Guide To Understanding Personal Loans - Personal Loan - Tata Capital

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Using personal loan as your down payment? Consider these things

Sep 11, 2018

Owning a house is every person's dream, and that, too, a legit one. After all, who wants to stay in rented apartments and shift places every two to three years? However, owning your own place is no child's play if you haven't saved up enough for the down payment. Now, just because you do not have enough resources for down payment does not mean you should give up on your dream house.

While your home loan will help you buy that house, wouldn’t you wish there was some special loan that could be used for down payment as well?

Well, there actually is a way to use a loan for down payments.

This is exactly what are personal loans meant for. Magical as it may sound, personal loans may be the answer to all your worries. You can easily use personal loans for a down payment of your property. Financial institutions like Tata Capital let you avail personal loans for down payment of your home.

Now, before you jump with joy and avail your personal loan, there are, of course, a few considerations to be made, and crucial things to keep in mind. Here are the five tips to consider while using the personal loan as your down payment:

Personal Loan down payment

1. Taking a personal loan for down payment means you will have two loans to repay. One, the EMI of your personal loan, two, the EMI of your home loan. Look into your finances to assess if you are in a position to repay two loans simultaneously, alongside your regular expenses.

2. Personal loans have a higher rate of interest compared to home loans. While home loans come at around 8.5 to 9 per cent interests, personal loan interest can range from anywhere between 11 to 20 per cent. Are you ready to pay this? Think.

3. One of the biggest advantages of personal loans is that the borrower can avail tax benefits on personal loan if he or she plans to use the funds to make the down payment for a house or do any kind of renovation work. One can claim up to Rs. 2 lakh on the interest paid against a personal loan. Now, that's an exciting offer, isn't it?

4. Using a personal loan for a downpayment of your property means you will not have to touch your savings or funds that you have set aside for medical emergencies, your child's higher education or say, that dream vacation or for even buying a vehicle. Your savings remain untouched, while you repay the loan on a monthly basis from your current income.

5. When availing of a personal loan for down payment alongside a home loan, remember that the sum of both your EMIs should not exceed 40 per cent of your net monthly income. For instance, if you have zeroed in on a property worth Rs. 40 lakh, you will get a home loan for 80 per cent that is Rs. 32 lakh. Your monthly EMI for this at the rate of 8.35 per cent for 20 years is going to be approximately Rs. 27,470 per month.

For the rest Rs. 8 lakh, you have to take a personal loan, and the EMI for that will be approximately Rs. 17,800 at the rate of 12 per cent for a tenure of five years. So your combined EMI will be Rs. 45,270. For a lender to approve this combined EMI of Rs. 45,270, your monthly income should be about Rs. 1, 13, 175. Are you earning that much? Do the math, and you are set to own your dream house.

A personal loan from institutions like Tata Capital is the answer for you when you have found the place of your dreams. A little thought and some basic calculations can help you figure out how you can use your personal loan for down payment as well as manage the home loan that you would want to avail for the home.

It’s never too late to find your dream home. Go ahead and start planning.

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Learn About Repayment for a Personal Loan For Education

Sep 04, 2018

We value our education. With the changing times and tides, it is a general belief that higher education with specialization can help us find the right career path. This is actually not just a belief. For so many of it is a reality.

We value our education because we know that it can help in our future endeavours. These days education comes at a steep price. There are those who work towards it or have saved for it. However, there are times when you know you have to study now so that you can pursue your future as per your life plan. What would you do if you have not saved for this?

Well, you can open up your financial nest and take a piece out of your saving or you can apply for a student loan.

Banks and NBFCs such as Tata Capital offer education loans so as to enable millions of people like you to acquire a higher education degree and make your future secure.

Planning for education loan

Education Loan Repayment

The first step to taking an education loan is to plan for it. You need to understand the circumstances under which Tata Capital or any other NBFC extends education loans. Typically, Tata Capital considers educational loan under its personal loan umbrella. Most importantly, you must remember that you have to repay the loan. Therefore, you must take the personal loan for education only to the extent that you need the loan and not a Rupee more. In order to help you repay the loan comfortably, the authorities permit you to repay the loan after completion of studies. The repayment process includes

  • Repayment holiday during the period of study
  • Repayment to start 1 year after completion of studies or after 6 months if employed
  • During the period of study calculation of interest rate is on simple interest basis
  • Post completion, interest accrued during the period of study plus loan availed becomes the principal payable
  • This amount becomes the new education loan payable through EMI options with tenure of 7 years. You can get an extension in special cases. Remember, this new loan attracts the interest of MCLR plus load (typically 1%) calculated on compound interest basis
  • Different repayment options

Planning for repayment

Once you have availed the loan, it is advisable for you to repay the loan as quickly as possible following the tips are given below,

1. The first thing to do to reduce the burden of repaying education loan is to pay off the simple interest during the period of study as and when it becomes payable. With this, you will not add the accrued simple interest amount to the loan amount. For instance, if the simple interest rate is10% and the period of study is 4 years, then on an education loan of Rs 5 lakh, the simple interest every year is Rs 0.5 lakh and thus for 4 years, the accrued interest would be Rs 2 lakh. If you don’t pay the simple interest, then the new education loan amount would be Rs 7 lakh. Thus, you would unnecessarily pay interest on the accrued simple interest for the tenure of the loan and that too at compound interest.

