Month: August 2022

Home Loan

A Home Loan is a form of financial assistance extended by banks and financial institutions. Such banks or financial institutions can help increase your budget to purchase a house with the loan amount offered. You can avail of the loan by meeting certain Home Loan eligibility criteria for a specific tenure. You must return the loan amount borrowed over the course of the tenure along with interest according to predetermined interest rates. You repay the Home Loan in monthly instalments, just like you would repay any other loan. Today, most banks offer Home Loans that not only help you purchase ready-made homes, but also facilitate the construction of a house from scratch. In addition, you can also seek Home Loans for renovation or repair purposes.

This is the most common type of home loan availed to purchase a house. There are many housing finance companies, public banks, and private banks that offer housing loans where you borrow money to purchase the house of your choice and repay the loan in monthly instalments.

You can get up to 80%-90% of the house’s market price in the form of financing. The lender will hold the house until you completely repay the loan.

Home Construction Loan

This is the right home loan type if you already have a plot of land and you need financing to construct a house in that land.

Home Extension Loan

Say you already own a house and you would like to extend the house with another room or another floor to accommodate the growing family. Home extension loan provides financing for this purpose.

Home Improvement Loan

A home improvement loan provides financing for renovating or repairing the house if there’s any fault in the existing system, such as painting the house’s interior or exterior, plumbing, upgrading the electrical system, waterproofing the ceiling, and more.

Home Loan Balance Transfer

The current home loan interest rate may be overwhelming, or you may not be happy with your current lender’s service; you can transfer the home loan’s outstanding balance to a different lender who offers a lower interest rate and better service. Upon transfer, you can even check out the possibilities of a top-up loan on your existing one.

Composite Home Loan

This type of home loan provides financing for purchasing the plot of land where you would like to construct a house and for the construction, both within a single loan.

Benefits of Taking a Home Loan

Tax benefits

The foremost benefit of a home loan is the income tax deduction you can claim on the interest and principal repayments. You can claim up to Rs.1.5 lakh on principal repayments u/s 80C, up to Rs.2 lakh on interest repayments u/s 24B, up to Rs.2 lakh on interest repayment in special circumstances u/s 80EE and 80EEA, and up to Rs.1.5 lakh on stamp duty expenses u/s 80C.

Due diligence of property

When you go through a bank to purchase a house, the bank will conduct thorough checks on the property from the legal perspective and check if all the documents produced are valid.

This due diligence check from the bank’s end will reduce the risk of you being scammed. If the bank approves the property, that means you and your house are safe.

Lower interest rate

The home loan interest rate is much lower as compared to any other loan types available. If you come across a cash crunch, you may get a top-up on the existing home loan at a lower interest rate than a personal loan to solve the issue.

Balance transfer facility

You can transfer the home loan from one lender to another for several reasons, such as the interest rate, service charges, customer service experience, and others.

Auto Loans

An auto loan is a loan that allows you to buy a desired four wheeler, and pay the vehicle off in equated monthly installments for a set tenure instead of having to pay the full price upfront. The terms of an auto loan depend on various factors, including your income and credit history.

Though everybody may not have enough cash to purchase the auto with a lump-sum payment, numerous lenders can help you realise your dream of buying the auto through a auto loan.

Applying for a auto loan is now hassle-free, easy, and paperless. Just make a few clicks, and you can submit the auto loan application form online. Almost every bank today offers auto loans at attractive interest rates. Based on one’s affordability, it is now quite easy to take a auto loan and then pay EMIs without really biting into a person’s finances.

Features and Benefits of Auto Loan

• Get financing for purchasing new and used autos.
• The financing can go up to 85%-90% of the on-road price of the auto. Some banks offer up to 100% financing on the vehicle’s on-road price to certain conditions.
• The loan tenure can range from one year up to seven years.
• The loan amount can be up to three times the annual income of the applicant.
• Some lenders offer instant financing facilities for autos.
• You may get additional discounts and offers if you choose to purchase a auto from the dealer or manufacturer the bank has a tie-up with.
• The auto purchased through financing will be held as collateral until the loan is repaid.
• The repayment structure most commonly followed for a auto loan is equated monthly instalments (EMI).

