest rate has an impact on the monthly EMIs you pay. There are two types of home loans based on the interest rate- floating and fixed.  If you opt for a fixed rate home loan, the EMIs don't vary over the loan tenure. In the case of a floating rate, the interest rate is determined based on the prevailing base rates plus a floating rate.  You can always switch amongst fixed and floating ROI during your tenure but check about the switching charge that banks may charge; these may or may not apply to your home loan type yet be sure of it.

4) Tenure:
The maximum home loan tenure offered by major lenders is for 30 years. The longer the tenure, the lower is the EMI, which makes it tempting to choose. However, it is advisable to go for shorter tenures that you can afford while filling the home loan application form.

5) Fees:
While applying for a home loan, you are expected to pay charges such as processing fee, legal fees and other administration charges to the lender. The processing charges range between 0.25% and 0.5% and vary from bank to bank. Ensure that you compare the fees of different banks before opting for a home loan.

Features of gold loans in India

Since ancient times, Indians consider gold as an auspicious metal. It holds a special emotional connect for most households and taking loans against gold is not considered a preferable option. The value of gold is continuously rising, and it makes sense to utilise its power. Most banking and Non-financial institutions have ventured in this space as they believe gold has a good capital appreciation rate.
In this loan, one has to deposit the household gold in the form of jewellery with the bank or financing agency and get a loan of up to 80 per cent of the value of the gold deposit. The interest rate for gold loans in India is much lower than that of personal loans.

Taking a loan against gold from NBFC or bank provides you with instant cash for most of the immediate expenses such as a quick family holiday, vehicle purchase, medical emergency etc. Here we have listed down few features of taking a gold loan from financial institutions.

1) Instant processing:

There is no such thing as unsecured gold loans. Once you submit the gold jewellery to the bank; the officials evaluate it and credit the loan amount to your bank account. The gold is kept as collateral with the lender. The minimum amount for loans is Rs 50,000/. Gold Loans for less than Rs 50000/- also available for rural markets. Most banks process gold loan within an hour, thus cutting down the processing and fund disbursal time.

2) Basic Documentation & No CIBIL score:

While most loans ask for Tax returns and income proofs, gold loans require basic documents such as:
• Passport
• Valid driving License
• Voter's ID Card
• Aadhaar Card issued by UIDAI
• PAN
 Even though you have a bad credit history in the books of account, banks are least concerned when it comes to gold loans. Therefore, if you are in urgent need of funds, try availing gold loans irrespective of bad credit score.

3) Digital application:

With the advent of digitisation, you can easily apply online for a gold loan instead of visiting the bank. Visit the bank’s official website and calculate the loan amount to borrow on the online gold loan calculators. You can fill the application form available on the site. After submitting the form, bank officials will get in touch with you through call or SMS concerning the application.

4) Convenience of repayment:

Borrowers get a choice to make onetime payment. It means a person can pay only the interest during the tenure of the loan. And pay the rest of the borrowed amount in a single sum at the end of the loan duration.

5 things to remember about PPF scheme

Introduced in 1968, the public provident fund is a savings-cum-tax saving investment vehicle. The scheme is one of the most sought-after investment plans to park your savings for retirement. PPF is a 15-year plan, which can be extended for a block of 5 years. You can open the account in a designated post office or a bank branch. One can open a PPF account in almost all Indian nationalised banks like SBI, Bank of India, and Central Bank of India as well as private sector banks like HDFC Bank, ICICI Bank and Axis Bank. 

Therefore, if you are looking for a safe investment option, you should consider opening a PPF account and earn guaranteed returns. Here are few details on the scheme:

1)    Tenure:

The PPF scheme is a 15-year scheme.  As per rules, the Public Provident Fund (PPF) account gets matured only after the completion of 15 years.   However, on maturity, the tenure can be extended for a block period of 5 years.  It can be done by submitting the Form H within one year from the date of maturity.

2) Interest:

The interest rates on the PPF scheme returns are set by government every quarter based on the yield (profits) of government securities.

3)  Investment limits:

The minimum annual amount needed to keep the public provident fund account active is Rs.500, while the maximum amount deposited in a financial year is up to Rs.1.5 lakh. If the contributions made in a year exceed Rs.1.5 lakh, the excess deposits will be treated as an irregular amount and won’t be eligible for tax benefits. The excess amount will be settled back to the subscriber without any interest.

