All posts tagged: loan

Tips to consider before lending money to friends

Lending-money

Lending money to friends becomes a difficult choice at times. Money has the tendency to create rifts between closely bonded people. Yet money is a topic that becomes unavoidable.

Lending and borrowing between friends can lead to sequences of debts, debt traps, uninvited apprehension and animosity. Situations where the money is borrowed, and half-returned, partially returned or in the worst case scenario not returned creates an unpleasant situation

However we can create a space of clarity in the money matters between friends if we follow some ground rules. They are listed below.

  • 1. Lending should always be a situational process. You should assess the urgency of the situation. . If a friend asks us to open a credit card in our name for their use or asks us to guarantee their loan, then you should consider its consequences. We should not put ourselves in a situation where some one else’s actions can affect our credit. Their wrong usage can disrupt our credit score, thus lowering our chances of getting loans.
  • 2. Lending should be within limits. Even if it is a friend that we are talking about, we need to still evaluate the amount that we lend. Do not nod in agreement for an amount that can push you in a debt trap.
  • 3. It is also imperative to gain access to the details of where the money would be utilised. Here we are not talking about the trust, of course we trust the people here who borrow. But knowing where the money would be spent will give us a better knowledge of whether it is being put in the right use or now. It will also help us in acknowledging whether the situation deserves a loan or not.
  • 4. Discussing it clearly might seem like an awkward idea to begin with. However having the terms and conditions set in the beginning leads to a smoothly painted financial end. Repayment period, interest rates and the loan amount itself should be discussed in detail to avoid any misconception or a possible rift.
  • 5. Draft an agreement. In case you are lending a large sum of money, having a financial agreement worded in paper is always a good idea. Both the parties know the exact details of when, how and why. This just clears the air and avoids conflicts.
  • 6. Also a great option for them is to borrow through the new-age and financially sound institutions.
    EarlySalary is one such platform that provides instant cash at ease without the hassle and obstacles. So refer EarlySalary to your friend and be a friend in need.
  • Image Source:WikiHow

All posts tagged: loan

Applying for a Home Loan

sm-6-home-loan-oct5-1_647_092415060251

Financial planning while taking a home causes us to hyperventilate without fail. This is an integral decision in our lives, where we are financially able to get a house of our own, but we dread the debt that follows to get one.
We need to involve ourselves in comprehensive financial planning, tackle debts and control our money efficiently.

We will discuss about few things that can help us in applying for a home loan without any hassle.

1. Firstly to get a home loan, we need to have a decent salary and a secured job. We should be regular with income tax payments and filing of the returns as well. We should also get our form 16 from our employer.

2. It is extremely crucial for us to have a good credit score. In the absence of a good credit score, the financial institution might reject our loan request.We should be prompt in paying our debt on the due date.

3. We need to also keep a check on any other loans that we have applied for and taken. Financial institutions monitor our capability to repay. For example, If we have taken many loans that occupy 50% or more of our salary, then we probably might not be in the state to repay the loans. Hence a balance is advisable.

4. We need to get a mortgage banker involved in the process of selection of loans. There are innumerable loan options provided by the lender, and we at our part have innumerable questions. Having a mortgage banker leads to us making decisions faster with efficacy.

5. As mentioned, financial institutions evaluate our repayment capabilities. the lending instruments will ask us for all the investment data that we have. We would be required to share the details of bank account/s, post office savings schemes, insurance plans, employment details etc. In case we are freelancers or self-employed, then we need to give the bank the details of our income, income tax return, balance sheets , so that they grant a loan.

6. It is very important for us to assess the kind of property that we choose to get a loan for. It may become a little difficult to get the loan sanctioned if the property is a resale property of age 10-15 years. The financial institutions also evaluate the construction stages of the property. The property needs to be dispute free as well. So it is wise to be safer by going for a property that falls under a good record and is on pre-approved list of the banks.

7. While applying for the home loan, we need to be ready with the down payment. Most of the banks give allowance for eighty five percent of your loan. We need to pay the remaining amount as down payment.

8. The repayment time also is an essential factor to contemplate upon. We can choose the time to repay our loan. But while deciding the time limit, we need to consider the fact that a longer period of repayment time will lead to lower EMI’s but higher rates of interest. We also need to consider our age too at the time of repayment. Will that be the right time and will we have the ability to repay at that age? So we need to make the choice accordingly.

9.The financial institutions do not press on the need to have a guarantor. However having a sense of guarantee ,leads to an increment in our credibility.
Also there are cases where in it becomes mandatory for us to have a guarantor. For example, if we are self-employed, or if we are on a transferable job, if our city of purchasing the property varies from the city where we reside etc.
The guarantor could be our friend or family. And he/she takes guarantee in the legal space. But there is criteria for the guarantor. There are age and income standards that are set by the financial institutions, and if they are not fulfilled then the person can not be a guarantor.
In case we become delinquent, and we are unable to pay back. Then it is our guarantor’s responsibility to repay the loan.