Personal loans

Personal Loan is an unsecured credit provided by financial institutions based on criteria like employment history, repayment capacity, income level, profession and credit history. Personal Loan, which is also known as a consumer loan is a multi-purpose loan, which you can use to meet any of your immediate needs.

Benefits

• With various financial institutions offering Personal Loan online services, the loan amount is disbursement within a few hours provided the lender is convinced of your repayment capacity.
• Unlike other types of loans like Home Loan or Gold Loan, where you must provide several documents, Personal Loans require minimum documents and the approval process is quick.
• Another significant feature of Personal Loan is that the lenders offer you the flexibility to choose your loan tenure. Usually, Personal Loan tenure ranges from one to five years. So, you can select the loan term based on your repayment capacity. You should opt for a shorter loan, so that you can save on the interest payment and repay the amount faster.

Safe Lockers

A safe deposit locker is a rented locker that a bank offers you to store your valuables. This could be jewellery, gemstones, financial or legal papers, insurance policies, identity proof, such as a passport, and other similar items of high value. You can rent a locker for as long as you want for a certain fee. The key to the locker remains with you, and you can access your items whenever you need them after informing the bank.

Features:

• Lockers Branches are equipped with high security features and specially built strong rooms.
• Safe Deposit Locker facility is one of the ancillary services provided by the Bank to its customers.
• Locker facility is available in over 2500 branches across the country. Wide availability of lockers in various sizes and at various locations.
• Hassle-free payment options through your HDFC Bank Account.
• Extended banking hours for accessing lockers.
• Nomination facility available.
• Nomination on safe-deposit lockers enables HDFC Bank to release the contents to the nominee of the person hiring in the event of their death. If a locker is held jointly, and one of the people hiring dies, the contents can only be removed jointly by the nominee(s) and the survivors.
• The nomination facility is available to anyone hiring a locker.
• For those hiring on an individual basis; nomination can be made in favour of one individual.
• For those hiring jointly by more than one hirer: more than one nominee can be made. In such scenario no. of nominees are restricted to the no. of joint hirers.
• Unpaid locker rentals are recovered from the nominee.
• If the hirer is major and the nominee is minor, the nomination will be made by someone lawfully entitled to act on behalf of the minor.

Jewel Loans

Avail a gold loan from a bank in India with interest rates ranging between 7% p.a. and 29% p.a. You can avail a loan amount of up to Rs.1.5 crore and repayment tenure starting at 3 months and going up to 4 years depending on the loan scheme availed by you. You can pledge your gold ornaments and jewellery for funds in the event of a financial emergency.

Features:

Purpose: You can avail a gold loan in order to finance various needs, such as for educational purposes, medical emergencies, going on a holiday, and so on.

Security: The gold that has been pledged with the bank or the financial institution acts as the security or collateral against which the loan amount is provided.

Tenure options: The tenure options can range from a minimum of 3 months to a maximum of 48 months.

Fees: The other fees and charges that might be applicable on a gold loan are – processing fee, late payment charges/ penalty for non-payment of interest, valuation fees, etc.

Repayment Options: There are three main options offered by lenders to borrowers for the repayment of a gold loan. These are:

• Repayment in Equated Monthly Installments (EMI)
• Payment of interest upfront and repayment of the principal loan amount at the end of the loan tenure.
• Payment of interest on a monthly basis and repayment of the principal loan amount at the end of the loan tenure.

Rebates: Several lenders offer the option of discount on the prevailing interest rate on the loan against gold if the borrower repays the interest regularly. This rebate can be 1% – 2% off on the original rate of interest.

