Term Plan – The best New Year gift for your family

Leave the expensive home appliances and new mobile phones – get your family the greatest gift ever, a term insurance plan.

Whenever we think of celebrating a milestone or gifting a special someone, we often think of buying big, expensive presents. While that is a great thought, the impact of that gift is only short-lived. After all, how long can one revel in the thought of a new mobile phone or a TV set?

But some gifts have a much more enduring value. They have a permanent good effect and they can be veritable life savers. We are referring, of course, to buying a term plan.

The best present this season – a term insurance plan

Your family may initially be puzzled if you whip out a term insurance policy document and say ‘Surprise!’ But a few minutes of explanation will help them realise the value of your decision to buy a term plan. If you are unsure of how to explain it to them, allow us to give you a few pointers:

• A term plan is an insurance policy that has a high sum assured and a low premium payment.
• It pays a substantial amount of money on termination. Hence, even if you are absent from your family’s world in the future, the term plan money can pay all their expenses and also for such things as children’s education, house maintenance costs and also repay loans.
• The term insurance nominees get the entire sum assured on termination of the plan, based on the pay-out option you choose.
• Once the plan tenure ends, the plan is terminated even if the policy holder outlives the plan.

How to buy term plans online

All reputed insurers today encourage prospective clients to buy term plans online. The applicant must fill out an online form, use the term plan premium calculator to find the best combination between sum assured and premium payable, and proceed to pay for the plan. Once the first premium is paid and processed, the term plan is deemed purchased.

Buying a term plan online also results in cheaper premiums. The premiums can be paid online every year and the insurer sends a reminder about due dates.

The premiums paid for the term plans are liable for tax benefits under Sec 80C of the Income Tax Act, 1961.

And so, it makes the best gift this season…

What would you rather choose – a gift that gives your loved ones momentary happiness, or a gift that protects their future with a substantial sum of money? We bet it is the latter option – after all, wouldn’t you want somebody to watch over your family when you are no longer around to protect them?

A term plan is that protector!

The easy guide to applying for loan against securities

Your LAS application process can be a breeze after understanding the features of the loan.

There comes a time in the growth cycle of every business, when taking a business loan becomes imperative to upgrading the business, acquiring new machinery, or purchasing new commercial premises. At this juncture, a deft solution is to take a loan against shares.

The loan against shares, as the name suggests, is a loan offered to you after you pledge your shares as collateral with a bank or financial institution. This option lets you monetise your owned securities at short notice, so that your business goals remain on track and you don’t have to liquidate your other assets. The only stipulation is the shares you pledge must be your own, and before applying for a loan against shares, find out from the prospective lending institution about their:

1. List of approved securities. Every bank and financial institution has a list of approved securities that they can offer a loan against. It is prudent to ask for this list from your preferred financial institution before you apply for a loan against shares. This will save valuable time for both you and the lender.
2. Rate of interest. The lending institution will offer you the loan against shares at a certain rate of interest. Find out the rate of interest being offered by at least three other comparable lenders before you make your decision. Interestingly, the interest charged on this category of loans is lower than that of personal loans or credit card loans. You are charged interest on the balance loan amount in your overdraft account.
3. Terms of use. Once the loan is approved and disbursed, you have the freedom to withdraw the funds as you wish. You are not required to withdraw the entire loan amount at once. You can use the money in stages as per your requirement. If you apply for loan against shares from a bank, you will be given an ATM card linked to the overdraft account, and you can withdraw money using the ATM card. Also, you can repay the money in equated instalments and incremental sums paid every few months.
4. Special factors. In most cases, the charges for processing the loan application, maintaining the overdraft account, stamp duty and registration of the loan agreement between you and the lender, etc. will be mentioned in a separate schedule of fees.

Personal finance manual: 5 rules to live by

We compile five financial planning rules that will help you amass wealth and keep you safe from future uncertainty.

Most of us wish that there was a manual we could follow that told us exactly how to get rich using the money we make. While you may or may not subscribe to the ideas that many financial experts put forth in books and TV shows, you must agree on one fact: your fiscal health needs a rulebook to live by!

