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Eight reasons why your loan request can be turned down

When you apply for a loan, banks judge your ability to repay the loan on various counts, including your age, income, job stability and primarily your credit report, which is a reflection of your true credit worth. Here are some reasons why your loan request can be turned down:
  • Your residential address is on the defaulter list: If you live under the same roof as someone who has slipped up on a loan payment or credit card dues and hence been reported to CIBIL, banks probably will have the address stored in their defaulters' database. In such as case, the probability of your loan application to be rejected is likely to be high. The reason being your residential address will find a match with the one on the defaulters' list.
  • Poor track record of credit card or loan repayments: You have been accumulating credit card dues over the years resulting in a huge pending payment, which is well past the due date. Or it could be that you have slipped up on a few EMIs. In these instances, your name would have been reported to CIBIL. When a bank looks up your credit card or loan repayment track record, it would have a strong reason to reject your loan. Also, telephone bills and insurance premiums are likely to join this list, so do keep a strict vigil on your entire bill and credit repayments.
  • Too many previous loans and too little income: If you are juggling too many loans already, then your income minus the ongoing credit repayments is what will be considered as your real income. If another loan is likely to cause a severe strain on this income or make it unlikely for you to be able to repay effectively, then your loan will be rejected.
  • Loan guarantor to someone who didn't pay up: When you sign the dotted line to be someone's loan guarantor, do exercise a lot of caution. You must make sure the applicant you are vouching for has the ability to repay the loan without hassles. Unless and until you have strong reasons to believe so, do not rush to sign for them because if they fail to repay for any reason you will be accountable to repay the loan on their behalf. In such circumstances, where you have been unable to repay their loan, you will be reported to CIBIL and this will reflect in a bad credit report.
  • Co-applicant has a poor CIBIL record: It is important for all the loan applicants to have a good credit repayment record. If you have a clean record but your co-applicant has a credit card issue reported for instance, then your loan application may not be considered.
  • You are a compulsive job hopper: Banks place a lot of importance on job stability and certain banks even insist that an applicant needs to be employed with a particular concern for three years or more to be eligible for a home loan. Also, in instances where a reputed company's future appears unstable, the bank can reserve its right to provide a loan to the applicant from that company.
  • You want a joint loan with your sister or friends: Though some banks might consider providing a joint loan to brothers who are co-applicants, banks, as a rule, do not provide loans to sisters or a brother and sister or friends, who wish to be co-applicants. However, you can choose to opt for your parents as co-applicants for the loan.
  • Your loan application has been rejected before: Remember, it is not a wise thing to keep applying for a loan without any rhyme or reason. If your loan application gets rejected, this is also recorded in your CIBIL record. So weigh the pros and cons before you apply for a loan simultaneously to different banks. Wait till you receive an offer before you apply to another bank. This will give you a chance to rectify errors or update your credit record in case there is an issue with it before you approach another lender.

    Here's how to prepare yourself before applying for a loan:
  • Gauge your repayment ability, calculate your net worth and evaluate if you are ready for a loan commitment.
  • Get a copy of your credit report from CIBIL and other bureaus, where your records can be found. Analyse them and figure out if there are any concerns in the report, which need to be addressed. For instance, if you have paid all your credit card dues but this is not reflected in your CIBIL record, then you need to approach the bank in question and get proof for the repayment. You will then need to submit the proof to CIBIL and get the information updated.
  • Ensure you have back up funds to pay your EMI for a bunch of months.
  • Make as much down-payment as possible and prepare well ahead to close the loan as quickly as you can to continue a good repayment track record. Moreover, closing off a debt when possible will free up your resources for other uses or even for a new loan if the need arises.
Source: NDTV Profit

Allahabad Bank lowers home loan rate by 5 bps to lure high-end customers

Mar 13, 2013

KOLKATA: State-run Allahabad Bank has lowered interest rate by 5 basis points to 10.25% for housing loans above Rs 30 lakh to attract new customers before the end of this fiscal.