10. If we apply for a certain loan amount, and it is not getting sanctioned, then we can choose to apply for the loan with our spouse. The chances of getting approval increases.

11. Having an appraiser in place helps all the parties aware that you are paying a reasonable price. The financial institutions arrange for an appraiser who essays the role of a third party. The appraiser evaluates and gives an estimate of the value of the house that we intend on buying.

At the stage of closing the process, there is certain paperwork that we need to get done with. It takes a few days for the lender to fund your loan after the completion of paperwork.

Our intention was to draw your attention towards certain basic but crucial points that are required in the home loan process. Hope this article helped! Happy Buying! .

All posts tagged: loan

How to Repair your credit score?

Credit score

Before conversing about fixing damages to the credit score. Let us talk about a good credit score. We often ignore credit score while applying for loans, and many of us unaware of the low score, until the lender rejects our application and informs us.

We should not turn a deaf ear towards our credit score; instead we should monitor it regularly.

What is the Credit score and why is it so important?

So essentially a credit score represents a person’s creditworthiness when he/she asks for a loan. A person’s credit score is determined by the person’s repayment behavior and credit history, and the creditworthiness is constructed around that. The credit agencies maintain a database of credit standings of individuals and commercial entities. The score ranges between 300- 900. Score of 750 and above is considered to be a good score. There are four agencies that are permitted to maintain this database. They are CIBIL, Equifax, Experien, and CRIF highmark.

Why is the score so important?

With a huge array of financial institutions you might feel that money is easily accessible, but this is not the case. The risks associated with lending have always been considered high and it is necessary for the institution to ensure that it’s lending to right person. Hence, the financial instruments rely on criteria that decide whether you deserve the loan or not. Here is where Credit score shines brightly. It is usually the decision making point for lenders to give or to not give the loan to the borrower. Hence it is important for you to maintain a good credit score, and work towards improving if it is low.

What makes a good credit score.?

The credit score, amongst many things, looks at these critical parameters:-

  • 1. Repayment history
  • 2. Loan enquiries and status
  • 3. Loan to income ratio
  • 4. Length of the credit history
There are no short cuts to improving credit scores. The best way is to administer and manage it over time. And gradually things will fall in the right place.

Let’s focus on some things that we can do to better our low credit scores

  • 1. Stop asking for a new credit – If you are aware that your credit score is poor, you should not apply for a loan at multiple banks. The more inquiries the lender puts into your credit score, the lower it goes. You need to be patient till the time you obtain the suitable score.
  • 2. Lessen the debt quotient in your kitty – You should meticulously chart out the credit accounts that you have out of your credit report. You need to stop using credit cards for this situation. Make a budgetary plan, and direct your expenses towards the higher rate interest credit cards first.
  • 3. Keep your repayment balanced: Well it sounds quirky, however repayment does affect your CIBIL score badly. So in this scenario if you drastically pay off all your repayments at once, then this portrays instability in your financial records. Repayments as a process should take place gradually thus reflecting monetary stability and rendering positivity to your CIBIL score.
  • 4. Set up reminders for Payment: We are so caught up in our routines, that we hardly have a breathing space. But we need to be alert, and sensible when it comes to financial planning and decisioning. Some financial institutions offer payment reminders through their online banking portals that can send you an email or text message telling you about the due date. Also there are automatic payments through your credit cards, wherein if you enroll, then payments are automatically deducted from your account and gets received by the lenders.
  • 5. Be vigilant of any sort of mismatches in your credit reports: It is advisable to leave no stone unturned. Sometimes bank authorities can across erroneous entries to CIBIL. So in such case scenarios, you need to approach banks to rectify the mistakes. Also you need to make sure that all the data on positive and timely payments is recorded and submitted by your lender to CIBIL
  • 6. Use your credit judiciously: Whenever you make use of your credit, then you should analyze the credit utilization ratio. This ratio is of amount of credit you have used to the amount if credit available as balance. If you have numerous credit cards, and you use only one of them, then your credit score may get negatively impacted. Hence you need to be smarter and spread your spends over numerous credit cards and not just one.
  • 7. You need to create credit history if you do not have one: For first-timers, there is an absence of credit history. Lenders might hesitate to give them a loan, owing to their zero credit score. So what you can do is open up a fixed deposit and take a credit card against it. And once you have one in your hand, then you can work towards it and improve the credit score.

We recommend you to check the credit score before applying for any loan to ensure that there are no issues in the credit history. Even if there are any, make sure you get them rectified by the agencies before applying for the loan. Our aim for writing this out was to make you understand the importance of a good credit history, and we hope that you take smarter steps towards financial goals.

Image Source:Credit.com