Ten Golden Rules To Follow When Taking A Loan - The Economic Times

5/16/2019 Ten golden rules to follow when taking a loan - The Economic Times
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Ten golden rules to follow when taking a

loan
If your EMIs gobble up too much of your income, other critical financial goals, like saving
for retirement, might get impacted.
By Neha Pandey Deoras, ET Bureau | Sep 14, 2015, 10.44 AM IST Save
76
Comments
In an ideal world, everybody would have

enough money for all his needs. In reality,
many of us have little option but to borrow to
meet our goals, both real and imagined. For
banks and NBFCs, the yawning gap SPOTLIGHT
between reality and aspirations is a Tech World
tremendous opportunity. They are carpet
bombing potential customers with loan offers
through emails, SMSs and phone calls.
Some promise low rates, others offer quick
If your EMIs gobble up too much of your income, other disbursals and easy processes.
critical financial goals, like saving for retirement, might
get impacted.
Technology has changed several things for
the lending industry. Online aggregators help customers zero in on the cheapest loan and
banks take less than a minute to approve and disburse loans. The personal loan facility
from HDFC Bank is the Usain Bolt of the financial world. It takes just 10 seconds to Rs 1,000: All it costs to crack
disburse a loan to its Net banking customers. “It’s a game changer for the industry,” claims WhatsApp code
a bank official. WhatsApp is being misused in at least three
ways: free clone apps, business senders &
software tools.
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UNDER THE LENS

While technology has altered the way loans are being disbursed, the canons of prudent A look at Alibaba's
borrowing remain unchanged. It still doesn’t make sense to borrow if you don’t need the next generation
money. Or take a long-term loan only to enjoy the tax benefits available on the interest you
pay.
1 TenOur cover
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https://economictimes.indiatimes.com/wealth/borrow/ten-golden-rules-to-follow-when-taking-a-loan/articleshow/48932386.cms 1/25
et e o Septe be 0, 0 9,
customers must keep in mind. Follow them and you will never find yourself enslaved by
debt. POLICY AND REGULATIONS
Should NBFCs be
made 'universal
banks'?
They outperform PSU banks on most
financial metrics and need a level playin...
P2P Loans & Lending

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Vikas?
❯ Fintech eco-system is moving to blockchain and
AI: Rajat Gandhi, Faircent
1. DON’T BORROW MORE THAN YOU CAN REPAY More from P2P »
The first rule of smart borrowing is what the older generation has been telling us all the
time: don’t live beyond your means. Take a loan that you can easily repay. One thumb rule
says that car EMIs should not exceed 15% while personal loan EMIs should not account
for more than 10% of the net monthly income. “Your monthly outgo towards all your loans
put together should not be more than 50% of your monthly income,” says Rishi Mehra, Most Read Most Shared Most Commented
founder, Deal-4Loans.com.
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return than your investment
Can online loan portals offer you a better deal?
Documents required for filing ITR
With banks falling over each other to attract business, taking a loan appears as easy as 10 reasons why you didn’t get a raise
ABC. But don’t take a loan just because it is available. Make sure that your loan-to-income Daughter's claim to father's property: When she can
ratio is within acceptable limits. Hyderabad-based Phani Kumar has been repaying loans and when she can't
right from the time he started working. Money lessons from Warren Buffett and Charlie
Munger
More »
Borrow Top Trending Terms

No-cost EMI Prepay Home Loan Reduce Loan Burden
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It started with two personal loans of Rs 5 lakh six years ago. At that time, he was paying
an EMI of Rs 18,000 (or 40% of his take home). Despite stretched finances, Kumar took a Oyo Hotels & Homes launches Oyo
car loan of Rs 5.74 lakh in 2012, adding another Rs 12,500 to his monthly outgo. Last Lite globally
year, he took a third personal loan of Rs 8 lakh to retire the other loans and another top-up
loan of Rs 4 lakh to meet other expenses. Today, he pays an EMI of Rs 49,900, which is
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If your EMIs gobble up too much of your income, other critical financial goals, like saving Returns in %
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first to be sacrificed in such situations. Even after six years of working, Kumar’s net worth For regulatory disclaimers, click here.
is in the negative. Make sure you don’t commit this mistake.

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2. KEEP TENURE AS SHORT AS POSSIBLE
The maximum home loan tenure offered by all major lenders is 30 years. The longer the
tenure, the lower is the EMI, which makes it very tempting to go for a 25-30 year loan. How women in Science & Tech are
However, it is best to take a loan for the shortest tenure you can afford. In a long-term making India future-ready
loan, the interest outgo is too high. In a 10-year loan, the interest paid is 57% of the
borrowed amount. This shoots up to 128% if the tenure is 20 years.
How the promise of a $120 billion Uber
If you take a Rs 50 lakh loan for 25 years, you will pay Rs 83.5 lakh (or 167%) in interest IPO evaporated
alone. “Taking a loan is negative compounding. The longer the tenure, the higher is the
compound interest that the bank earns from you,” warns financial trainer P.V.
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Sometimes, it may be necessary to go for a longer tenure. A young person with a low cheerleader
income won’t be able to borrow enough if the tenure is 10 years. He will have to increase
the tenure so that the EMI fits his pocket. For such borrowers, the best option is to
increase the EMI amount every year in line with an increase in the income. Smartphone companies ring in price
cuts
Increasing the EMI amount can have a dramatic impact on the loan tenure. Assuming that
the borrower’s income will rise 8-10% every year, increasing the EMI in the same
proportion should not be very difficult. If a person takes a loan of Rs 50 lakh at 10% for 20 Steeper rate cuts to boost mkts: Dipan
years, his EMI will be Rs 48,251. If he increases the EMI every year by 5%, the loan gets Mehta
paid off in less than 12 years. If he tightens the belt and increases the EMI by 10% every
year, he would pay off the loan in just nine years and three months.
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3. ENSURE TIMELY AND REGULAR REPAYMENT
It pays to be disciplined, especially when it comes to repayment of dues. Whether it is a