2. The moratorium period of 6 months is there as a cushion in the event you don’t get a job immediately after studies. However, in today’s campus recruitment scenario you are likely to land a job well before you complete your studies. You also will know your emoluments. So, it makes immense sense to think a little ahead and seek the recast of the education loan as soon as you complete the studies. Further, you can plan to keep the tenure much smaller so that you can repay the loan much earlier.

3. If you can earn while you are studying it is that much better and you can use the earned money to pay the simple interest or even some portion of the principal.

4. If you can manage to live frugally you can use the saved money to repay the personal loan for education.

5. Indians have a penchant for showering gifts on their young relatives and you too must be a beneficiary of such munificence. Use any cash gifts to reduce your education loan burden without splurging the gifted money. You could also use any windfall amounts you may receive such as the maturity of a life insurance policy taken by your parents on your behalf when you were a minor.

6. If you are already a taxpayer then it makes sense to use the tax provisions available under the education loan to reduce your tax burden. You can use the saved amount to reduce your education loan burden.

These are some of the ways in which you can plan the repayment of your education loan. You must remember that as you grow in your career your needs would grow and perhaps owning a home would be a desired objective. In such an event, your home loan eligibility will depend on your other loans. So it is advantageous for you to get the repayment of your education loan out of the way as soon as possible.

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Money lessons for this upcoming Ganesh Chaturthi

Sep 04, 2018

Among the pantheon of Gods for the Hindus, Lord Ganesh is the God invoked to start a new venture as Lord Ganesh is the God of intelligence and wisdom. More importantly, Indians believe that Lord Ganesh removes any obstacles that may come in the way of the success of the new venture. Indians all across the country celebrate the festival of Ganesh Chaturthi – a 10-day festival that falls as per the lunar calendar translating to different dates each year as per the Gregorian calendar typically in August/September.

Why are we talking about celebrating the highly revered Ganesh Chaturthi in a financial website? There are important lessons that you can learn from the way people celebrate this festival. Let’s see what lessons we can learn from this long-drawn 10-day festival.

Invoke the Lord to start your financial investment venture

If you have not already started investing for your future financial security, Ganesh Chaturthi is the ideal time to treat it as a new venture and begin during this festival. With the Lord’s blessings, you can use your intelligence to invest wisely and you are bound to succeed as the Lord is there to help you remove any obstacles that you may encounter. This is the best time to firm up your mind and commence a systematic investment plan (SIP) in a mutual fund scheme or commence a recurring deposit scheme. The key point is the regularity of investment with single-minded devotion; just as you would celebrate the festival regularly and with reverence.

Gain knowledge on various investment avenues

The Lord is the God of wisdom and intelligence. You should investigate all avenues for investment and gather as much information as possible and apply your intelligence to firm up plans for a planned investment journey that lets you become financially independent in the near and distant future. You can scour the Internet or you can take up a short-term course or you can follow any of the numerous websites that offer investment advice.

Learn to invest individually and collectively

You realize that you celebrate Ganesh Chaturthi individually in your home and also collectively in your community. This tells you that you can invest prudently as an individual in various schemes of your own volition or invest in mutual funds which professionals manage for you and millions of investors like you. You can benefit from your own intelligence and the intelligence of others.

Insurance as protection

You invoke the Lord to protect you. Make life insurance and health insurance your financial protectors. This is important because you don’t know when any untoward events may occur that can drain you financially. Besides invoking the Lord, you should wisely invest in insurance schemes to help you tide over difficult times for you and your family. Often, the cost of protection is just about the same as the amount you spend on celebrating the festival.

Use loans prudently

You may plan your financial affairs very well but you are bound to face some financial difficulties along the way. It is just for such occasions that banks and NBFCs such as Tata Capital provide short-term help to tide over difficult financial situations. Perhaps, your child needs to go on a study tour for which you had not planned. Instead of delving into your savings or breaking some of your long-term investments, you can overcome the difficulty by taking a festival loan or a personal loan extended by Tata Capital.

Learn financial discipline

When you prepare for celebrating Ganesh Chaturthi, you plan well, provide funds, socialize, exchange gifts, perform the rituals reverently, clean homes and wear new clothes. You repeat this year after year and each year your reverence grows. This teaches you to become disciplined in your financial affairs. If you set goals and set out a plan to achieve those goals then you need to discipline yourself to pursue the plan and implement it faithfully. For instance, if you had to take a personal loan, then you need to evaluate the pros and cons – how much to take, what EMI you can afford, use of tools available such as personal loan EMI calculator, who offers the best terms, ease of obtaining the loan and when to apply for personal loan. If you have learned discipline, then taking the loan is no big deal because you know that you will repay it with little fuss.

The above are just a few of the ways in which you can learn a lot from Indian festivals. The significance of the festivals, the way you celebrate them, the reverence with which you celebrate each of them and the disciplined approach you take to prepare for the celebrations especially Ganesh Chaturthi are remarkably prescient and will come in handy in your financial independence journey of your life.There is always NBFCs such as Tata Capital to support you.

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