Top 5 reasons why one should open a PPF account

PPF or Public Provident Fund is a scheme started by the National Savings Organization in 1968 with the objective of promoting small savings. Any resident Indian can open a PPF account. Only one PPF account is allowed to be opened per individual, and there can be no joint holders for this account.

The PPF account is one of the most popular investment alternatives that people enjoy in India today. This instrument has a 15-year lock-in period after which it can be renewed for 5 years at a time. But what makes the account so popular? Here are the top 5 reasons why one should open a PPF account:

1. Tax-free income:
The income earned on investments made in a PPF account is exempt from income tax. This makes it an attractive source to earn tax-free income. The interest is compounded for future years, and the interest earned on this compounded interest is also tax-exempt. This increases the returns from PPF.

2. Guaranteed income:
The PPF has a sovereign guarantee. What this means is that the Government backs the PPF. The returns on investment are guaranteed. This makes it a secure form of investment. Since minors can have their account, it is an excellent investment that parents can make for their children.

3. Tax break for investments:
Any investments made in Public Provident Fund get a deduction under Section 80C of the Income Tax Act. This makes it a lucrative investment option since it not only saves tax at the time of investment, but the income is tax exempt.

4. Flexible investment amounts:
While most investment modes have a fixed investment amount that should take place periodically, the PPF gives the investor the flexibility to make investments between Rs. 500 and Rs. 1,50,000 every year. These investments can be made any time during the year, up to 12 instalments. This flexibility means the investor can invest in this account any time he has the funds to invest.

5. Withdrawals:
The only major drawback about PPF is the liquidity. PPF accounts have a lock-in of 15 years from the year of account opening. For example, if you opened the account in July 2017, the account and the funds are locked in till March 2033. However, in spite of this lock-in, partial withdrawals can be made at any time subject to the terms and conditions. On maturity, the investor can choose to close the account and entirely withdraw his balance.

Top benefits of using UPI

UPI or Unified Payments Interface is a type of payment developed by the National Payment Corporation of India (NPCI). UPI has simplified the hassles involved with the transfer of money from one party to the other. 

How does UPI work?

To make a UPI payment, the first step is to create an account, either on the BHIM UPI app or through the different UPI apps available. Different banks offer their versions of the UPI app which work similar to BHIM.

After creating the account, the next step is to decide a UPI ID. Traditional payments use the bank account number and the bank’s IFSC code to receive payments, which presents a security risk. With UPI, the UPI ID becomes the mode that is used to receive payments. The UPI ID can be shared with people to receive payments instead of the bank account number, and this step provides an additional layer of security.

The next step is to create a PIN. To make a UPI payment, the person making the payment needs to authenticate it with a PIN. Once this authentication is done, the amount is debited from the bank account directly.

Top benefits of using UPI:

1. Secure mode of making and receiving payments:
UPI is a very reliable mode of making and receiving payments. There is no need to share bank account details. All that is required is a UPI ID. In case the UPI ID is not available, payments can be made using the bank account number and IFSC code. Using merely the UPI ID is of no risk since the transaction does not get authenticated without the PIN. This makes the UPI safe.

2. Instant transfers:
The Unified Payments Interface works on the IMPS system. This is not dependent on the bank’s working hours. UPI works 24x7 regardless of a bank strike or holiday.

3. Integrates different bank accounts:
One of the best features of UPI is that the app allows you to incorporate different bank accounts. You can receive payments in one bank account and make payments from the other.

4. Cost effective:
UPI is a free method of fund transfer. At the moment, banks have agreed to not charge for any transfers done via UPI. The proposed charges for UPI may be around Rs. 0.5 per transaction which is much lesser than NEFT and RTGS.

5. Easy to use:
Making payments using UPI is very easy even for a layperson. The process of registration is simple and hassle-free. The user interface is clean, and the process is well explained.

What are home loans?

Getting a house of their own is a dream that many people in India have. However, the prices of a home in many cities, especially metros are very high. It is not possible to finance the purchase of a house out of one’s own savings. One of most popular ways of meeting this gap in funds is to take a home loan.

A home loan is a loan that gives out funds to purchase a home. The home loan does not distinguish between the type of house purchased i.e whether it is an apartment or whether it is a house built on a plot of land. Home loans in India are a very popular way of financing house purchases, especially in metro cities where real estate prices are very high.

Features of a home loan:

1. The home loan value is based on the value of the property. The LTV (loan to value) for a home loan is generally 70% to 80%, which means 70% to 80% of the property value is issued to the borrower depending on his requirements.
2. A housing loan is a secured loan. This means the original property purchase papers and agreements are with the lender. In case of repeated default, the lender can dispose off the property to recover their dues. However, during the repayment of the loan, the borrower can stay in the house.
3. Home loans are repaid through EMIs (equated monthly installments). These EMI depend on the tenure of repayment and the rate of interest.
4. Most lenders do not charge any prepayment charges for extra principal repaid. This works out in the borrower’s favour since they can repay the loan faster and saves on interest cost.
5. The maximum tenure of such loans is generally 20 years. However, most borrowers tend to prepay their loan and pay it off over a shorter duration.
6. Home loans are available at both fixed interest rates and flexible interest rates.