short-term debt like a credit card bill or a long-term loan for your house, make sure you
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don’t miss the payment. Missing an EMI or delaying a payment are among the key factors
that can impact your credit profile and hinder your chances of taking a loan for other needs
later in life.
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Never miss a loan EMI, even if it means missing other investments for the time. In an e-deliveries
emergency, prioritise your dues. You must take care never to miss your credit card
payments because you will not only be slapped with a non-payment penalty but also be
charged a hefty interest on the unpaid amount.
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If you don’t have the money to pay the entire credit card bill, pay the minimum 5% and roll Nasscom, Fintech want crypto in RBI’s
over the balance. But don’t make a habit of this because at an interest rate of 24-36%, sandbox
credit card debt is the costliest loan you will ever take. To avoid missing the due date every
month, just give standing instructions to your bank to pay the minimum 5% amount
whenever the bill is due. Buffett's Berkshire unveils $861 million
Amazon stake
4. DON’T BORROW TO SPLURGE OR INVEST
This is also one of the basic rules of investing. Never use borrowed money to invest. Ultra-
GST anti-profiteering body may get
safe investments like fixed deposits and bonds won’t be able to match the rate of interest fresh lease of life
you pay on the loan. And investments that offer higher returns, such as equities, are too
volatile. If the markets decline, you will not only suffer losses but will be strapped with an
EMI as well.
'Funding crisis to worsen unless India
pumps in cash'
There was a time when real estate was a very cost-effective investment. Housing loans
were available for 7-8% and real estate prices were rising 15-20%. So it made a lot of
sense to buy a property with a cheap loan. Now the tables have turned. Home loans now
Along came a Whatsapp trojan
cost around 10% while property prices are rising by barely 4-5%. In some pockets they
have even declined in the past 1-2 years.
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among EMs
Similarly, avoid taking a loan for discretionary spending. You may be getting SMSs from
your credit card company for a travel loan, but such wants are better fulfilled by saving up.
“It’s not a good idea to take a personal loan for buying luxury watches and high-end bags,”
Intex may exit handsets business
says Vineet Jain, founder of LoanStreet.in. If you must go on a holiday, throw a lavish party
or indulge in some luxury shopping, start saving now.
On the other hand, taking a loan for building an asset makes eminent sense.
Mumbaibased Sandeep Yadav and his wife junked their plans to go on a foreign holiday Grofers raises $200 million in
SoftBank-led round
and instead used the money for the downpayment of their house. This way they managed
to bring down the overall loan requirement for the house.
5. TAKE INSURANCE WITH BIG-TICKET LOANS GSK FY19 value share in health drinks
weakens
If you take a large home or car loan, it is best to take insurance cover as well. Buy a term
plan of the same amount to ensure that your family is not saddled with unaffordable debt if
something happens to you. The lender will take over the asset (house or car) if your RBI releases payment roadmap for a
cash-lite India
dependents are unable to pay the EMI. A term insurance plan of Rs 50 lakh will not cost
you too much.
Typically, banks push a reducing cover term plan that offers insurance equal to the Brookfield to buy 2 wind farms from
Axis Energy
outstanding amount. However, a regular term plan is a better way to cover this liability. It
can continue even after the loan is repaid or if you switch to another lender.
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start making money
Ex-FDA chief endorses use of generic