4) Tax benefits

Under Section 80C of the Income Tax Act, 1961, PPF contributions made every year are eligible for tax deductions. The tax deductions are eligible only for PPF contributions up to Rs 1.5 lakh in a financial year. Interests earned on PPF deposits are tax-free, while wealth tax is not applicable on PPF accounts. Therefore, these accounts offer you triple exemption benefits – the deduction on deposits, tax-free returns and no wealth tax. To claim these benefits on your public provident fund account, you need to submit the details of the PPF investments made in a year in your income tax returns.

5) Premature closure of PPF account:

The PPF scheme allows withdrawals from the account only if it has completed five financial years. The retreats are also allowed on specific grounds such as treatment of serious ailment or life-threatening disease of the applicant, spouse or dependent children or parents, only after producing supporting documents from official medical authorities.

Skip the queue and apply for a personal loan online!

A loan that does not require any collateral or security and is offered with minimal documentation is considered as a personal loan. These funds from the bank or any non-banking financial company (NBFC) can be used for any financial need, but like any other loan, this one too must be repaid to the bank, in the agreed amount of time – be it months or years. The amount which can be used for anything from funding a holiday to paying for medical treatment needs to be repaid to the financial institutions in instalments.

Like most loans, there are different ways to apply for personal loan online. They are as follows:

-    If you have an account with the bank from which you want to take the loan, you can apply for personal loan online, through the bank’s website. Almost all banks – ICICI, HDFC, HSBC, SBI, etc. have sites with personal loan sections where if their users require personal loans, apply online. The bank will have a form in which you will have to fill in all your basic information and check your eligibility and even fill out the application form. Each user will also be required to attach scanned copies of their documents, to apply for personal loan online. This is only possible if the user has a net banking account with the bank.

-    Another way to apply for personal loan online is via email. You will need to email all your details, including the amount you want to borrow, and the bank will review your eligibility and respond to you.

-    To get a personal loan, apply through an ATM as this feature is now available at kiosks as well. Once the request for a loan has been raised, a relationship manager will get in touch and take it forward.

Once the online personal loan has been requested for, the application is processed your bank will verify everything from your address to credibility and financial information. Unlike other loans, there is no other collateral other than yourself, due to which the verification process is longer. To ensure smooth approval of the loan, your credit score needs to be 750 or more. If the bank has approved the loan and the EMI is not repaid, the bank will levy a penalty on the outstanding amount. If multiple EMIs are skipped, legal action can be taken.

Five benefits of investing in a two-wheeler insurance

Two wheelers are the easiest way to commute, especially on the traffic-congested roads of India. Cars take up too much space and are a much more significant investment and responsibility, so two-wheelers work as the best bet for most. With any asset, be it a two-wheeler a car or anything else, misfortune could fall and damage the vehicle in an accident or event of a natural disaster. Whatever the case, it is advisable for all two-wheeler owners to invest in two-wheeler insurance to cover the costs of any damage. One can even easily apply for a two-wheeler insurance online as it is mandatory for all bike owners in India.

Some of the benefits of investing in two-wheeler insurance are:

-    Bikes are susceptible to burglaries and theft since they are relatively easy to transport and move. In crowded cities that are more accident prone, bikes also get scratched and damaged. The two-wheeler insurance covers the service or replacement cost of the vehicle and makes it easier on the pockets of the vehicle owner.

-    When disaster strikes, there’s not much one can do about it but take shelter. Alas, our vehicles, if not protected, can get easily damaged. Two-wheeler insurance can come in handy at times like this and save you from heavy expenses that may occur during a fire, earthquake, flood, landslide, etc.

-    Having a two-wheeler insurance means that the owner of the vehicle does not have to bear the expenses of fixing the damages to the vehicle, property or surrounding in case an accident arises. The insurance ensures that the owner of the two-wheeler is free from any third-party liability, where the vehicle was part of the accident. This is one of the main reasons why insuring the two-wheeler is mandatory.

-    Investing in an online two-wheeler insurance ensures that the owner of the vehicle can avail discounts like a ‘no claim bonus’. Some insurance companies even offer great discounts on spare parts of vehicles which comes in handy if the bike is a luxury one and very expensive.

-    With the two-wheeler insurance also comes a sense of safety and security as it also helps in saving money on fines imposed and other more substantial expenses.

Some of the aspects that are not covered in two-wheeler insurance are the normal wear and tear of the vehicle, mechanical or electrical breakdown, depreciation of the vehicle over time and damage due to nuclear activity. Before getting your two-wheeler insured, make sure you go through the documents carefully to be clear on what you are signing up for.