And so, we compile 5 personal finance rules that will help you create wealth for the future:

1. 1 The 10% post tax rule. Rule #1 of your personal finance manual should be ‘Pay yourself first’. This means that you must set aside savings the moment you get paid. Most people do this in reverse – they try to save money from whatever is left of their income at the end of the month. Instead, set aside 10% of your post-tax income per month for a couple of years. When your income increases, you can increase this percentage to 15% for more savings.
2. 2 The 50% only rule. How much of your income should you spend on daily living? As much as you need, or as much as you can afford – or a little of both? The answer is: Spend only about 50% of your income on bills, groceries, travel, occasional recreation, children’s expenses, other household costs, etc. The remaining can be split into savings, children’s education fund and emergency fund.
3. 3 The emergency fund. Emergencies always strike without warning – there are no cautionary bells and whistles to tell you that a disaster is on its way. And so, it is vital that you prepare for any future crisis with an emergency fund that you build along with your savings. Aim to invest at least 5% of your income in this fund every month. You could operate a seldom-used bank account to stow away this money.
4. 4 The loan conundrum. Rare is the person who has not had to borrow a loan to finance a personal or professional need. From buying a home, to investing in your start-up, and from needing money for your child’s education, to paying for your parent’s hip surgery, a loan can finance a variety of needs. If you want money to pay for your own wedding, or book a special holiday or even to buy a new bike, you can simply opt for a personal loan. Do check your personal loan eligibility first!
5. Lifesavers’ special. Life and health insurance have become vital in today’s world of lurking health conditions and rising inflation. Stress, undiagnosed illnesses and high living costs all strain your resources when you fall ill. Your loved ones might also be left floundering if you are not in their midst in the future. So if you are thinking of investments, think of life and health insurance.

Things to Know Before You Opt for a Home Improvement Loan

About 833 million people, accounting for 69% of India's total population, live in rural areas. Out of this, 75% have a monthly income of less than Rs. 5,000. About 51% of them make their living through annual labour and 70 million do not have access to socio-economic benefits.

According to The Times of India, a vast majority of the population still lives in per capita space of equal to or less than 10x10 feet. This space is not just used for living but also for sleeping, cooking, washing and toilet needs. It comes down to 103 sq feet of space per person in the rural areas and 117 sq feet in the urban parts.

Although cities have slightly better facilities, not even a single city provides 24-hour water supply to its citizens and about 400 million people do not have proper toilets. With an estimation that 7 in 10 people living in cities by 2050, this poses a serious threat and home improvement loans are your best option to ensure that you kids grow up in a healthy environment.

Here are a few things you should consider before opting for such loans.

It is for Improvement and Not Addition

A home improvement loan is sanctioned for repair work that needs to be done and not to buy new items like furniture or kitchen equipment. It can be used to fix a leakage in the pipes, paint the walls, etc. In simple words, it is for the purpose of renovation. Therefore, read all the fine print on the application form thoroughly before signing it.

The Amount of Money to be Borrowed

Usually banks in India pay up to 80% of the total cost of renovation. You can calculate the total expenditure using a home improvement loan calculator. It is easier to acquire if you are already a home loan customer of a bank.

Eligibility Criteria

Just like other types of loans, your monthly income, age and credit history decide the amount that a bank will be ready to lend. If you already have a home loan which is 6-12 months old, you can approach the bank for an improvement loan too.

Benefits over Personal Loan

Unfortunately, a majority of the people in India are not aware of this product and thus opt for a personal loan instead. However, unlike a personal loan, an improvement loan allows you to extend the repayment tenure up to 15 years from 7 years, which means you have to pay a lesser amount as EMI.

Interest Rate and Processing Fee

The interest rate for this product is between 9.5% to 11%, while the processing fee can be anywhere between 0.5% to 1% of the loan amount. It varies from lender to lender.

Tax Exemption

Up to Rs. 30,000 is exempt under Section 24b of the Income Tax Act, but limited to home loan exempt of Rs. 2 lakhs.