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Moreover, insurance policies that are linked to a loan are often single premium plans.
These are not as cost effective as regular payment plans. If a lender forces you to buy an
insurance plan that is linked to the loan, take up the matter with the banking ombudsmen
and the insurance regulator.
6. KEEP SHOPPING FOR BETTER RATES
A long-term mortgage should never be a sign-and-forget exercise. Keep your eyes and
ears open about the new rules and changes in interest rates. The RBI is planning to
change the base rate formula, which could change the way your bank calibrates its lending
rates. Keep shopping around for the best rate and switch to a cheaper loan if possible.
However, the difference should be at least 2 percentage points, otherwise the prepayment
penalty on the old loan and processing charges of the new loan will eat into the gains from
the switch.
Also, switching will be more beneficial if done early in the loan tenure. Suppose you have a
loan at 11.75% and are being offered a new rate of 9.9%. You can save up to 52 EMIs if
the loan still has 18 years to go. But if the loan only has five more years to go, the new
loan tenure will be only three EMIs shorter. The same applies to prepayment of loans.
The earlier you do it, the bigger is the impact on the loan tenure. The RBI does not allow
banks to levy a prepayment penalty on housing loans but they may levy a penalty on other
loans. Some lenders do not charge a prepayment penalty if the amount paid does not
exceed 25% of the outstanding amount at the beginning of the year.
7. UNDERSTAND THE FINE PRINT
Loan documents don’t make for light reading. Paragraph after paragraph of legalese
printed in a small font can be a put off. Yet, read the terms and conditions carefully to avoid
unpleasant surprises. Bengaluru-based Subhash Shetty applied for a personal loan of Rs
1 lakh but received a cheque of only Rs 91,800. The lender had deducted Rs 5,152 as an
upfront interest charge and an annual insurance premium of Rs 3,047.
Shetty had signed on the papers without going into the fine print. Some lenders are
notorious for slipping in clauses that are loaded against the borrower. If you are unable to
understand the legalese, get a financial advisor or chartered accountant to take a look at
the agreement before you sign it.
8. SUBSTITUTE HIGH COST LOANS
If you have too many loans running, it’s a good idea to consolidate your debts under one
omnibus low-cost loan. Make a list of all outstanding loans and identify the high cost ones
that can be replaced with cheaper loans (see table). For instance, an unsecured personal
loan that charges 18-20% can be replaced with a loan against life insurance policies.
A loan against property can be used to repay all other outstanding loans. You could also
consider other options like gold loans and loan against bank deposits. It is also a good
idea to prepay costly loans as soon as possible. Divert windfall gains, such as annual
performance bonus, tax refunds and maturity proceeds from life insurance policies towards
repayment of these high-cost loans.
Borrowers sometimes avoid ending loans because they offer tax benefits. If a house is
self-occupied, up to Rs 2 lakh interest paid on a home loan can be claimed as a tax
deduction. If the house is given out on rent, the entire interest paid can be claimed as
deduction. In case of education loans, the entire interest paid on the loan is tax deductible
for up to eight years.
But this tax benefit alone should not be the reason to keep a loan running. True, the tax
1 Ten golden
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rules to follow when taking a loan
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that can be avoided by ending the loan as soon as possible. Unless the money can earn
you a better return than the effective cost of the loan, use it to prepay the outstanding sum.
9. DON’T NIX RETIREMENT BY AVOIDING LOANS
Indians are emotional about certain financial goals, especially when these relate to
children. Given a choice, no parent would want to burden their children with a loan,
especially for the purpose of education. While securing your child’s future is important, you
need to also assess if it impacts your own future.
Dipping into your retirement corpus to fund your child’s education can be a risky
proposition. Students have options like loans and scholarships to cover their education
costs but there is no such arrangement to help you plan for your retirement needs. Your
retirement is as important as your child’s education, perhaps even more. Do not plan for
your children in isolation. Let all your goals be a part of your expense planning, it will help
you balance better.
10. KEEP SPOUSE, FAMILY IN LOOP ABOUT LOAN
1 Ten golden
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takingita with family.
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repayment will impact the overall finances of the entire household. Make sure your spouse
is aware of the loan and the reasons for taking it.
Keeping a spouse in the dark on money matters not only increases stress in a marriage
but also precludes your chances of finding a more cost effective solution. Maybe your wife
(or husband) has some spare money which can help you avoid taking the loan altogether.
Don’t miss out on that opportunity by keeping your need under wraps.
Save
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What is the difference between CIBIL Score

and CIBIL Report?
If you are keen to make your financial goals a reality, you should work towards a CIBIL
Score of 750+ and a healthy CIBIL Report.
P2P Loans & Lending
ET CONTRIBUTORS | May 15, 2019, 02.07 PM IST Extending access to credit: Are
0 creating tangible impact?
Comments
Getty Images
By Sujata Ahlawat
experience to achieve Sabka Saath, Sabka
Have you ever been confused between Vikas?
CIBIL Score and CIBIL Report? Are you new ❯ Fintech eco-system is moving to blockchain and
to credit and cannot figure out one from the AI: Rajat Gandhi, Faircent
other, or the significance of either? Let's take
More from P2P »
a look at two key factors that can help you
get access to credit at your fingertips - your
CIBIL Score and your CIBIL Report.
While your CIBIL Report includes the last 36 months of Your CIBIL Report is a detailed record of
your credit history, your CIBIL Score is based on the last your credit history consisting of your
Most Read Most Shared Most Commented
24 months of your credit behavior. personal information, contact details,
employment information, loan account and What to do if your mutual fund scheme earns more
credit card information, and enquiry information. On the other hand, your CIBIL Score is a
3-digit numeric summary of your CIBIL Report, reflecting your credit worthiness. This is 10 reasons why you didn’t get a raise
based on your credit history and payment behavior - an integral part of your profile,
especially because your past behavior is taken as an indicator of your future actions.
1 Ten golden rules to follow when taking a loan 2 What is the difference between CIBIL Score and
CIBIL Report? 3 Millennials taking personal
Daughter's
rise: Report
loans
claim to to travel
father's on the When she
property:
4 How canto red
don't cut ra
and when she can't
Whil CIBIL R ti l d th l t 36 th f dit hi t CIBIL
While your CIBIL Report includes the last 36 months of your credit history, your CIBIL
Score is based on the last 24 months of your credit behavior. Despite differences between Money lessons from Warren Buffett and Charlie
Munger
your CIBIL Score and Report, it is important to note that both have a role to play in the
approval of your loan application, and lenders depend on both the CIBIL Score and Report More »
to assess your loan eligibility.

