What to Do When You Fail To Pay Your Home Loan EMIs

Home Loan EMIs

These days buying a home is more of a basic necessity than a luxury. Home loans are available so that you do not miss out this necessity. The banks consider your home as collateral and sanction you home loan of eligible amount. Once your loan has been disbursed, a lender is expected to start paying EMIs every month till the loan tenure ends.

However, everything will go smooth till you pay your monthly EMIs on time.  But what if you face a financial crisis such as losing a job or sudden medical emergency and you default on your home loan EMIs. This article will tell you what can happen if this situation arises and what options you have in such situations.

• The bank will send you a reminder notice if you miss EMI of a month.
• If you fail to pay EMIs for three consecutive months and you have been constantly ignoring the bank reminders regarding the due payments, then your loan might get declared as Non-performing asset. A notice will be sent to you concerning the recovery process of due payments under the 2002 SARFAESI (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest) Act.

• If a borrower will ignore the above notice also, then bank will send a notice for seizing the property for auction. This notice includes all the details and terms of auction along with the value of property. Usually, the auction date is set after one month of sending the final notice.

• Generally, banks do not like such lengthy recovery process and auction, so there are chances that you might settle and negotiate your dues before this situation arises.

Such borrowers who are unable to pay back the monthly EMIs are advised to take the corrective measures as soon as possible and should avoid the banks to get into action. Here are some options which can be considered.

Meet your lenders

If you are unable to pay your EMI for a month and have a fair idea of your future financial situation then do not hope for the things to get better. Meet your lenders immediately and tell them briefly about your financial situation.

Ask for a grace period

You can try to get a grace period from the bank by explaining the reason of being unable to pay the EMIs on time. There are chances that your lenders might consider your explanation and give you a grace period of 3 to 6 months with some penalty.

Restructure your loan

If you are sure that your finances will remain tight in the future and you cannot take the burden of loan EMIs or cannot afford the increased EMIs then you may also ask your bank to restructure your loan. The extended loan tenure will reduce your monthly EMIs. In this case, you will be paying more interest than before but you would protect your home from the auction and you will get the time to fix up your financial picture.

Transfer your loan

If your bank is not ready for settlement and negotiation, then you can also transfer your loan to another bank. But before doing that, you must remember that you will be facing processing fees and other charges also.

Liquidate your investments

This can be your final step. You can liquidate any of your existing investments such as mutual funds, deposits etc. to pay off your loan EMIs. It is advised that you should also consider doing the part payments of your loan so that it can reduce the EMIs to go forward.

Conclusion…

You can consider the above points when you default on your monthly payments. This situation can be prevented by keeping 5-6 months of emergency funds aside. This would help in tiding over the crisis. Ideally you should use a home loan EMI calculator before taking a home loan to ensure that you are able to pay out EMIs on time. You must also consider taking a health insurance and business insurance that would help in the times of critical illness and business loss. 

How to Change Your Car Registration

Relocation comes with a lot of work and the most important one is your car re-registration. The procedure of changing your car registration is quite confusing and tedious. Many people have no clue of this procedure and to get things sorted they end up paying a lot of money to the middlemen.

This article will tell you everything about transferring the registration of your car when you relocate.

NOC from the bank

If your car is financed by a bank, i.e., if you have a car loan against the car you are planning to take with you, then you will have to get a state transfer NOC from your bank. Visit your bank with an application and important documents such as ID proof, address proof and a valid reason of relocation like Job transfer certificate or anything else.

After checking all your documents and other details, bank will validate your request and when they find everything okay, they would give you letter of consent or NOC  which approves the state transfer of your car.

Apply NOC from the RTO

You need to submit NOC form to the RTO office, where you got your car registered. Form 27 and Form 28 have to be submitted along with a photocopy of the NOC you obtained from your bank. 

Here is the list of other documents which are required.

• An application requesting for NOC of interstate transfer
• Registration certificate, pollution under control paper, insurance papers and tax documents

• Original chassis of the vehicle
• 3-4 photocopies of CMV Form 28
• NOC from the traffic police department which state that you do not have any due fines for traffic violation under your name

When you submit all the above documents, RTO will issue the NOC certificate that would allow you to move your car from one state to another.