State Bank of India, India's largest bank, offers home loans above Rs 30 lake at 10.10% rate, while ICICI Bank's rate for this high-value bracket is 10.5-75% a year. Kolkata-based Uco Bank offers home loan at 10.2% a year.

Source: The Economic Times

LIC Housing launches home loan scheme for self-employed

Jan 29, 2013

CHANDIGARH: LIC Housing today said it is planning to roll out a new housing loan scheme for self- employed people wherein monthly loan repayment schedule might be tweaked to daily or quarterly.

"Other than the Equated Monthly Installments (EMIs) system (meant for service class), we are planning to have an arrangement for self employed category in such a manner that where money (housing loan installment) can be deposited (by borrower) on daily basis or quarterly basis," LIC Housing Finance Director and Chief Executive V K Sharma told reporters here today.

Source: The Economic Times

Charge prepayment penalty only on fixed rate loan dues : RBI

Jan 23, 2013

MUMBAI: Home loan borrowers who have opted for fixed rates may have easier terms on their mortgages as the Reserve Bank of India has advised banks to revise the penalty structure on prepayments and charge it only on the outstanding amount. It has also recommended that banks should focus on raising long-term deposits to fund more long-term loans to help reduce the EMI burden on home loan borrowers
Source: The Economic Times

10 things to know about budget 2013-14

Rich pay more taxes : It is time for the rich to be worried as they would have to pay an additional surcharge of 10% on taxable income of over Rs 1 crore. This is because the budget raises taxes for them. The rich buying luxury cars will also have to pay 100% customs duty on high end sport utility vehicles. However, the budget gives relief to the common man through an additional Rs 1 lakh deduction on interest paid on home loans of up Rs 25 lakh.

Tax revenue : The slowdown in the economy has hurt as Total tax revenue for the central government fell short of the target at Rs 7.42 lakh crore. In the year 2012-13 it was estimated that the total tax revenue would be around Rs 7.7 lakh crore. The finance minister has set an ambitious target of Rs 8.84 lakh crore for 2013-14. The amount that the government raises through levying taxes is known as the tax revenue which is generally an aggregation of income tax, corporation tax, excise duty, customs duty and service tax.

Fiscal deficit : Fiscal deficit is the difference between the total expenditure of the government in a year and the revenue receipts cum the recoveries of loans. Fiscal deficit also represents the amount that the government will have to borrow to fund its shortfall. The lower the deficit the better it is for the country as it brings down inflation and interest rates. The fiscal deficit was estimated at Rs 5.1 lakh crore in last year’s Budget, however, this was revised to Rs 5.2 lakh crore today. So Mr Chidambaram has achieved that target and promises to take it down further. He has also promised that it would be 4.8% in 2013-14 at Rs 5.43 lakh crore. International investors and credit rating agencies pay a significant attention to this number.

Disinvestment : Mr Chidambaram has increased the target of disinvestment to Rs 40,000 crore. The process of selling the stake of the central government in companies that it controls or in some cases where it has a small holding refers to disinvestment. In 2012-13, the government estimated of Rs 30,000 crore on the amount that would be raised through disinvestment.

Plan expenditure : The Finance minister has set the target for plan expenditure at Rs 5.55 lakh crore for 2013-14, which is 30% higher than 2012-13. This is the expenditure that is incurred by the central government in consultations with the Planning Commission. Here the expectation is that Expenditure should result in helping create better infrastructure and facilities across the country.

Non-plan expenditure : The target for non-plan expenditure is set at Rs 11.09 lakh crore. Expenses like salaries, pension, administrative costs, defence expenses, subsidies are all under non plan expenditure. A total of Rs 9.7 lakh crore was estimated to be spent under the non-plan expenditure in 2012-13. In the year gone by, India has spent more than Rs 10 lakh crore.