Technically, an individual should have more than six months of credit information to be
eligible for a CIBIL Score. However, a new-to-credit consumer may not have enough Land Loan vs Home Loan Low Credit Score
information or credit history to generate a score. In this case, they may receive an NH/NA Rights of Loan Defaulters Car Loan
(No History or Not Available). Over the course of time, they can build their credit footprint Home Loan Interest Rate Rules to follow for Loan
with good credit behavior such as timely repayments, a good credit mix, and staying within Education Loan Personal Loan
their credit utilisation limits. This will eventually lead them to a numeric CIBIL Score Pradhan Mantri Awas Yojana PPF Home Loan
between 300 and 900. The closer the score is to 900, the higher are the chances of your
loan application getting approved. In fact, 79 percent of loans are sanctioned to consumers
with a CIBIL Score greater than 750.
This does not mean that you should lose heart if you are new to credit and don't have a
score yet, or if you do not have a score greater than 750. Luckily, lenders may look at your
CIBIL Report for a larger view of your credit footprint. This may include checking for the
days past due on outstanding payments, red flags on loan accounts or the number of
enquiries made on your account - all available in your report. This overview allows them to
take a better informed decision when underwriting and approving a loan application.
Moreover, in the last two years, select banks and lenders have started rewarding credit-
conscious, high-scoring consumers with preferential pricing loans at discounted rates of
interest. Now, not only can a high CIBIL Score and healthy CIBIL Report give you access
to credit but it can also pave the way for considerable savings.
If you are keen to make your financial goals a reality, you should work towards a CIBIL
Score of 750+ and a healthy CIBIL Report. Monitoring your score and report regularly also
helps you verify your personal and loan account details are updated correctly, so that you
have access to credit when you need it the most.
(The author is VP and Head of Direct-to-Consumer Interactive, TransUnion CIBIL.)

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here
do not reflect the views of www.economictimes.com.)
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HerCIBIL
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Usha golden
Martin University when taking a loan 2 Amazon Business
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Millennials taking personal loans to travel on

the rise: Report
The new generation of young Indians is now planning a holiday loan, just the way one
plans investments.
P2P Loans & Lending
ET Online | Updated: May 02, 2019, 04.48 PM IST Extending access to credit: Are
Comments
Getty Images
Indian millennials are funding a lot of their
lifestyle needs by borrowing money. For experience to achieve Sabka Saath, Sabka
instance, according to digital lending Vikas?
platform, IndiaLends, has reported a 55 ❯ Fintech eco-system is moving to blockchain and
percent growth in personal loans for travel AI: Rajat Gandhi, Faircent
purposes. More interestingly, 85 percent of
More from P2P »
these loan seekers are millennials, who are
seeking personal loans in the range of Rs
30,000 to Rs 2. 5 lakh.
The digital lending space has enabled easier access to By the looks of it, for a whole new generation
loans, even to new-to-credit salaried individuals with of young salaried and tech-savvy
zero credit history. professionals in the country, the idea of
approaching traditional banks often seems What to do if your mutual fund scheme earns more
unappealing.
10 reasons why you didn’t get a raise
Why they are taking loans from a digital lending platform?
Obtaining loans from banks can be a long and lengthy process. On the other hand, the
Daughter's claim to father's property: When she can
digital lending space has enabled easier access to loans, even to new-to-credit salaried
and when she can't
individuals with zero credit history, said a press release by IndiaLends. Gaurav Chopra,
Founder & CEO, IndiaLends said, "The emergence of 'leisure consciousness across Money lessons from Warren Buffett and Charlie
Munger
India's younger generation and the realisation that a balanced lifestyle is important, has led
More »
to increasing in domestic as well as international travel."
Also
1 TenRead: Don’t
golden rules fall into
to follow debt
when trap,
taking know your
a loan good
2 What loans
is the frombetween
difference
CIBIL Report?
bad ones
CIBIL Score and
3 Borrow Top Trending Terms
Millennials taking personal loans to travel on the
rise: Report 4 How to red
don't cut ra
Why personal loan? Land Loan vs Home Loan Low Credit Score
The new generation of young Indians is now planning a holiday loan, just the way one Rights of Loan Defaulters Car Loan
plans investments, said IndiaLends. "There has been a shift in the younger generation in Home Loan Interest Rate Rules to follow for Loan
terms of financial planning. Not just those who don't have enough savings, but also those Education Loan Personal Loan
who want better travel experiences or wish to visit finer destinations are opting for loans. Pradhan Mantri Awas Yojana PPF Home Loan
This also indicates the popularity of digital lending which is growing substantially in India.
For a new generation customer, the ease of services is one of the important criteria for
choosing the servicing company", he further added.
Also Read: 11 signs that show you are falling into a debt trap
Where are borrowers travelling?

As per IndiaLends data, borrowers usually opt for countries offering visa on arrivals, since
most millennials take loans for last-minute holiday plans.
These include countries like Thailand, Dubai, Sri Lanka, Indonesia, Nepal, Maldives and
Bhutan. Not all millenials want to holiday on a budget; there are some who take loans for
luxury travel as well. These customers take loans for luxury holidays to Europe, USA,
South Africa, Australia and New Zealand.
Read this article in :Hindi
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App for
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Millennials taking personal loans to travel on the
don't cut ra
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How to reduce home loan EMI even if banks

don't cut rates
Despite consecutive rate cuts by the RBI, banks have not brought down their lending
rates. However, there are steps you can take to bring down your borrowing costs.
P2P Loans & Lending
By Narendra Nathan, ET Bureau | Updated: Apr 22, 2019, 09.42 AM IST Extending access to credit: Are
Comments
Getty Images
Through consecutive cuts in its benchmark
rates, the Reserve Bank of India (RBI) has experience to achieve Sabka Saath, Sabka
prodded banks to keep interest rates down. Vikas?
However, the banks have only tweaked their ❯ Fintech eco-system is moving to blockchain and
lending rates and not reduced them in AI: Rajat Gandhi, Faircent
tandem. A 50 bps cut by RBI (two cuts of 25
More from P2P »
bps each) was followed by most banks
cutting the marginal cost of lending rate
Reach out to Top Generator Dealers near you
(MCLR) by only by 5-10 bps. Most and get free quotes
commercial banks use the one-year MCLR
GET QUOTE
Since banks are not in a mood to reduce lending rates, for home loans.
borrowers have to think of alternative strategies.
1 Ten golden rules to follow when taking a loan 2 There