There are no prepayment charges for this type of loan and you can choose between fixed and floating rates of interest. So, learn about the amount you need and the EMIs you are likely to pay for it using a home improvement loan calculator and make an informed decision to make your house a better place to live in.

10 things to mindfully plan for your retirement phase

Your retirement can be a glorious phase in your career if you plan for it well. We present 10 good investment options for your consideration.

A lack of planning and awareness about the right instruments can be the difference between a stable retirement and an uncertain one. Take a look at the following investment options that will help you plan for your retirement:

1. ULIPs. A Unit Linked Insurance Plan (ULIP) is an excellent insurance instrument to get capital appreciation over investment. It is a long term investment solution that also provides life coverage. You can start investing in a ULIP in your early 30s and keep investing it instead of withdrawing it after a few years, so that you build a large fund of money.
2. PPF. The Public Provident Fund remains one of the most popular investment instruments for Indians today. It provides an interest of 8% on the funds deposited for 15 years, and the minimum deposit is Rs 500 per year. Since it has a lock-in period of seven years, one is compelled to keep depositing in it. After seven years, one may partially withdraw the funds in it for personal use.
3. Annuity plans. This is one of the best instruments to explore for a peaceful retirement. Using the option of Immediate or Deferred Annuity, one may make an investment either one-time or over a period of years respectively. Look for a product with a traditional and non-participative plan that has flexible pay-out options for both you and your loved ones in your absence.
4. Property. Property always appreciates in value, and this feature makes it an attractive investment option. It may be difficult to buy property initially, but there are ways to monetise it almost immediately after purchase, by renting it or reselling at a later date. Property offers good liquidity and many options to make a regular income.
5. Money back insurance policy. This is an insurance product that offers regular income after a certain number of premiums have been paid. The income is provided annually and becomes a valuable second source of revenue in the retirement years. Generally, money back plans offer both survival and maturity benefits.
6. ELSS. An Equity Linked Savings Scheme (ELSS) offers good returns over investment and tax benefits. It is a diversified equity mutual fund that is also known as a tax saving mutual fund.
7. Mutual funds with SIP. A SIP (Systematic Investment Plan) helps you invest in mutual funds in equating instalments, so that you do not need to park a large sum of money in the fund at the outset.
8. Recurring Deposit. This is a way to invest incremental sums of money every month for a certain tenure, so that a large fund may be created at the end of the tenure. On maturity, you get a sizeable corpus with interest payable on the investment.
9. Fixed deposit. A fixed deposit uses a one-time deposit of money for a certain tenure (in months) and gives you returns by paying you interest on the deposit.
10. Life insurance. You can choose a life insurance product that has maturity benefits. The advantages are dual: 1) You get life coverage, and 2) The maturity can be timed to coincide with your retirement, so that you may get a large fund of money for your personal use.

How ULIPs can help you have a happy retirement

Financial experts advise against depending only on private savings and pension plans for a comfortable retirement. It is time to look at ULIPs.

Many people planning their retirement at the current moment have built a large savings fund from their income and/or invested in good pension plans for the future. Both are excellent options and must be pursued by every potential retiree. But the question to ask is: Are these enough?

With living costs rising every day and inflation showing a constant upward trajectory, it is vital to look at investment options that can beat inflation and offer good returns. You may have invested in a bank fixed deposit or must make regular contributions to your PPF account. But when you retire, will the monies from these instruments help you tide over a financial crunch?

It is time to look at Unit Linked Insurance Plans (ULIPs) to create a retirement corpus.

Why invest in ULIPs?

Many would be terrified about investing in equity-linked securities, especially in the context of retirement planning. But the best ULIP plans for retirement are aimed at further lowering the inherent risk while offering excellent returns on investment.

Unit-linked pension plans help you build a large corpus for your retirement. Imagine if you invested a lump sum amount of Rs 50,000 at 14% interest for 30 years. After deducting tax, the returns on the ULIP would amount to about Rs 25 lakh. Processing and other charges are lower on ULIPs than on other equity-linked investments.

Besides, you have the option of switching your ULIP investment to debt markets if you do not wish to invest in equity markets. You can switch back to equity markets if they are performing well. In all, you can switch your fund options up to four times a year. Hence, you are assured of high returns on investment. However, it is better to entrust this task to the fund manager to avoid switching at the 

wrong times in the market cycle.

