Loans and Credit Card Payments

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We all are burdened by the vagaries of life. Loans simply add to it. Cheer up!…Remember the less you have the more there is to get…credit cards are like mosquito’s …you can keep them away for a while but sooner or later they will come back to suck your blood.

Here the main factor a person needs to consider is Do I really need a loan. We notice nowadays that people take loans just on their whims and fancies. I see my neighbor with a new car, I want it too. He has the latest laptop I want it too. I do not consider my purchasing power but just make a quick purchase even if I have to take a loan. Here I need to take the following decisions. Financial Planning helps us to make these decisions.

Loan is basically a debt taken by the borrower that is the person who takes the loan, from the lender,  that is the person who gives the loan. Here the amount borrowed is the Principal which is to be repaid along with a certain additional charge called the Interest, paid back in regular installments for a certain period of time. Here the interest portions are the incentive for the lender to lend money to the borrower. We all know that nobody gives anything for free…on a lighter note I don’t find it hard to meet expenses. They’re everywhere…

Should I Make the Purchase Now?

Is this product really necessary for my well being? Can I live without it? Is it a necessity for my day to day activities? Remember do not try to walk before you can crawl.

Can I Make The Payments On Time?

Here we need to carefully introspect and answer these questions. Does my salary justify the purchase of this particular product? Am I a victim of mis-selling? If you think no one cares if I am alive try missing a couple of your loan payments.

Do I Have A Backup Plan For These Payments?

If yes am I sacrificing better sources of investment in lieu of these payments? These are the questions we need to answer. Am I making an informed decision? For any questions regarding loans and types of loans contact

For further information on the topic you can CONTACT Prajna Capital on 94 8300 8300 by leaving a missed call.

 

How Fast can I Pay Back The Loan?

Nobody likes to be burdened by a loan ,and faster it is paid off better it is for all parties involved. Here one needs to consider the most comfortable time frame by which he can pay off the loan. A loan not only burdens the debtor but also his family. Remember if you can’t be good be careful.

Should I Purchase a Less Expensive Item?

A person should always weigh the need to purchase a particular item. Do I really need this particular item. Is it a luxury or a necessity. Once he makes the necessary conclusions after weighing the pros and cons he needs to take an informed decision. Remember half a loaf is better than no bread.

Do Not Fall For Marketing Tactics and Gimmicks:

A number of new products such as mobile phones and smart phones are released every month which captivates our mind. We should not fall for such misleading tactics and buy only what we require. Do not argue with an idiot. He will drag you down to his level and beat you with experience.

Never Bite More Than You Can Chew:

Here we need to follow a simple golden rule. Never Borrow More Than You Can Repay. Here borrowing can become a bad habit and the person may borrow more than he can repay. This is similar to gambling where a person is in a high state of euphoria during the state of the game and keeps playing on borrowed money. This might take away money from certain important needs ,and the person might have to compromise on his day to day needs such as paying his day to day expenses, and the amount payable keeps accumulating until it becomes too hot to handle. Let us consider the worst case scenario where a person has taken a loan against collateral or a guaranteed loan. He is not able to repay the loan amounts and this might lead to an eviction from his house if it is on mortgage, a car repossessed by the bank in case of a default on car loans or business equipment and investments lost in case of a business loan default. This results in a financial and emotional loss to the borrower. Is this right on the part of the borrower to put his family in such a mess?

For further information on the topic you can CONTACT Prajna Capital on 94 8300 8300 by leaving a missed call.

 

There Are No Free Lunches:

We come across cases where a student takes an educational loan and does not repay the amount as he believes the bank would write off the particular amount .What are the consequences of such actions. Would any other financial institution or bank come to know of it?

Bankers and other financial Institutions across the country report the credit information of the borrowers to CIBIL (Credit Information Bureau of India).It helps to eliminate cheating and fraud from the system.

For further information on the topic you can CONTACT Prajna Capital on 94 8300 8300 by leaving a missed call.

 

So What Does CIBIL Do?

·         CIBIL is a credit Information Company which helps businesses secure loans faster and on better terms. This helps to eliminate fraud from the system.

·         CIBIL maintains and collects records pertaining to loan repayments and credit card bill repayments of individuals submitted by banks and other financial institutions on a monthly basis. It then assigns credit scores to loan applicant s which helps evaluate loan applicants for banks and financial institutions.

·         Credit scores are assigned on values ranging from 300-900. Banks generally prefer a rating of 700 and above.

 

Play Safe:

So how does all this affect a loan applicant and his chances of securing a loan? Here we need to consider the CIBIL TransUnion Score, a number basically between 300-900.In simple language this provides banks the customers who are likely to repay their loans on time , Their eligibility to be provided with more loans. In simple language a score close to 900 means customers who are most likely to pay back loans based on their past loan repayment history.

For further information on the topic you can CONTACT Prajna Capital on 94 8300 8300 by leaving a missed call.

 

Be Within The Safe Zone:

So what happens to a loan applicant with a lower score close to 300.This is a question which must be going through the minds of all who take these loans.

·         Late Payments or Defaults of loans in the recent past means you will be provided with a lower credit rating.

·         Credit Limits: When a person uses a credit card he can avail of an amount called credit limit similar to loan talk time provided by some Telecom providers on their prepaid cards. Similarly on credit cards one can avail of such schemes. Here CIBIL monitors the number of times these are taken up and higher the usage, lower would be your score. This needs to be understood and monitored by the loan takers.

·         Take higher percentage of secured loans like Auto Loans and Home Loans rather than unsecured loans which are not covered by collateral. A higher proportion of collateralized loans means a higher credit score.

·         Credit Hungry loan applicants are viewed with caution as this indicates a debt burden already Borne by the loan applicant and his inability to service further debts.

 

Our New Year Resolutions:

Every Year passes and we make New Year resolutions which we try to keep. A very important resolution we all need to note is maintaining our credit credibility profile on a priority basis.

·         Know your score: Take time and effort to view and track your credit profile preferably online. View if it is properly updated .If a loan has been settled get the no dues certificate from the bank and see that the closure of the loan is updated in your credit records with CIBIL.

·         Maintenance Of Balance in your bank accounts : This is necessary for payment of dues as part payments do not help your credit score. This is necessary for paying your EMI and credit card outstanding amounts.

·         Consolidate Your Loan Accounts: Bring all your loans outstanding under a single umbrella. If you have four credit cards with a single bank with credit limits of INR 50000 each ,restructure them such that you will have 2 cards of INR 100000 credit limit each. This improves your CIBIL score.

·         Repay any unsecured loans as soon as possible as they degrade your credit score. Try to get a loan against shares or property and securitize these debts.

·         Do not stand guarantor for any loans for frivolous reasons and make informed decisions as this might spoil your credit rating.

I would like to conclude this article with the phrase Look Before You Leap as it is futile to think back once a commitment is made. So it is essential to plan in advance what one wants from his money.

For further information on the topic you can CONTACT Prajna Capital on 94 8300 8300 by leaving a missed call.

Happy Investing!!

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