What is are
CIBIL Report?
severalbetween
the difference reasons why
CIBIL banks
Score and are
3 Millennials taking personal loans to travel on the
Most Read
rise: Report Most Shared 4 How
Most Commented
to red
don't cut ra
not passing on the rate reduction to borrowers “The bank’s cost of funds is not linked to
not passing on the rate reduction to borrowers. The bank s cost of funds is not linked to
repo rates. Banks use repo facility only when their liquidity situation is tight and therefore, What to do if your mutual fund scheme earns more
reduction in repo rates does not bring down their cost of funds,” says D.N. Panigrahi,
Professor, Institute of Management Technology, Nagpur. 10 reasons why you didn’t get a raise

Secondly, interest rates on current and savings accounts (CASA), which account for
Daughter's claim to father's property: When she can
almost 30-40% of the deposits of large retail banks, have remained unchanged. and when she can't
Money lessons from Warren Buffett and Charlie

Thirdly, while RBI cut interest rates, there was no corresponding reduction in rates of Munger
competing products like small savings schemes. Finally, there is a mismatch between the
More »
loans and deposits of banks in India.
“Though the majority of loans are on floating rate, floating rate deposits are not popular in Borrow Top Trending Terms
India. Since the interest rate reset on existing FDs happens only after a fixed tenure, cost No-cost EMI Prepay Home Loan Reduce Loan Burden
of funds won’t come down for banks even if there is a cut in deposit rates now,” says Land Loan vs Home Loan Low Credit Score
Panigrahi. Rights of Loan Defaulters Car Loan
Since banks are not in a mood to reduce lending rates, borrowers have to think of Education Loan Personal Loan
alternative strategies. While it is easy for new borrowers, who can shop around for the Pradhan Mantri Awas Yojana PPF Home Loan
cheapest rates, things are tough for existing borrowers. However, the following measures
can help.
First, check your loan rate and the interest rate regime it was decided in. Since MCLR was
introduced only in April 2016, you may be stuck with the previous rate regimes like base
rate, prime lending rate, etc. All the old rates are higher than market rates as they were
fixed by banks in a non transparent manner. There are also no incentives for banks to cut
these rates.
Next, find out what interest rates are being offered by competing banks. Consider shifting if
the same is significantly lower than the existing one. However, don’t ignore the costs
involved in these loan shifts. New banks usually charge a processing fee. The same could
be a percentage of the outstanding loan amount, or a fixed fee or a combination of both. If
you are still stuck in the older rate regimes like base rate or prime lending rate, there may
be some prepayment penalty also to be paid. Consider all these costs and switch only if
the savings are higher than the costs involved.
Banks slow to cut rates

Despite 50 bps cut by RBI; banks have only made small cuts in their MCLR.
Banks 03 Jan 11 Apr Change
2019 2019
Punjab National 8.50 8.45 -0.05
Bank
State Bank Of India 8.55 8.55 0.00
Union Bank Of 8.70 8.60 -0.10
India
Central Bank Of 8.60 8.60 0.00
India
Allahabad Bank 8.75 8.65 -0.10
IOB 8.75 8.65 -0.10
Indian Bank 8.75 8.65 -0.10
Syndicate Bank 8.75 8.65 -0.10
Bank Of India 8.70 8.65 -0.05
Canara Bank 8.70 8.65 -0.05
Bank Of Baroda 8.65 8.65 0.00
Compiled by: ETIG Database. Sorted on the basis of latest MCLR; One-year MCLR
To find out the total expected savings, you need to consider the outstanding loan amount
and remaining loan tenure. “Consider the outstanding loan amount and also remaining
loan tenure before taking any decision. As a thumb rule, it makes sense to shift if the
1 Ten golden rules
outstanding
to follow when taking a loan
loan amount or loan tenure is high,2 What is the difference between CIBIL Score and
because
CIBIL Report?the benefit of interest rate 3 Millennials
rise: Report
taking personal loans to travel on the
4 How to red
don't cut ra
reduction will be significant over the years,” says Shilpa Wagh, a Sebi registered
investment adviser.
You can understand this by taking a closer look at your loan statement. Most of your EMI
payment will be going towards the interest component in the early stages of the loan
repayment. However, it will be the opposite during the last few years—the interest
component will be low and principal will be high.
What you can do to pay lower EMI

Threaten to shift; no bank will reduce rates till you do that.
Take help of relationship manager to negotiate lower rates.
Consider shifting if your current interest rate is at least 1% higher than rates offered by
other banks.
Consider shifting if your remaining loan amount or loan tenure is long.
Shift if you are still stuck in earlier rate regimes like base rate or prime lending rates.
Consider all cost of shifting before taking a fi nal decision.
Before shifting to a new lender, negotiate with the existing lender. Most banks will start
talking if you demand a loan statement, telling them you need it to shift the loan. “If you are
a privilege customer, use that tag to put pressure on the bank. Approach the relationship
manager to negotiate a rate reduction,” says Wagh. Stand firm. Most banks will only
reduce rates only if they are convinced that you will shift.
Finally, don’t expect too much from your new lender. Future rate reduction will be slow
there too. You can also blame the reset clause in the MCLR for this. Though the reset
clause can vary from agreement to agreement, banks usually align the reset period of
MCLR-based loans with that of its period. For instance, one year MCLR is usually reset
after a year. Assume that you shift to a new lender and get a good rate of 8.8%. Even if the
new bank cuts its one-year MCLR to 8.6% next month, your loan rate won’t come down till
April 2020.
0
Comments
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State Bank Of India Bank Of Baroda Loan EMI Union Bank Of India
Punjab National Bank
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How to improve credit score