Even more importantly, the best ULIP plans give you the option of increasing your investment size in the ULIP pension plan. You can do this if you have extra income in the future, or if you have gained returns from another investment that you wish to invest in the ULIP. Hence, you get higher returns by the time you retire.

If you are on the lookout for the best ULIP plan for retirement, we recommend Wealth Max Plan. It is a single premium ULIP that gives the option of future top-ups, plus the freedom to partially withdraw against the ULIP in an emergency. Also, the plan provides tax deductions under Sec 80C and 10(10D) of the Income Tax Act, 1961.

Loan against shares: Which companies are the top performers?

Reputed financial institutions and banks in India have upped the ante on extending loans against securities in India.

As expenses go up every single day and consumers look to create new channels of funding for personal or professional needs, there is a rising trend to seek hitherto unconventional borrowing methods.

This has led to consumers exploring funding through asset backed means. Asset backed loans comprise such instruments as owned gold, shares, equity mutual funds, exchange traded funds (ETFs), bonds, Government securities, etc. Taking loans against securities is fast becoming popular among businesspersons and even private individuals in India. These means are explored when conventional loan methods may not be available or may not be effective. Normally, loans against securities are borrowed for a shorter period of time.

The big guns in the loans against securities universe

Responding to consumers’ growing need to borrow loans against securities, reputed banks and financial institutions in the country have created a range of excellent loan products. While consumers use these loans for their needs, several banks and NBFCs have emerged as key players in this space.

The big players in the loans against securities arena are:

• IDBI Trusteeship
• Aditya Birla Finance Limited
• Axis Bank
• Axis Finance
• IL&FS Trust
• Bajaj Finance
• Citicorp Finance India
• Kotak Mahindra Investments
• Tata Capital Financial Services
• L&T Fincorp

How loan against securities work

You may pledge your securities – shares, gold, bonds, Government securities, et al – the lending institution for a certain tenure. The securities are then valued and the loan amount is issued to about 50% to 70% of the securities’ value. The borrowers’ credit history also plays a factor in the approval of the loan.

In India, the top performers in loans against securities are measured against their cumulative lending per financial quarter. 

10 most popular loan products

Here’s a look at the most popular loans being availed by different segments of the population in India today, to fund both personal and professional pursuits:

1. Home loans. These are the most popular loan products in India. They are loans extended for the purchase of new or resale property. They are secured loans with a lower rate of interest than other products such as personal loans.
2. SME loans. These are loans extended to businesses in the MSME sector so that they can scale up operations and achieve their goals. The loan amount can be used to buy new machinery, bid for a prominent contract or even purchase new property.
3. Loans against property. This is a secured loan, but it differs fundamentally from home loans. In this loan, the owned property is mortgaged to the financing institution for a certain tenure. The loan amount is fixed at about 70% of the property’s value at the time of application. The money can be used to buy new property or make large business payments.
4. Personal loans. These are unsecured loans with a high rate of interest. They are typically extended against the applicant’s credit history and income capacity, for a period generally not extending five years. The money can be used to fund child’s education or wedding, or personal medical procedure, etc.
5. Business loans. These are offered to businesses in both the urban and rural areas at a slightly higher rate of interest than home loans or loans against property.
6. Commercial vehicle loans. Some businesses require their own vehicles for the daily transport of goods and staff. These vehicles may comprise mini-vans, trucks, jeeps, SUVs or even trailers.
7. Two wheeler loans. These are useful for people in the rural areas, who find it easier to navigate bad, narrow roads on two wheelers. Premier financial institutions in India have made the two wheeler loan application process extremely simple.
8. Education loan. Education loans are popular products for those families wishing to send their children to national or foreign universities for higher education.
9. Rural housing loans. People in the rural hinterland are now able to buy their own land or ready houses on the basis of rural housing loans. The loan amount is given up to 70% of ready homes and up to 80% of self-constructed homes.
10. Rural business loans. Small and medium businesses in the rural areas of the country are now able to set up small office spaces, buy factory space and even invest in machinery through rural business loans.