Growth outlook : For everyone to prosper, the country needs faster economic growth. Mr Chidambaram in his budget did not give any predictions on the growth rate. He expects India would get back to high economic growth ways through measures announced. “The overall economy is expected to grow in the range of 6.1 to 6.7% in 2013-14,” said the economic survey on Wednesday. There is an assumption here that India would have a normal monsoon, which along with moderation in inflation as per the Economic Survey, should enable low interest rates and mild recovery of global growth.

Surprises in the budget : The subsidy bill is estimated to be more than expected by the market at Rs 2,57,654 crore. The stock market built a significant expectation from the budget. At the time of going to press, the S&P BSE Sensex and NSE Nifty fell 1% at a time when markets across Asia surged. This indicates that the stock market is not too convinced about the ability of the government to manage its finances.

Expensive or cheap : Any changes in duties or taxes make things consumed cheap or expensive. In this year’s budget, finance minister P Chidambaram has made sports utility vehicles, yachts and high-end mobile phones (of value over Rs 2,000) more expensive. Cigarettes will also get expensive. Handmade carpets, electric hybrid cars and leather and leather goods including footwear could get cheaper.

Courtesy- yahoo.co.in and Bhushan Jadhav , editor in chief of Wealthcraft pvt ltd

0.25% cut…………does it mean anything????

Sunday, February 02, 2013

25 basis points .YES by 25 basis points the Reserve Bank of India has reduced the repo rate and cash reserve ratio on Tuesday. Now what do you mean by Repo rate? , it’s the rate at which banks borrow from the central bank, and it has been reduced to 7.75%; and the cash reserve ratio. A relief for banks is that the portion of bank deposits the banks keep with RBI, has been deducted to 4%. This gives a win win situation to both the banks as well as its customers. As per financial planners or advisors, the deduction in interest rate would benefit both the home loan borrowers and investors alike.
Now the main question stands, which is, what would this cut in rate mean for a home loan borrower, an equity market investor or an Impact on home loans?
They can expect some break in their EMI as banks are expected to pass on the interest rate cuts to borrowers. For an e.g.-is one is paying EMI at 12%, it will be reduced to 11.75%.
"There is a case for transmission as the RBI has cut repo rate and CRR. However, the timing of the rate cut will vary from bank to bank," says Punjab National Bank CMD KR Kamath. Borrowers should negotiate with the bank on least rate
According to financial advisors, there are still borrowers who still pay at interest rate of 12-13%, almost 2-3% higher comparatively to the industry rates. If the bank cuts base rate by 0.25%, these borrowers will still get more breathing space.
"The borrower should approach the bank and negotiate on the least possible rate. Today most banks charge a conversion fee of 0.5% and allow its borrowers to shift to the lowest applicable rate on their home loans," says Vipul Patel, director, Home Loan Advisors. Borrower can opt for a BT (balance transfer) scheme
Balance transfer is a concept introduced by the banks to benefit the borrower, they can opt it as it has become a cost-effective option with the abolition of pre-payment penalty on floating rate loans. "The balance transfer option is more cost effective than conversion. A salaried employee is expected to pay around Rs 10,000 plus service taxes if they switch lenders. Self employed individuals are expected to pay Rs 10,000 or 0.25% of the loan amount, whichever is higher," says Patel.
"While banks are saying that they will pass on the benefit of the policy rate cut to home loan borrowers, it is not clear whether it will be applicable to both new and existing borrowers. If the bank offers reduced rates only to new borrowers, existing borrowers should look at transferring the loan to a lender who is charging a lower rate. They can also switch to the current rates being offered by the bank, after paying conversion charges. In both the cases, they need to do their math," says Satish Mehta, founder and Use SIPs to invest in equities
"A cut in interest rates could come as a breather to companies which have a high working capital," says K Ramanathan, executive director & chief investment officer, ING Mutual Fund.
"A fall in interest rates if passed on to customers could lead to lower slippages for PSU banks," says Pankaj Pandey, head of research at ICICI Securities. The market was factoring in a rate cut of 25 basis points. Hence one saw profit booking and the Sensex ended the day down 117 points, at 19,985. While the rate cuts are a catalyst, they may not be enough to revive the investment cycle, which has slowed down over the last few years.