Consumer Durable Loans

Consumer durable loan is a special category of personal loan that is generally used to purchase electronic gadgets and household appliances that include smartphones, televisions, PlayStations, home theatres, laptops, cameras, washing machines, modular kitchens and much more. Typically this loan type can be availed for amounts ranging from Rs. 10,000 to Rs. 15 lakh. Consumer loans are mostly available at a 0% interest rate or No Cost EMI and can be repaid within a range of a few days to 36 months.

Benefits:

Minimum Formalities

Some basic documents are required to apply for such loans, making the process relatively simple.

0% Interest Rate

Consumer durable loans are typically available at a lower interest rate than personal loans. Tata Capital offers such loans with no interest and minimum payment. Tata Capital does not even ask for any security deposits, making the loan application process effortless.

Tenure

The loan tenure for a Tata Capital Consumer Durable loan is between 6-24 months. This may differ from one lending institution to another. Usually, a longer tenure attracts a lower EMI and vice versa. As the repayment period affects EMI payments, it is important to calculate the EMI on an online EMI calculator before applying for loans.

Education Loans

An education loan is a loan that students apply to meet the financial requirements to complete their course. Many banks and NBFCs in India offer education loans at competitive rates to help educate the upcoming innovators and leaders.

Types of Education Loans

Based on Location

Domestic Education Loan

Students who would like to pursue education in India can apply for this loan type. The loan will get approved only if the applicant is admitted to an Indian educational institution and meets all other lender criteria.

Overseas Education Loan

Such loans help students realise their dream of pursuing the course of their desire in a foreign institution. The loan covers the airfare, accommodation, and tuition fee for students who wish to study abroad only if they satisfy the eligibility criteria.

Based on Course

Undergraduate Loans

This type of education loan is provided for students to give financial aid to students so they can complete their undergraduate degrees. An undergraduate degree will usually be a 3 to the 4-year long course under various specialisations. Having an undergraduate degree helps individuals to land a decent job and start earning.

Postgraduate Loans

Many undergraduates would like to continue their education with a postgraduate course, usually a 2-year long course in India. An advanced degree is desired to get more profound knowledge in the area of interest.

Career Development Loans

Many professionals who work for a few years in corporate jobs prefer to pause their career and take up professional courses and training to improve their employment prospects. Such individuals would strive hard to get into reputed business and technical schools to polish their skills and reach greater heights in their career.

Based on Collateral

Loan Against Property, Deposits, and Securities

You can pledge immovable assets, such as agricultural land, residential land, flat, house, and others, fixed deposit certificates, recurring deposits, gold deposits, bonds, debentures, and equity shares to get the necessary financing to pursue education.

Third-Party Guarantee

A guarantee letter from an employee of the bank or a home bank can help the student get an education loan.

Features and Benefits

• 100% financing available for certain conditions.
• The loan amount can go up to Rs.1 crore for international students and up to Rs.50 lakh for domestic students.
• The financing covers other expenses, such as student exchange travel expenses and laptop.
• Preferential forex rates may be available for international disbursements.
• Loan repayment tenure can go up to 12 years after six months from completing the course.
• Parents should be joint borrowers for the education loan.

Women Bank

A women-only bank is a financial institution catering exclusively to women. In 2001, Dubai Islamic Bank opened a women-only bank branch.

Iran opened such a bank in Mashhad on June 7, 2010. The bank’s director stated, “the aim is not sex segregation but respect for women.” The government-owned bank is Bank Melli.

In Saudi Arabia, most banks have some sort of women-only branch within the main branch. Not necessarily all branches and banks have this. Albeit the main branch can usually be accessed by both men and women.

in 2013, India launched its first public sector bank for women only, in Mumbai, aimed at economically empowering millions of women in India.

Payments Bank

Payments banks are new model of banks, conceptualised by the Reserve Bank of India (RBI), which cannot issue credit. These banks can accept a restricted deposit, which is currently limited to 200,000 per customer and may be increased further. These banks cannot issue loans and credit cards. Both current account and savings accounts can be operated by such banks. Payments banks can issue ATM cards or debit cards and provide online or mobile banking. Bharti Airtel set up India’s first payments bank, Airtel Payments Bank.