Loan against property: How it helps get a new business off the ground

Entrepreneurs can look at loan against property as the primary seed money for their business. We explain how these loans work.

The first question facing any potential entrepreneur is this: ‘How will I start the business?’ The question is not related to a lack of business ideas; it pertains to a funds crunch. Many businesspersons are hampered by a lack of money – hence, they are unable to get their business idea off the ground. They may either borrow seed capital from friends and family, or take a personal loan.

But there is a better way to get funds quickly and without paying as much interest as one does on a personal loan. We refer to the ‘loan against property’, a solution that can help get one’s business up and running.

How it works

The loan against property is a sum of money that the lending institution grants an applicant who pledges their owned property for a certain amount of time. It is different from a traditional home loan. The loan against property is a secured product, since one pledges the property as collateral. This is how it fundamentally differs from a personal loan, which is an unsecured loan product.

The features of loans against property

• Though slightly more expensive than a home loan (in terms of interest payable), the loan against property is more affordable than a personal loan.
• The factors that normally affect the loan amount are: Whether the property is residential or commercial, location, age, rented/vacant/self occupied, etc.
• The lending institution conducts its own valuation and bases the loan amount on the lowest evaluation. Normally, the loan amount does not exceed 70% of the property value in most cases.
• The tenure for these loans is often smaller than those of home loans, and larger than those of personal loans.
• The property documents remain with the financing institution till such time that the loan is repaid, but it does not exercise ownership over the property.

Repayment capacity is also an important factor in deciding if a loan against property is a good choice or not. A first time entrepreneur with limited prospects and erratic cash flows might find it difficult to repay the loan. For entrepreneurs with good business prospects, however, this is an affordable funding option. If repaid regularly and with partial pre-payment at regular intervals, the funds from the loan against property can literally help take one’s business to the next level.

Where does your monthly salary go?

Are you saving money for your future? If you want to, you must start by opening a savings bank account.

Our lives follow an almost similar trajectory as our parents’ did before us: we get a good education, secure a job, get married and have a family, raise our children and retire in peace. These are the larger goals in life. The smaller goals are about the little things: going abroad for a family vacation, buying an expensive electronics appliance once a while, doing things for our parents.

But whether a goal is large or small, you require money to make it come true. Proper financial planning will help you create sufficient funds for the future. And the first step in this direction is taken by opening a savings bank account.

Why you need a savings account

One of the most helpful habits to inculcate is the savings one. It requires tremendous discipline and focus to save money every month, especially in the face of emergency expenses. But saving money every month holds you in good stead for the future: you can pay for a variety of needs and secure yourself against penury. Saving regularly also reduces the habit of overspending. Also, you need to deposit the saved money in a savings bank account so that you do not end up spending it by mistake and you also earn returns on it (through interest paid by the bank on the residual funds).

Start by budgeting and saving money regularly

Set six monthly targets for yourself, basis the goals you wish to accomplish. For example, if you want to take a foreign vacation in six months, find out how much the flight tickets and accommodation will cost. Now break this sum down into six parts: you must save this much money every month to achieve this target.

Similarly, you might wish to hit a certain mark in your savings so as to invest that corpus in a fixed deposit or a mutual fund. Whatever your reason, you must begin by opening a savings account.

Using the savings account

Once you open your savings bank account, ensure that you deposit a certain sum of money in it every month. Also deposit any additional money that comes your way from a gift, increment at the office or an annual bonus. But the saving must be made first, before monthly expenses get in the way. Imagine, if you start by saving Rs 5,000 per month, you will have an extra Rs 60,000 in your savings account at the end of the year.

Budget 2016: A roadmap for progressive rural development

The Union Budget 2016 charted out a clear vision statement for the progress of India’s rural regions. We take stock of some key announcements.

Budget 2016-2017 was observed by many as an exercise in carrying forward and implementing some of the reforms announced in the previous budget. However, this financial year’s budget took a significant departure to focus on farming, agriculture and the country’s rural areas. Several significant announcements in Budget 2016-2017 were devoted to these areas, and if implemented correctly and efficiently, should boost India’s agriculture and rural business landscape to great heights.