CRR cut to improve banks' profitability by 2-3%: CARE

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Source: moneycontrol.com

SBI expects 16-18% credit growth in FY13

New Delhi: State Bank of India (SBI) today said it expects loan growth of 16-18 per cent in the current fiscal despite a general slowdown in credit offtake. "There is demand slowdown... We expect a credit growth of 16-18 per cent for 2012- 13," SBI Deputy Managing Director S B Nayar said here.

With regard to corporate loans, he said certain sectors which are doing well in terms of credit offtake include ports, consumer goods and cement.

However, there are issues with some sectors, including road and powers, he added. Credit growth of banks has been flat in the second quarter at 0.1 per cent to 16.4 per cent, according to RBI data for the period.

On the recent rating action by Standard & Poors (S&P) on SBI, Nayar said the downgrading will have no impact as the agency has only brought the rating on par with the sovereign rating. So,there will be no cost implication on raising of funds, he said.

Earlier this week, S&P revised the stand-alone credit profile (SACP) of SBI to 'BBB-' from 'BBB'.

Meanwhile, SBI's newly appointed Managing Director S Vishvanathan said last year, the bank spent Rs 71 crore in Corporate Social Responsibility (CSR) activities.

This year the target is Rs 110 crore, which is one per cent of the net profit for 2011- 2, for various CSR activities, he added.

Vishvanathan also donated a vehicle to Sant Hardyal Education and Orphans Welfare Society here as part of its CSR.

Source: The Financial Express

ICICI offers Rate Cut upto 1 % on Home Loans.

MUMBAI: ICICI Bank, the largest private sector lender by assets, followed state-run banks in lowering interest rates for home loans as the fight to retain retail market share intensifies this festival season.

The lender led by Chanda Kochhar on Thursday cut lending rates from 25 basis points to 100 basis points across maturities. This is applicable for two months, but it still remains higher than State Bank of India's. A basis point is 0.01 percentage point.

ICICI's cut follows recent moves by SBI that still controls a fifth of the total banking industry and others such as Vijaya Bank and Bank of Baroda. New borrowers at ICICI would pay Rs 502 to Rs 6,700 lower a month depending on the loan slab.

"Banks are giving a thrust to retail loans since corporate loan book is not growing at a healthy pace," said D Sarkar, chairman and managing director of Union Bank of India, which took the lead in May.

"Also, considering the current economic scenario, giving boost to retail loans, such as consumer loans or personal loans, will give indirect boost to manufacturing sector which is good for the economy."

ICICI's floating rate home loans up to Rs 30 lakh will now cost 10.25% from 10.5% earlier. Between Rs 30 lakh and Rs 3 crore the rate is 10.5% which is 100 basis points lower. The bank has also done away with the slab of Rs 30 to Rs 75 lakh so that the biggest segment benefits from lower rates.

Indian banks are turning their attention to retail lending as demand from companies remain sluggish as chief executives defer new projects amid administrative inertia. Home loans are considered the safest with it being nearly half the total of the retail banking industry.

"We are seeing demand for home loans doubling ever since we have reduced rates on home loans,'' said A Krishna Kumar, deputy managing director of SBI. "Also, we are seeing customers from other finance companies and banks migrating to SBI due to our attractive rates.

There is hardly any demand for loans from corporates.'' Banks such as Union Bank of India, Bank of Baroda and Punjab National Bank have not only lowered rates for home loans and car loans but also done away with processing fees as a special bonanza.

Uco Bank says the bank takes no processing charges on home loan if availed with a car loan. There are stand alone offers too: 50% off on processing charge on home loans or 100% off on processing charges on car loans. "We have noticed that a segment of customers prefer to take home and car loans together,'' said UCO Bank CMD Arun Kaul.
Source: The Economic Times

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