Staying away from credit completely may not be the right way to improve your score.
However, you also need to keep other factors in mind.
ET CONTRIBUTORS | Apr 22, 2019, 06.30 AM IST P2P Loans & Lending
0 Extending access to credit: Are
Comments alternate finance platforms
Getty Images creating tangible impact?
Priyadarshini is a 35-year-old doctor working
in a private hospital. Recently, she applied
for a home loan. However, she has been ❯ P2P lending: Can India replicate the UK
informed that since her credit score is low, experience to achieve Sabka Saath, Sabka
Vikas?
she is not eligible to get the amount she
needs. The interest she is being offered is
also higher than the prevailing rates.
Priyadarshini has accessed her credit score More from P2P »
and found it to be 600. She knows that the
upper limit is 900 and the higher the score,
Unpaid or disputed loans should be settled as quickly as
the better is the person’s credit worthiness.
possible. Now, she wants to improve her score so that
her ability to access credit facility at lower
What is the difference between CIBIL Score and
1 Tenisgolden
costs rules to follow
not affected when taking
in future. What are the 2steps
a loan she
CIBIL needs to take to better her score?
Report? 3 Millennials taking personal loans to travel on the
Most Read
rise: Report Most Shared 4 How
Most Commented
to red
don't cut ra

The credit score is based on Priyadarshini’s past credit usage and repayment behaviour. return than your investment
She must check her past records to see if there are any credit card balances or loans that
remain unpaid or disputed. If so, it needs to be settled immediately as it is definitely going
to impact her score. Signing on for automatic debit facility with her bank for loan repayment Documents required for filing ITR
will ensure that obligations on any loan or credit facility that she is currently servicing are Daughter's claim to father's property: When she can
met on time. and when she can't
Money lessons from Warren Buffett and Charlie

She has to make sure that the account has sufficient funds so that there are no instances Munger
of default. If she has any savings, she can use it to pay-off high cost debt since More »
outstanding debt has a large impact on the credit score. This is a must if she has a high
concentration of unsecured debt such as credit card outstanding and personal loans which
are seen as less desirable than secured debt from a credit rating point of view.
Priyadarshini must work towards improving her credit behaviour. This includes cutting Land Loan vs Home Loan Low Credit Score
down on her credit card usage so that her credit utilisation ratio, that is usage relative to Rights of Loan Defaulters Car Loan
credit limits, improves over time. Applying or seeking too many credit facilities should also
be avoided.
Staying away from credit completely may also not be the right way to improve her score,
since she needs to exhibit her ability to be disciplined in using credit and meeting
obligations. Priyadarshini must realise that making all these moves will improve her credit
score over time. It is not going to happen immediately and she will have to keep working
on managing her credit activities.
(The content on this page is courtesy Centre for Investment Education and Learning
(CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)
0
Comments
Read more on Emi Interest Rate Home Loan Credit Score Credit Rating
Also Read
Not happy with your credit score? Here's how you can improve it
Not up to the mark? How to improve your credit score
When can your personal credit score affect a business loan?
9 tips on how to maintain a good credit score
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growth potential to invest in homage to Y C Deveshwar Bengal? Don’t rule it out 100-DMA key support
NEXT STORY
How is your CIBIL score calculated?

Your CIBIL score is based on your credit history and past payments, but it subsequently
impacts your future access to credit.
By Sujata Ahlawat
Your CIBIL score is an important factor that ❯ P2P lending: Can India replicate the UK
lenders look at while evaluating a loan experience to achieve Sabka Saath, Sabka
Vikas?
application. Hence it's important to
understand how the score is calculated.
While there is a proprietary algorithm that
determines your CIBIL score, the most More from P2P »
important elements of the score composition
are based on an individual's loan payment
There are four key factors that impact your CIBIL score.
behavior.
Let's take a look at what exactly the CIBIL score is, and how it is calculated.
What is the CIBIL score?
Your CIBIL score is a 3-digit numeric summary of your credit history, derived by using return than your investment
details found in the 'Accounts' and 'Enquiries' sections of your CIBIL report, including (but
not restricted to) your loan accounts or credit cards, and their payment status, as well as
outstanding amounts' days past due. The score reflects your credit worthiness, based on Documents required for filing ITR
your borrowing and repayment history, as shared by lenders. Your CIBIL score ranges Daughter's claim to father's property: When she can
from 300 to 900 and the higher your score, better are your chances of getting a loan and when she can't
approved. In fact, 79 percent of loans are sanctioned to consumers with a CIBIL score Money lessons from Warren Buffett and Charlie
greater than 750. Munger
More »
How is the CIBIL score calculated?
There are four key factors that impact your CIBIL score:
1. Payment history: Making late payments or defaulting on your EMIs has a negative
impact on your score. No-cost EMI Prepay Home Loan Reduce Loan Burden
2. Credit mix: Having a balanced mix between secured loans and unsecured loans is Land Loan vs Home Loan Low Credit Score
likely to have a positive impact.
3. Multiple enquiries: Too many loan enquiries may have a negative impact on your
score as it indicates that your loan burden may go up in the future.
4. High credit utilisation: A high credit utilisation limit indicates a rising debt burden over
1 time
Ten golden rules to follow when taking a loan
and may negatively impact your score. 2 CIBIL Report? 3 rise: Reporttaking personal loans to travel on the
Millennials
4 How to red
don't cut ra
How can you work towards a high CIBIL score?