In a nutshell, the following were key announcements for the rural areas as outlined by Budget 2016-2017:

1. 1 Mass welfare: Priority to be given to funding initiatives aimed at rural families. These include primary education, two wheeler loan and small business funding, incentives for women’s cooperatives, and special focus on drought-prone areas.
2. 2 Basic services: At least 5,500 villages were slotted to receive power by May 2016, Rs 19,000 crore to build roads in villages, cooking gas for BPL families, and Rs 9,000 crore for Swachh Bharat Abhiyan with special emphasis on clean villages and toilets for every home.
3. 3 Modernisation: 3,000 medical stores to be started under Jan Aushadhi Scheme till 2017, launch of agricultural e-market portal, digital literacy mission programmes, and new reforms in banking, insurance and infrastructure.
4. 4 Agriculture: 28.5 lakh hectares to be brought under irrigation programmes of Pradhan Mantri Krishi Sichai Yojana, Rs 412 crore for organic farming initiatives (5 lakh acres area being targeted for organic farming), Rs 5,500 crore from PM Fasal Bima Yojana, Rs 5,500 crore for crop insurance, Rs 17,000 crore for irrigation, aim to double farmers’ earnings by year 2020.

These initiatives will go a long way in uplifting India’s rural regions. A lot of untapped potential exists in India’s villages, held back owing to lack of opportunity, timely finance and even awareness about several welfare schemes. Meanwhile, several financial institutions in India are doing their bit to bring about a revival in the fortunes of India’s villages. These initiatives include simple and accessible banking and insurance services for the rural areas, as also funding opportunities for families like two wheeler loans and business loans to kick-start their own venture. 

Benefits of a Home Loan

According to statistics released by the Reserve Bank of India, the housing market has been witnessing a constant rise in prices since the first quarter of the financial year 2010-2011. The Residential Property Price Index (RPPI) saw a stark increase of 61% from the first quarter of the financial year 2010-2011 to the third quarter of the financial year in 2014-2015. With 78% RPPI growth, Jaipur became the city with the highest growth rate, whereas the lowest growth rate of 40% was recorded in Chandigarh and Hyderabad during this period.

The inflation in house prices saw a slight decrease in India since the last quarter of 2014-2015.The annual house price inflation moved slightly upward in developed countries like the US and UK since the last quarter of 2013-2014, while in Asian countries like China, Indonesia and Malaysia, the inflation rates went down during the same period.

This constant rise and fall of rates in the market is making it even tougher for the common man to own his dream house. That's where banks and housing loans come into the picture to help you fulfill your dream without having to worry about the market volatility. Here’s a look at some of the benefits of taking a home loan, especially if you evaluate the amount you apply for using a home loan EMI calculator.

Advantages You Stand to Gain

1. Low Interest Rates Buying your dream home with a loan is a long-term decision, which can have a financial impact on you for over a period of at least 10 years. During this time, the interest rates are bound to go through various up and down cycles. Therefore, it can lead to situations where interest rates fall, allowing you to prepay the whole loan and own that home faster than you expected. For example, the interest rate in 1995 was 18%, as compared to 7.5% in 2015-2016. Banks often provide lower interest rates to new borrowers. So, when there is a rise in your existing home loan rates as the per interest rate cycle, pay 0.5% of the outstanding loan as processing fee and avail the rates offered to new borrowers. 
2. Tax Benefits According to Section 24(b) of the Income Tax Act of 1961, you can claim a tax deduction of up to Rs. 1.5 lakhs towards the total interest payable on a home loan. According to the newly added Section 80C, along with the 80CCE of the Income Tax Act, repayment of the principal amount up to Rs. 1 lakh on your housing loan can be given as a deduction from the gross total income under certain prescribed conditions.

So, when you decide to go ahead with a home loan, make sure to use the home loan EMI calculator to find out the amount you will have to pay every month. This will give you the freedom to plan your financial matters well in advance and avoid any rude shocks later on. 