Types of housing loans:

1. Home loan:
This is the standard home loan for purchase of a house.

2. Home extension loan:
A home extension loan works for people who are looking to expand and extend their homes. Some of the common extensions done are:

• Addition of bedrooms
• Addition of bathrooms
• Pulling in a balcony or carving a balcony
• Addition of office rooms

3. Home improvement loan:
A home improvement loan funds home renovations.  Some of the common renovations that can be funded with these types of loans are:

• Waterproofing work
• Paint work
• Reconstruction of walls with cracks or structural problems
• Plumbing
• Electrical work
• Building or removing false ceilings

4. Home loan for land purchase:
These loans fund the purchase of plots of land. The plot can be used either for constructing a house or for investment.

5. Home construction loan:
A home construction loan is taken to construct an entire house. A detailed estimate of the costs of construction is required for this loan.

Credit cards: 5 reasons to apply for one

With the advent of plastic money and digital banking, a credit card has become a common item for people to have in their wallets. But what is a credit card?

A credit card is a type of card that lets you borrow up to a certain limit (the pre-decided credit limit of the card) from the bank for your purchases. This has to be repaid before the due date. You can swipe the card at merchants or use for online transactions. Some credit cards can even be used internationally.

Because credit cards give you credit for a particular time and the freedom to swipe and use in a wide range of transactions, they come with an annual charge. This charge depends on the benefits that come with the card. Typically, credit cards come with their point system which can then be redeemed for free air tickets, discounts in restaurants, in outlets etc.

A credit card is a useful item to have. Applying for a credit card is very simple, and there's a fair bit of competition among different banks which has simplified the process. 

Here are 5 reasons to apply for a credit card:

1. It builds your credit score:
One of the strongest reasons to apply for a credit card is that it creates your credit score. The score is the snapshot of your financial history and is frequently referred to by lenders to identify the creditworthiness of a person. Regularly using a credit card ensures the person has some credit history.

2. Emergency funds:
An online credit card is one of the best sources of funds in an emergency. It can be swiped up to the credit limit to provide funds immediately. The best part is that the funds are not payable until the end of the grace period. This makes a credit card a dependable source of cash to have.

3. Points and airline miles:
Depending on the type of card and the bank, each transaction will earn you either points or airline miles. These can be redeemed for benefits in the future in the form of cash back, reward flights, hotel stays etc.

4. Offers and discounts:
With digital banking becoming popular, it is easy to get offers with an online credit card. If you want best suggestions for applying for credit cards online, especially in the case of co-brand cards, which give double the benefits regarding points. However, it is essential to check the yearly fees before applying for a credit card.

5. Grace period:
Credit cards come with a grace period. A transaction done in one month is payable at the end of the next month, thus giving a grace period of almost 60 days. This type of interest-free borrowing can be used beneficially to spend money without paying interest on it.

Car loans: Everything you need to know

Are you thinking of buying a car? Are you worried about the price of your dream car? Put these worries to rest because you can avail a car loan and get yourself the car of your dreams.

With the rise in consumerist culture, most lenders have quickly adapted to provide specialised consumer finance, which includes car loans. Lenders give out car loans either to an individual or through companies which adjust the EMIs through the borrower’s salary, thus making it even easier to buy the car of your choice.

What are car loans?

1. Secured loan:
Car finance is secured, i.e. the car is hypothecated to the lender until they repay. In case the EMI for the car loan is not paid, the lender can seize the vehicle and sell it to recover dues. However, this is only in extreme cases.

2. The rate of interest:
Car loans can have either a fixed rate of interest or a floating rate of interest. The type of interest and the price depends on the lender and also the borrower's loan application. The rate of interest may be higher for borrowers who already have existing debt or for pre-owned cars.

3. Documents required:
A car loan requires fairly standard documents:

• Identity proof (PAN card/Aadhar card/Passport/Voter ID/Driving license)
• Address proof (Aadhar card/Passport/Voter ID/ Driving License/Telephone bill/Electricity bill/Gas bill/Life insurance policy)
• Income proof
o ITR for the previous 3 years,
o Form 16/Salary slips
o Balance Sheet/Profit and Loss account as applicable
• Bank statement for the last 6 months
•

4. Eligibility criteria:
Most lenders put up the car loan eligibility criteria on their websites for prospective customers to see. It is best to check out the eligibility criteria before applying for a car loan. Some of the standard criteria are:

• Minimum and maximum age of the applicant
• Minimum years of employment with the employer
• Minimum income including that of spouse or co-applicant

Some lenders may specify some other criteria, but by and large, these are the standard eligibility criteria.