Re-registration of your car

Once your vehicle has relocated to a new state, you need to revisit the RTO office for the re-registration of your car along with the following documents.

1. Form 29-30 for the re-registration of your car’s number
2. Original copy of RC
3. Copy of insurance papers
4. Copy of NOC you obtained from the bank and RTO office
5. Emission test certificate
6. Original chassis of the vehicle
7. Your ID proof along with a local address proof
8. Your passport sized photos
9. Applicable fees like octroi charges and road tax (Octroi charges are calculated on the basis of depreciated value of a car and the state in which you are moving)

After submitting the above documents, you will get a new registration number of your car within few days.

Refund of road tax

Let’s assume that you purchased your car from Delhi and already paid a life time road tax, but after few months, due to some circumstances you need to relocate to Mumbai. In that case, you may request for refund of road tax but only after getting a new registration number from Mumbai.

Here are the following documents which are needed in this process.

• An application which requests for refund of road tax
• Duly filled Form 16
• RC copy with new registration number of your car
• RC copy of with old registration number of your car
• Insurance certificate of your car
• Passport sized photos
• Address proof

Once these documents and an application seeking for refund is submitted, then the RTO office in Delhi would contact the RTO office in Mumbai to validate the mentioned registration number. They will ask for an intimation that is CRTI. The old RTO office would process the refund request after obtaining the CRTI receipt.

It is always advised that you should start the process of obtaining the letter of consent or NOCs from bank, traffic police and local police in advance because it usually takes 2-4 weeks for the validation of paperwork. And once you have all the documents in place then the process of transferring of registration of car will not be a concern at all.

Transfer of Ownership of Used Car

As cars have become more of a necessity than a luxury for the average Indian, the market for new as well as pre owned cars has witnessed rapid growth. Though the market of used cars in India is brimming with great choices, you may also come across unscrupulous sellers. So before buying a used car, check the paperwork thoroughly and also make sure that your seller sends the letter of information about the sale to the Regional transport office, RTO (where the car had been registered) within 14 days. Here are some important documents which you must get before finalising the deal.

Thoroughly inspected car parts and documents:

Firstly, get the car checked by a trusted mechanic; doing this will either help you in fixing the problems by the owner itself or you can negotiate the price. Check the number of documents here:

Insurance papers: Check if the car had undergone any accidents and claims related to it. To know this, you must check the no claim bonus (NCB) percentage. It’s always better to have a high NCB.

Always check if the chassis number and engine number matches the numbers on registration papers.

Examine the condition of the tyres, brakes and filters of the car. A poorly maintained car is not worth of your money.

Transfer of the ownership of car

A buyer should submit the following forms to the nearest jurisdiction. These forms must be signed by the previous owner and the current buyer.

• Form 28: No objection certificate (NOC)
• Form 29: Transfer of ownership of car
• Form 30: Application of intimation and transfer of ownership

In case, the car had been registered in a different jurisdiction then a buyer can demand a NOC from the RTO of that jurisdiction, it will speed up the whole process of transferring the ownership.

After submitting the above documents and forms, the local RTO would start the process of transferring of ownership. A buyer will receive a receipt in 15 to 20 days and a copy of RC (with buyer’s name) will come in around 40 to 45 days. This process shows your legal transaction and acts like an evidence of transaction.

Once you receive the RC, there are some other documents also which you need to take care of:

1. Get the car insurance transferred at your name, or get a new one as an alternative
2. Do not forget to get the service book which includes all the records of services done along with the road tax receipts
3. If the car has CNG fitted to it, then do get the bi-fuel certificate
4. Also ensure that the seller should give you pollution under control (PUC) certificate.
   

In case your seller had taken a car loan for buying the car, then make sure you get Form 32 and Form 35, It will make sure that car has no pending and previous loan on it.

If the car is bought on finance then make sure that you get the original invoice of the car along with the NOC issued by the car finance company.

Conclusion

Buying a used car from a dealer is less exhausting as he takes care of transferring of ownership in the name of the new buyer. But make sure that you are buying the car directly from its first owner and not the car dealer, in that case you will become the third owner and it would cut down the resale value of the car. However, buying a car from the auto company is one of the best and safest options as you get all the documents thoroughly checked by the company itself. It does the full car servicing before selling it and gives a warranty of up to 1 year along with 1- 3 free services. But usually this advantage has many terms and conditions applied to it, you can avail an exchange offer only if you have bought your first car from the same company. 