Understanding monthly income plans and their benefits

If good returns with a supplementary source of income are what you expect from your investment, look no further than monthly income plans.

What is your expectation from the money you invest? Do you merely wish to see steady growth or do you want the investment to return as a second source of income? The very least your investment must do is multiply and provide you with regular income. But there are tonnes of investment options out there, so it can become a little daunting to choose the most suitable one.

Start yourself on the road to financial success with a highly useful investment instrument known as the ‘monthly income plan’.

What are Monthly income plans?

A Monthly Income Plan (MIP) is, as stated above, an investment product that helps one secure his finances for the future. When you buy a monthly income plan, about 80% of the corpus is paid towards investment in debt instruments, while the remaining in invested in cash or equity securities. Thus, it is a debt market oriented mutual fund with the potential to provide periodic income via dividends. The money is invested in such debt instruments as corporate bonds, Government securities and debentures. Thus, the growth of the monthly income plan is assured, though the nature of the investment is a long term one. It also needs careful study of the prevalent interest rates to monitor the fund performance better.

Choosing the best monthly income plan

When looking for the best monthly income plan, look for one that is rated highly in its category and has strong recommendations from prominent business publications in the country. Some MIPs also receive awards for the best rate of growth and overall performance. Keep a lookout for customer testimonials as well – they offer the best inputs on which plans to buy.

However, the plan you choose depends on your financial outlook and long term goals. You will be better served exploring another investment option if you seek short term gains. Monthly income plans are useful for the medium to long term. The plan must adjust itself to realign with smaller equities in markets that see a reduction in debt returns – this assures returns on the plan despite declining interest rates. It is prudent to remember that every monthly income plan carries a moderate risk.

However…

• MIPs may not declare dividends every month, and certainly not in the first month right after investment. At a later stage, dividends are not declared owing to poor market performance.
• The returns are accounted for in terms of the prevalent interest rates. The equity component of the MIP helps to offset the rise and fall in market rates.
• Monthly income plans are taxed just like other debt funds in India. 

Bad credit score? Here’s how you can improve it

We present a few tips and tricks to improve your credit score before applying for a home loan.

It is easy enough to get a loan in today’s times, both for professional and personal reasons. But it is not as easy as just applying for a loan and getting the cheque from the lending institution – there is the matter of having a good ‘credit score’ in between.

A credit score is simply a number derived from the applicant’s personal credit history, basis the past credit, new credit taken recently, loans repaid and time taken to do so. This number is often the first thing that banks and financial institutions look for when examining an application for a loan. Most applicants do not know this – they simply assume that a large income and good repayment capacity will get them the loan approval.

The credit score thus helps lenders establish the applicant’s credit worthiness, i.e. if the applicant is a safe one or a risk for the lender. Basis the lender’s interpretation and understanding of the credit score, one’s loan application may be approved or rejected outright. If a ‘risky’ candidate’s application is approved, the rate of interest levied might be a higher one.

But the credit score is studied before you apply for a loan. Fortunately, there are ways to improve your credit score before you make your loan application. The following are a few ways:

• The lender will not ask for past loan history to first time applicants, but will examine current assets that the applicant will put up as collateral. Make sure these assets are of high quality.
• If you still have an unpaid loan, try to repay it as quickly as you can, over and above the EMIs you pay per month.
• Before making your application, use a home loan EMI calculator to find out how much your monthly outgo will be. If you already have some funds in reserve, apply only for the remainder.
• Lenders also study repayment patterns on credit cards. Clean out all credit card debt first.
• Your application might be rejected if you are found to be embroiled in cases of cheating and/or forgery, or if you have ever declared bankruptcy or there have been foreclosures against your name.

5 Things to Ease into your Retirement with Improved Finances

It is never too early but it might get too late to plan for your retirement. We explain how you can ensure good cash flows in your post-working years.

The retirement years can be a time of blessed release from familial obligations, financial worries and in fact, any pressure. But this is true only for those who have sufficient financial wherewithal to tide over the expenses at the time. Have you made a financial roadmap for your retirement life? If not, consider these five steps to get started:

It is never too early but it might get too late to plan for your retirement. We explain how you can ensure good cash flows in your post-working years.