5. Charges:
The interest on a car loan is not the only charge that a borrower will have to pay on the car loan. Some of the other costs are:

• Foreclosure charges
• Part-payment charges
• Overdue EMI charges
• Loan processing fees
• EMI payment mode swapping charges
• Cheque return charges
• Amortisation schedule charges
• Legal, repossession and incidental charges

While selecting the car loan, it is best to find out the lender who provides the loan with the lowest amount of charges.

6. Types of car loans:
Usually, there are three types of car finance available:

• Car loan for a new car
• Car loan for a pre-owned vehicle
• Loan against car

Each loan has different terms and conditions and interest rates.

What are the advantages of taking a personal loan?

A requirement for funds may arise at any point. In case you need to raise funds through a loan, it is best to get a loan that gets quickly approved and disbursed and doesn’t come with too many conditions. A personal loan is perfect for that.

A personal loan is a favourite type of unsecured loan. These loans are quick and easy to avail and provide a source of fund infusion especially in case of medical emergencies, where the fund requirement is urgent. People prefer personal loans because of their flexibility and ease of application.

Benefits of a personal loan:

1. Online personal loans:
With the digital revolution, it is very easy to get personal loans online. Several lenders have a completely online application procedure. You only need to fill the form, upload the documents and the lender will process your loan application and get in touch with you. Many lenders have a loan interest form online where approved loan applicants are contacted for further procedures. It has now become very easy to get funds in a matter of a few clicks.

2. Unsecured loans:
A personal loan is an unsecured loan. The borrower does not need to put up any collateral to avail this loan. This makes it possible for any borrower to avail it. The final loan disbursement depends on the borrower’s eligibility, but not having security makes this type of loan accessible to a lot of borrowers.

3. Negotiable rate and tenure:
Depending on the borrower's financial position, it is possible to negotiate the price and mandate for a personal loan. If you hold a strong credit score and repayment capacity, you can get favourable repayment terms, and even waive off charges such as loan processing charges.

4. No conditions attached:
One of the crucial benefits of a personal loan is that there are no conditions attached to the use of funds. It can be used for any purpose for example, for wedding expenses, for travel, for medical emergencies, for home improvements etc. The lender does not place any conditions on the use of funds which gives a lot of freedom to the borrower.

5. Instant approvals and fund disbursements:
It is possible to get an instant personal loan online in a matter of minutes. Many lenders have speedy loan approval processes which are completely online. This makes it easy to apply and get a personal loan.

6. Minimum documentation requirements:
A personal loan requires very few documents. It requires address proof, identity proof and income proof documents which are very standard documents. This makes it an excellent source of funds in case of emergencies.

5 ways to negotiate business loan offers

You have a successful business in place and you wish to expand it. However, you do not want to go over the board with your funds. Then business loans are your best ally. Banks and NBFCs offer different types of business loans based on the requirement of the company. Some of the reasons why companies opt for a business loan are:

• For establishing a new business
• For expanding the current business
• To purchase new equipment and machinery
• To maintain the cash flow
• Require working capital for the business
• To turn the loss into profits
• For repaying outstanding dues
• For running a seasonal business

However, you should apply for a business loan:

• When you have a strong business strategy in place
• When you foresee steady cash flow in the future
• When the capital flow is greater than a business loan interest rate

The major benefit of business loans is that it does not require any collateral. Also, most of the lenders sanction the loan with minimal pre-payment charges. However, the interest rates are on the higher side.

So, you need to possess strong negotiation skills if you want the desired deal. Some of the ways to get a better offer are:

1) Establish a negotiation strategy: Determine which financial aspects are important and which ones can you give up easily on. It is essential to put forth a strong point to the lenders. Once you decide upon your factors, you can create a strategy around it and implement them.

2) Know the business risk profile: Identify the weakness point of the business, so that the lender does not catch you for the same. Rectify those errors before approaching your lender. Once you recognise the risk factor of your business, you can talk to the financier accordingly.


3) Negotiate the interest rate: As mentioned above, the interest rates tend to be higher since business loans are collateral-free. While applying for the loan, choose between fixed and floating interest rates. These rates will have a massive impact on the monthly budget. Go for the lowest rate.

4) Clear out unnecessary expenses: While negotiating the business loan deal, try to save money wherever you can. Try to curb the expenditure where not required.

5) Know the prepayment charges: Every loan comes attached with additional fees, and most of them are unknown to people. There is more to this than meets the eye. Understand the terminologies associated with the business loans and pay what based on what the business needs. Ask the lender regarding the pre-payment charges.

Research various schemes on the third-party websites. Use the business loan EMI calculator, as it enables the customers to check the results of n number of schemes. Accordingly, avail of the loan that best suits the business.