Features of Payment Banks

• They are differentiated and not universal banks.
• These operate on a smaller scale.
• It needs to have a minimum paid-up capital of Rs. 100,00,00,000.
• Minimum initial contribution of the promoter to the Payment Bank to the paid-up equity capital shall at least be 40% for the first five years from the commencement of its business.

Activities that Can Be Performed By Payment Banks

• The money received as deposits can be invested in secure government securities only in the form of Statutory Liquidity Ratio (SLR). This must amount to 75% of the demand deposit balance. The remaining 25% is to be placed as time deposits with other scheduled commercial banks.
• Payment banks can take deposits up to Rs. 2,00,000. It can accept demand deposits in the form of savings and current accounts.
• Payments banks will be permitted to make personal payments and receive cross border remittances on the current accounts.
• It can issue debit cards.

Savings Bank

A savings bank is a financial institution whose primary purpose is accepting savings deposits and paying interest on those deposits.

They originated in Europe during the 18th century with the aim of providing access to savings products to all levels in the population. Often associated with social good, these early banks were often designed to encourage low-income people to save money and have access to banking services. They were set up by governments or by socially committed groups or organisations such as with credit unions. The structure and legislation took many different forms in different countries over the 20th century.

Savings banks and savings-and-loans are often confused. The original function of savings banks to service consumers was limited to savings. Savings banks invested in government and corporate debt. Savings and loan associations had a dual purpose which gave more importance to home loans. Towards the end of the 20th century their functions blurred as savings banks issued mortgages.

The advent of Internet banking at the end of the 20th century saw a new phase in savings banks with the online savings bank that paid higher levels of interest in return for clients only having access over the web.

Microfinance Banks

Microfinance is a category of financial services targeting individuals and small businesses that lack access to conventional banking and related services. Microfinance includes microcredit, the provision of small loans to poor clients; savings and checking accounts; microinsurance; and payment systems, among other services. Microfinance services are designed to reach excluded customers, usually poorer population segments, possibly socially marginalized, or geographically more isolated, and to help them become self-sufficient.

Microfinance initially had a limited definition: the provision of microloans to poor entrepreneurs and small businesses lacking access to credit. The two main mechanisms for the delivery of financial services to such clients were:

(1) Relationship-based banking for individual entrepreneurs and small businesses.

(2) Group-based models, where several entrepreneurs come together to apply for loans and other services as a group.

Over time, microfinance has emerged as a larger movement whose object is: “a world in which as everyone, especially the poor and socially marginalized people and households have access to a wide range of affordable, high quality financial products and services, including not just credit but also savings, insurance, payment services, and fund transfers.”

Proponents of microfinance often claim that such access will help poor people out of poverty, including participants in the Microcredit Summit Campaign. For many, microfinance is a way to promote economic development, employment and growth through the support of micro-entrepreneurs and small businesses; for others it is a way for the poor to manage their finances more effectively and take advantage of economic opportunities while managing the risks. Critics often point to some of the ills of micro-credit that can create indebtedness. Many studies have tried to assess its impacts.

New research in the area of microfinance call for better understanding of the microfinance ecosystem so that the microfinance institutions and other facilitators can formulate sustainable strategies that will help create social benefits through better service delivery to the low-income population.

Creditor

A creditor could be a bank, supplier or person that has provided money, goods, or services to a company and expects to be paid at a later date. In other words, the company owes money to its creditors and the amounts should be reported on the company’s balance sheet as either a current liability or a non-current (or long-term) liability.

Some creditors, such as banks and other lenders, have lent money to the company and will require the company to sign a written promissory note for the amount owed. When a promissory note is required, the company borrowing the money will record and report the amount owed as Notes Payable.

If the creditor is a vendor or supplier that did not require the company to sign a promissory note, the amount owed is likely to be reported as Accounts Payable or Accrued Liabilities.