The retirement years can be a time of blessed release from familial obligations, financial worries and in fact, any pressure. But this is true only for those who have sufficient financial wherewithal to tide over the expenses at the time. Have you made a financial roadmap for your retirement life? If not, consider these five steps to get started:

1. Make a monthly expense plan. At about five years from retirement, you will have a good idea of how much money you will need in your retirement years. Your income will stop but your expenses will not – these include daily living expenses, rent/mortgage, unpaid loans, variable costs (clothes, groceries, bills), large costs (vacations, home repairs, etc.) Now factor in inflation and add it to this figure – will your pension or any other source of income pay these expenses? If not, you must consult with an advisor about generating more post-retirement income.
2. How will you be protected? Your retirement years will see you falling ill, developing age-related aches and pains, selling some assets to pay liabilities, etc. You require protection for yourself, your house, your car and other valuable assets you own. If you have not taken insurance, do so now (though the premiums might be higher at a later stage of life).
3. Take a calculated risk. Once your income stops, you might need to make a plan about how to raise finances against the assets and investments you already own. For instance, some people take a loan against mutual funds or open a bank fixed deposit to mature in time for retirement. Others sell off their current homes to buy a smaller one and live comfortably on the surplus funds. Your financial adviser can best tell you how to do this basis your finances and investment risk.
4. Count your taxation. Taxes eat away a chunk of one’s finances every year. Though you will not have a salary in your retirement years, you will still accrue income from owned properties, investments, maturity of fixed or recurring deposits, any business you own, etc. If you are a senior citizen, your income might come within the permissible tax bracket. If not, your financial adviser can show you how to reduce your taxable income.
5. Make a plan for your partner. What happens to the home and the household expenses after you are gone? Your partner might suddenly become vulnerable to financial uncertainty and might have to depend on children and close relatives for sustenance. Make a plan that takes into account your partner’s living expenses, the transfer of assets such as property and gold to your partner, making your partner a nominee for your savings account corpus, etc.

Top tips to find the right home loan

Not every home loan is created equal. Finding the one that works for you will take planning and calculation.

Owning a home is the topmost priority for most people today, especially those who live in rental accommodation in the country’s expensive cities. Every person wants a space to call his own, free from the hassle of paying monthly rent and moving homes every few years. Hence, it is preferable to buy one’s own home and live in peace and security for the rest of one’s life.

However, you will need a home loan to pay the bulk of the home’s price. This is how you select the best home loan product for you.

• Check your loan eligibility. Each lending institution starts by finding out the applicant’s loan eligibility. This is computed by examining the applicant’s source of income, whether repayment capability is bolstered by spouse applying as co-owner, credit history, existing debts, etc. If the applicant is found suitable, the lender will give the go-ahead for the application. You can find out how much loan amount you will get and your monthly outgo.
• The EMI question. The monthly EMI you will pay against your home loan repayment is an important figure. It is deducted directly from your bank account every month and you cannot ask the lender to not deduct the EMI for a month or two if your finances are tight! Hence, agree to pay an EMI which will not strain your monthly budget to impossible levels. Ask the lender for all calculations of your EMI basis the different rates of interest being offered, or readjust the tenure.
• Choose the right rate of interest. You will be offered a fixed or a floating rate of interest on your home loan amount. If you are fairly confident of repaying the loan early, choose a floating rate of interest because your repayment amount will be lower. Else, choose a fixed rate of interest. The lender must give you a choice to select between the two and switch at a later date.
• Select a shorter tenure. If you multiply the EMI to be paid with the tenure (in months) that the lender is offering you, the resulting figure should be the loan amount. If you choose a shorter tenure, your EMI amount will increase. But the loan with a shorter tenure will be cheaper for you. However, select a shorter tenure only if are sure of repaying the loan before tenure is up.
• Select the right lender. There are several home loan lenders today providing excellent loan products. Find the one that works for you the best by seeing the disbursal process, the rate of interest, the processing charges and whether any foreclosure charges are being levied. You can also try and negotiate the interest rate if you have a relationship with the lending institution.