Your CIBIL score is based on your credit history and past payments, but it subsequently
impacts your future access to credit. What you do today can help you build a stronger and
healthier credit footprint. Here are a few quick tips to help you improve your score:
Always pay your dues on time. Late payments are viewed negatively by lenders.
Keep your balances low. Be prudent, do not use too much credit, and control your
utilisation.
Maintain a healthy credit mix of secured (like home loan and auto loan) and unsecured
loans (like personal loan and credit cards) - too many unsecured loans may be viewed
negatively.
Apply for new credit in moderation. This shows that you are not continuously seeking
excessive credit.
Monitor your co-signed, guaranteed and joint accounts monthly. Remember that you are
held equally liable for missed payments in co-signed, guaranteed or jointly held
accounts, and your joint holder's (or the guaranteed individual's) negligence could affect
your ability to access credit when you need it.
Review your credit history frequently throughout the year. Monitor your CIBIL Score and
Report regularly to avoid unpleasant surprises (like a rejected loan application).
Checking your report regularly will also alert you to possible inaccuracies, if any. In case
you spot any discrepancy, you can log a dispute on the CIBIL website or request the
lender to report the correction to CIBIL.
As you look to achieve your planned financial goals or in case of an emergency, you may
need access to credit. Make sure you monitor your CIBIL score and credit profile regularly
to ensure you are credit-ready. Start working towards improving your score today.
(The author is VP and Head of Direct-to-Consumer Interactive, TransUnion CIBIL.)

0
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Read more on Loan Credit Score Borrow CIBIL Score Loan Payment
Also Read
What is the difference between CIBIL Score and CIBIL Report?
Social media and digital transactions may soon determine your Cibil score
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Banks and NBFCs have set strict eligibility criteria concerning income, credit and
employment history and past repayment capacity for availing personal loans.
1. A personal loan is given by a bank or an
NBFC to an individual to meet any personal
needs like funding a marriage, home ❯ P2P lending: Can India replicate the UK
renovation, vacation etc. experience to achieve Sabka Saath, Sabka
Vikas?
2. Since personal loans are not secured
against any asset, the lender cannot recover
the funds by selling anything. Hence, the More from P2P »
rate of interest is higher than other secured
loans.
A loan processing fee has to be paid besides interest
3. Banks and NBFCs have set strict eligibility
and lenders can charge a prepayment penalty.
criteria concerning income, credit and
employment history and past repayment capacity for availing personal loans. Most Read Most Shared Most Commented

4. A loan processing fee has to be paid besides interest and lenders can charge a return than your investment
prepayment penalty.
5. Sometimes, based on the relationship with the lender and financial history, the customer Documents required for filing ITR
is given the facility of a pre-approved loan limit. Daughter's claim to father's property: When she can
and when she can't
(This content is courtesy Centre for Investment Education and Learning (CIEL). Money lessons from Warren Buffett and Charlie
Munger
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)
More »
0
Comments
Read more on Bank NBFC Secured Loans Personal Loans Asset
Also Read Education Loan Personal Loan
Millennials taking personal loans to travel on the rise: Report
1 Lenders
Ten goldenbank
rules on personal
to follow loans
when toagrow
taking 2 What
loan retail books is the difference between CIBIL Score and
CIBIL Report? 3 Millennials taking personal loans to travel on the
don't cut ra
How to track personal loan status
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market as Ramzaan fast a day; Is it a value buy now? have to sell assets RoohAfza supply for India's
begins shortage
Financial Calculators
Plan your Tax Calculate EMIs and more Plan your Savings
INCOME TAX INVOICE CAR LOAN PERSONAL SUKANYA EMPLOYEES'

CALCULATOR GENERATOR CALCULATOR LOAN SAMRIDDHI PROVIDENT
YOJANA FUND
HOUSE HRA EDUCATION HOME LOAN NPS RETIREMENT

PROPERTY CALCULATOR CALCULATOR CALCULATOR CALCULATOR CALCULATOR
INCOME
More Calculators
NEXT STORY
View: How to ringfence the IBC

It is true that NCLT and NCLAT often had to adjudicate. But there are certain innovations
possible within IBC.
1 Ten golden rules to follow when taking a loan 2 What is the difference between CIBIL Score and
3 Millennials taking personal loans to travel on the
4 How to red
ET CONTRIBUTORS | Updated: Apr 09 2019 06 29 AM IST

CIBIL Report?
P2P Loans & Lending
rise: Report don't cut ra
ET CONTRIBUTORS | Updated: Apr 09, 2019, 06.29 AM IST oa s & e d g
Agencies creating tangible impact?
By Amitabh Kant and Richa Roy
Last week, the Supreme Court struck down ❯ P2P lending: Can India replicate the UK
as ultra vires — acting or beyond one’s legal experience to achieve Sabka Saath, Sabka
Vikas?
authority — the February 12, 2018, RBI
circular that instructed banks to trigger
insolvency proceedings under the Insolvency
and Bankruptcy Code (IBC) against More from P2P »
borrowers with defaults above a specified
amount. Reach out to Top Generator Dealers near you
and get free quotes
Banks are no longer bound by RBI to take defaulting
This means banks are no longer bound by
borrowers to the NCLT. A constructive approach, GET QUOTE
RBI to take defaulting borrowers to the
however, may be used to retain IBC’s promise.
National Company Law Tribunal (NCLT). A

constructive approach, however, may be used to retain IBC’s promise. Most Read Most Shared Most Commented