Other creditors include the company’s employees (who are owed wages and bonuses), governments (who are owed taxes), and customers (who made deposits or other prepayments).

Some creditors are referred to as secured creditors because they have a registered lien on some of the company’s assets. A creditor without a lien (or other legal claim) on the company’s assets is an unsecured creditor.

Debtors

A debtor is a person, company, or other entity that owes money. In other words, the debtor has a debt or legal obligation to pay the amount owed.

A debtor is an individual or entity that owes money to a creditor. The concept can apply to individual transactions, so that someone could be a debtor in regard to a specific supplier invoice, while being a creditor in relation to its own billings to customers. Even a very wealthy person or company is a debtor in some respects, since there are always unpaid invoices payable to suppliers. The only entity that is not a debtor is one that pays up-front in cash for all transactions. Thus, an entity could be a debtor in relation to specific payables, while being flush with cash in all other respects.

A debtor is considered to be in default if it does not pay a debt within the payment terms of the debt agreement. Thus, a short payment or late payment could trigger a default.

The liability owed by a debtor can be discharged in bankruptcy, or with the agreement of the counterparty. In either case, if the liability is no longer valid, the entity involved is no longer a debtor in relation to that liability.

When a customer hires a safe deposit locker from the bank, the relation between the bank and the customer is lessor and lessee. The bank is the lessor (licensor) and the hirer of safe deposit locker is the lessee (licensee/tenant).

Bailor and Bailee

Bailment refers to delivery of goods by one person to another for some purpose under a condition that the goods to be returned to depositor when the purpose is accomplished or otherwise disposed of according to the directions of the person while delivering the goods (Sec 148 of contract act). The person delivering the goods is known as bailor and the person to whom goods are delivered is called bailee.

Ex.

• The articles, valuables, securities deposited in the safe deposit vault of the bank are also an example of bailment. In this case, the customer and banker relationship is bailor and bailee, besides their relationship as trustee and beneficiary. The bailor is still the rightful owner of the item though the item is in bailee’s possession. As a bailee, the bank has to take care of the goods bailed.
• A car parked in a parking area where parking charge is collected. The car owner is the bailor and the contractor who collected the charge is the bailee. As a bailee, the contractor has to take care of the car parked at his parking area.
• Relationship of Pledger and pledgee is also a type of bailment in which goods are delivered by one person to another as a security for payment of a debt or performance of a promise (Sec 172, Contract Act, 1872). For example, the borrower delivers the gold jewel to the bank as a security for the loan granted by the bank. In this case, the borrower who pledged the gold to the bank is the bailor (pledger) and the bank is the bailee (pledgee).

Trustee and Beneficiary

When a banker accepts items like securities or documents for safe custody or maintains escrow accounts of the customers, the relation between the banker and customer is a Trustee and the Beneficiary (Trustier). The bank is the Trustee and the customer is the beneficiary.

 (Escrow is a separate type of bank account generally opened for various business deals like acquisition, transfer of shares and debentures of a company, where money deposited in banks will be released only under fulfillment of certain conditions of a contract).

Agent and Principal

When a bank collects cheques, bills and other instruments for customers, the relation between the bank and customer is that of Principal and Agent. The bank also makes regular payments of insurance premium rent etc. as per standing instruction received from the customer. In the above cases also the relation between the bank and the customer is of Principal and agent. The bank act as the agent and customer the principal.

Advisor and Client

When a customer invests in securities, the banker acts as an advisor. The advice can be given officially or unofficially. While giving advice the banker has to take maximum care and caution. Here, the banker is an Advisor, and the customer is a Client.

Relationship of Bailor and Bailee

When Customer deliver goods to bank for purpose of safekeeping under a condition that goods will be returned to depositor when purpose is completed. In this case, Customer becomes bailor and bank becomes bailee. The process is known as Bailment. Example of Bailment is; Articles, Securities and valuables kept in safe deposit locker. In this case, relationship between banker and customer is Bailee and Bailor.