Car Loan EMI Calculator - check EMI with easy steps

These days buying a car has become more of a necessity than luxury. It is advised that you should not burn all your savings at once if you are planning to buy a car, there is an alternate option for this- car loan. It allows a potential buyer to pay for the vehicle in monthly instalments with interest (EMI) and the bank will pay off for the car in full. Wondering how many EMIs you will be paying over the loan time period and how you can manage your finances accordingly, EMI calculator will help you in doing so.

Car Loan EMI

Equated monthly instalment is the amount you pay every month to the bank until the borrower pays off the full loan amount. It includes the interest and a part of the principle amount. The tenure is divided by the sum of principle amount and interest and it gives the total amount which has to be paid every month. The interest would be larger in the initial months and will gradually shrink with each payment.

Three major facts about EMI: 

1. Longer tenure will reduce your monthly instalments
2. If the rate of interest is high, then your EMI would be higher
3. EMI depends on your loan amount, high loan amount will give you high EMIs

Car Loan EMI Calculator

Car loan EMI calculator plays a major role when you are planning to take a car loan, from deciding the perfect car model to assisting you in planning your monthly finances. It is very easy and hassle free tool that helps you in maintaining your present and prospective monthly instalments. Many third party loan comparison websites, leading banks and financial institutions offer this tool on their official websites and an applicant can use it for free. 

You can just enter the details which includes your rate of interest, loan amount and repayment tenure, EMI calculator will instantly calculate your monthly  instalments as well as amortization schedule. If you enter a processing fee (if any) then this fee will be added to your principal amount and will give you the sum of expense which you will be incurring. If you wish to prepay your loan, then you can also check the influence of your prepayment on EMI by entering the prepayment amount, prepayment frequency and prepayment penalty. To make your EMI affordable, it is advised that you use the EMI calculator and plan your monthly budget accordingly

How does EMI calculator works

EMI Calculator first calculates the compound interest of your principal amount at the current rate of interest. The calculation is based on the total payable amount, compound interest and the remaining part of the EMI is considered to be the principal amount.

EMIs can be computed mathematically using this formula.
[P x R X (1 + R) ^ N] / [(1 + R) ^N - 1] = Monthly instalments

Where P = principal loan amount, R = Rate of interest per month and N = number of monthly instalments. Suppose your rate of interest is 12% per annum then the interest rate per month will come out to be
12/ (12 x 100).

The EMI is a total of principal amount and the interest amount. For example, if the borrower takes up a loan of Rs. 10 lakh on which the monthly interest is 0.0075 (according to the annual interest rate of 9%) and the tenure is 15 years tenure that is 180 months
then by using the formula, the EMI will be calculated as Rs. 10, 142.67.

By using an online car loan EMI calculator, you will get results without any calculation errors or hassles that are prone to occur otherwise.

Why Gold Loan Is Better Than Personal Loan?

When faced with a financial crisis or a large expense, a loan might just be your best bet to get out of a financial hole. In this context, a personal loan or gold loan are often considered to be the best options. Both options are equally capable of meeting any of your expenses. The difference between the two is that in the case of personal loan you cannot give any type of collateral to pay off the debt sooner whereas the gold loan is backed up by your gold in the form of ornaments or gold coins (bullion is not currently acceptable by Indian banks and NBFCs). Listed below are some other key aspects that justify why gold loan is better than personal loan:

1. Zero processing fees: As personal loans are given to you without any collateral, you need to submit your income proof documents along with 0.5 percent to 1 percent of the loan amount as part of the processing fee. The benefit of the gold loan here is you do not have to pay any or at most a nominal processing fee and only minimal documentation is required. But banks offering gold loan may need for some document proofs such as you ID and address proof. And you need to submit your gold with the bank to get the Gold loan application processed within a few hours at the most. 
   
   
2. Lower interest rates: If you keenly observe the gold loan interest rate in the market, you will find them floating around 12 to 15 percent per annum mark as they are secured loans. Whereas personal loan interest rates though they start at 11.49% you would be quite hard-pressed to get a offer cheaper than the18 percent to 24 percent range as they are unsecured. The substantial difference in the two loan types makes gold loan the preferred choice among a large proportion of borrowers. 
   