NCLT’s capacity is a critical issue. It’s required to adjudicate on the full gamut of matters return than your investment
under the Companies Act 2013, as well as those under IBC. This has placed severe strain
on NCLT. About 30% of the more than 800 ongoing cases under corporate insolvency
resolution process (CIRP) have surpassed the time ceiling statutorily prescribed, with an Documents required for filing ITR
additional 20% having crossed the six-month timeline. Daughter's claim to father's property: When she can
and when she can't
The recent induction of 38 new members into NCLT is extremely welcome. But it’s crucial Money lessons from Warren Buffett and Charlie
for the tribunal to inculcate specialisation as well as depth in its expertise. One way could Munger
be to set up specialised NCLT benches to deal only with insolvency matters. China set up More »
specialised bankruptcy courts during 2007-17. In their 2018 study, ‘Going Bankrupt in
China’ (bit.do/eNKZx), Bo Li and Jacopo Ponticelli show that courts brought faster
resolution of financially distressed firms, improved access to credit, and pushed local
private firms to invest more. India could learn from this. No-cost EMI Prepay Home Loan Reduce Loan Burden
A major success of IBC has been the deterrent effect it has had. For such settlements to
be more effective, they should take place in a structured manner, similar to a ‘pre-pack
arrangement’.
Pre-packed insolvency arrangements are relatively common in Britain, allowing for the sale
of a business as a going concern prior to the appointment of an administrator or insolvency
professional, subject to the approval of a majority of the creditors. A similar proposal, the
European Restructuring Directive, was approved by the European Parliament last week.
This will, however, require checks and balances to prevent it from being gamed or used
tactically to subvert IBC. They could include a code of conduct to be issued by the
Insolvency and Bankruptcy Board of India (IBBI) to regulate the behaviour of the resolution
professional dealing with the pre-pack. Additionally, guidelines on the conduct of the
creditors, permitting holding-out creditors to be ‘dragged along’ as well protection for
certain creditors and the manner in which this will be made binding on all creditors, should
be drawn out.
The corporate affairs ministry has been working on a template. Along with industry and
IBBI, a framework can be developed. RBI’s circular had provided for a resolution process
prior to referring to a borrower to IBC. The pre-pack arrangement with safeguards could
replace this.
Certain existing provisions of IBC and its subordinate legislation can be revived and
utilised more effectively. Under Section 61, for instance, appeals from NCLT to the National
Company Law Appellate Tribunal (NCLAT) are permitted under certain tightly
circumscribed matters of law, and as a creature of statute, NCLAT has to comply with this.
And, yet, there are multiple instances where it What
has overstepped this mandate, ruling
and on the
1 Ten golden rules to follow when taking a loan 2 CIBIL isReport?
the difference between CIBIL Score
3 Millennials taking personal loans to travel on the 4 How to red
process of resolution in certain instances, including on the share of the classes of lenders.rise: Report don't cut ra
p g
It is true that NCLT and NCLAT have often had to adjudicate on disputes, making the
adjudication process complex and time-consuming. There are, however, certain
innovations possible, even within IBC. Economists Oliver Hart, Philippe Aghion and John
Moore, in their paper ‘Improving Bankruptcy Procedure’ (bit.do/eNK8y), propose a
procedure that should resolve insolvency in 90 days.
They acknowledge that certain contentious claims and disputes can’t be resolved in this
period, and propose that the plan be voted upon with contentious claims remaining
outstanding. It could be settled following the approval of the plan. IBC could incorporate
this principle.
IBBI’s Corporate Insolvency Resolution Process Regulations’ Regulation 14 provides that

where the amount claimed by a creditor is uncertain, the resolution professional shall make
the best estimate of the amount of the claim based on the information available with her,
and revise the estimate of the claims she comes across additional information warranting
such revision.
This would allow the resolution process to continue with such contentious claims being
resolved subsequently. Further, under Section 31of IBC, the order passed by NCLT or
NCLAT approving a resolution plan provide for ongoing implementation and supervision of
the plan, which could include the adjudication of such disputes.
With some of these innovations, IBC could deliver even better outcomes, and lenders
voluntarily file proceedings, and not on account of a dikat from their regulator.
Kant is CEO, NITI Aayog, and Roy is a lawyer involved with the drafting of IBC
0
Comments
Read more on European Parliament Corporate Insolvency Resolution Process
Insolvency And Bankruptcy Code Niti Aayog National Company Law Tribunal
RBI Circular Amitabh Kant
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1 Ten golden rules to follow when taking a loan 2 years?
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5/16/2019 Ten golden rules to follow when taking a loan - The Economic Times

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Ten golden rules to follow when taking a

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6. KEEP SHOPPING FOR BETTER RATES

7. UNDERSTAND THE FINE PRINT

8. SUBSTITUTE HIGH COST LOANS

9. DON’T NIX RETIREMENT BY AVOIDING LOANS

10. KEEP SPOUSE, FAMILY IN LOOP ABOUT LOAN

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