   
3. Easy payment options: Generally in case of personal loan, you need to repay your loan through EMIs spanning over a fixed period of time.  And if you pre-pay any amount, a bank will charge you a prepayment fee that would be around 2 percent of the current outstanding principal amount. However, this is not the case with the gold loan. You can make payments in advance and close your gold loan account anytime you wish to without incurring extra charges.
   
   
4. No EMI Payment: This is the most important aspect of gold loan which a bank will never offer you on a personal loan. As part of this facility, there will be no EMI option given to you which combines the interest amount plus primary compensation. This is because the lender already has your gold which is more expensive than the loan amount, so you only have to keep paying the interest amount and the lender will be more than happy to keep the loan account active for years. The reason behind this clause is to give you flexibility in hard times when you cannot pay the bank loan due to a medical emergency, loss of job, etc.
   
   
5. The More the Value of Your Gold, the bigger the Loan Amount Will Be: Unlike personal loan where your loan amount depends on your salary, the gold loan amount will vary as per the amount of your gold. Let’s suppose you are earning Rs. 50,000/- per month then you will easily get a personal loan of about Rs 10 lakh for a period of 5 to 7 years.   But in the case of a gold loan, you can normally expect the loan amount of up to 70 percent of the current market rate of your gold. And this amount can go up to 90 percent if you can pay the higher rate of interest. This is based on individual company schemes.

To summarize, a gold loan being a secured loan features a lower interest rate and also offers an additional flexibility to pay the amount as per your convenience. To know more about gold loans option, you can visit www.paisabazar.com.

Do Personal Loans Have Tax Benefits?

Personal loan has become one of the popular loans these days that help individuals meet their current financial needs such as the marriage of their son/daughter, construction or renovation of their home or any other. A personal loan is an unsecured loan that people often apply for as there is no security required for it and the processing time is short. It is usually taken by those who necessitate quick and easy loans with low-interest rate and minimum documentation.

Typically, a personal loan is not considered as part of your income, so this loan will not be considered as a taxable fund when you are filing income tax returns. But you need to make sure that the loan should be taken from an authorized bank or any other financial body as loans from unidentified sources are considered as part of your income while calculating your taxes.

Exception to the Rule

If you can prove that you have used the loan amount for a few valid expenses, you can actually use your personal loan for tax savings and can claim tax relief on the same. A few examples where you can claim tax benefits on personal loan include cases such as if you use the loan amount to finance your business expense or if you have taken a personal loan for your house such as performing renovations.

Personal loan to buy a residential property

Section 24 (b) of the income tax act provides relief to the home buyers by giving them the privilege of tax deduction on personal loan if it is taken to buy a residential property or to renovate it. If you use a personal loan for the down payment of a property, you can claim tax exemption. This clause is also valid if you use the loan amount to pay for home repairs, renovation, or for reconstruction, all these are considered valid expenses for the tax deduction.

Note that you can only claim the tax deduction on the interest amount, not on the principal amount of the loan. In case you are currently living in a house on which you have spent your personal loan amount, then you are eligible to claim tax reduction for interest amount of around Rs. 1,50,000. But if you are living in a rented house, then there is no limit on the interest amount that can be claimed.

Also if you have invested in a house that is under construction, you cannot claim the tax deduction until the property is completely constructed. Also, you need to assure that the property will be ready to acquire within three years if taking the loan. Preserve all the documents needed to provide proof that you have spent the loan amount in construction or renovation of your house. If you have used the amount to carry out the repairs or renovations, preserve the bills for materials and labor. These are needed to claim your tax deductions.

Personal Loan for Financial Business Expenses

The exception to the rule also applies for the financial business expense. You must be personally liable for the loan and should be able to enumerate what portion of the interest paid is attributed to legal business expenses. Similarly, if you use a personal loan to buy a motor vehicle that you use solely for business i.e. commercial purposes, then all of the interest on the loan is tax deductible.

Conclusion

A personal loan is considered as an ultimate option to meet immediate financial needs. They can also be used as tax saving tool if used properly. So you need to understand how you can get a personal loan for your assistance while claiming tax benefit from it too.