5 Factors That Affect Your Home Loan Eligibility

Your decision to buy a dream home needs a lot of planning and preparations. Not only it requires you to arrange adequate funds but also to ensure that you find the best property that should define all your purposes, you’ve been looking for. Home loan is one of the organized ways to buy your dream home without worrying about finances. But before initiating the process of getting a home loan, read on to know the list of five factors that could affect your home loan eligibility if not taken care of it on time.

 1. Your profession and tenure of work: It is one of the most important things that most lenders look for while approving a home loan of a potential candidate. This factor states that if you have switched too many jobs in the recent past and do not have at least a year’s salary slip to provide it as a proof of income tax, your home loan application may be put on hold. Besides, lenders consider employees from the well-established firms as the borrowers instead of those who are associated with the start-up ventures. Some lenders are also cautious of sanctioning home loan to those whose jobs are uncertain. Thus lawyers, media professional and those employed with the police department may find it a tad difficult to get a home loan.

 2. Your CIBIL score: Your home loan eligibility is greatly associated with your CIBIL score. The higher the score, maximum are the chances of you getting a home loan and vice versa. As per the current rule, if your CIBIL score is less than 750 out of 900, you’ll not be considered eligible for a home loan. Other factors in your CIBIL report that can lead to home loan application rejection include: if you have made too many inquiries or have availed too much credit in the recent past and if your repayment burden is already high. In order to avail a home loan, maintain good credit behavior with your existing credit by making timely payment of all your credit card outstanding in full each month and make timely repayments on your existing loans.

 3. The age of the property you purchasing: According to the current trend, banks only provide home loans for properties developed by real estate developers as they have a tie-up with them. This does not mean you will not get a home loan for any other property. In its place, the banks will carry out an independent evaluation of your chosen property and perhaps lend you just a part of the property price. Old property is an apt example for this situation as it is more prone to structure collapse in future.

 4. Your marital status: Despite the fact that many banks are offering home loan schemes especially for woman, good many lenders don’t provide the home loan to those women who are single with the fear that they may stop working after getting married or childbirth. This does not mean that you should avoid getting married but we suggest you to put off your home purchase till you tie the knot and then apply for a home loan jointly.

 5. No credit history at all: If you are living with the mindset that your home loan application will easily sail through because you have no credit score at all, it could get you in a serious mess as this factor can reject your home loan application at the very first level. If you will have no credit history, the lender will have no such reference to know your credit score history and your dream to buy your own home will squeeze off in seconds. To avoid getting into such hassle, It is prudent to have at least a few years of good credit history behind you before you think of applying for a home loan

When you are applying for a home loan, you are actually signing a long term bond with the bank. While do your best in getting your papers in order and managing the funds for the down payment, you must also keep the aforementioned factors in mind to improve your home loan eligibility.

Buy a House or Continue on Rent

After working for a couple of years, as soon you enter your late 20s, a question arises in one’s mind. Should you continue living on rent or buy a house? Obviously, the answer is not that easy. Although the best thing would be to buy a house as soon as you can, it is easier said than done. As you build your career, you start saving money and may choose to buy a home. But if you are a person who thinks buying a house at this point of time does not make sense in your life then you should evaluate the costs, pros and cons of owning a house and renting a place.

Before evaluating your financial health and whether you are ready to don the homeowner’s hat, think of how you foresee your career. If you wish to live in your current city forever, it would make sense to invest in property. However, if your job requires you to constantly change base, it would be prudent to not invest until you are more geographically stable.

Be sure to have a stable job in case you are thinking of investing in a house. Banks do not give home loans without checking an applicant’s employment stability. Your EMI also sets to increase if the rates go higher so be sure about the future and how much salary hike you may get over the years. Your financial position also helps you make a decision to buy a house or staying on rent. Given below are some of the main differences in owning a house and renting a house.

Maintenance & Tax benefits:

When you own a house a monthly or yearly maintenance cost applies like painting, repairs and also renovation if desire. But when you rent a place, these maintenance cost are not applied and are almost nil. Owning a house also has tax benefits. Under Section 80C of the Income Tax Act, the deduction to claim a principal repayment is only available for up to Rs. 1,50,000 within the overall limit in FY 2014-15.

Time Duration & Choice of Locality:

By being the owner of a house there is no time period for you to stay there. You own it which means you stay as long as you don’t sell it but when you stay on rent, it is the landlord who decides the time-period for renting his home to you. Another difference is when you are on rent, you can decide change the location to rent next time you shift and you have no problems in doing it. While on the other hand when you buy a house, you have no flexibility left for choice of location.

Depreciation, Long Term Benefits & Payout-fee:

The value of your home may depreciate over the course of time due to weather changes, repairs etc but these costs do not count when you are staying on rent. Another difference between owning a house is the payout charges that you are charged are minimal and only in case of a floating housing loans. Whereas a home on rent usually have an increase of 10% on the monthly rent.

Proper Research of the Market:

It is best to go with each and every detail thoroughly before making a decision. Go through the advantages and disadvantages of buying a house or rent one such as property rates, the home loan interest rates and how the housing is market responding at the present time.

Monthly Savings:

Make sure about your savings and financial needs. If your monthly income after all the deduction is not enough to pay the EMI for your home loan then there is no point of paying an extra amount leaving you almost with nothing at the end of the month. It is also because investing and buying a house is a long term investment and commitment. While your monthly rent would be far less than your loan EMI, it would also allow you to save money as well as give you time to think about owning a house or not.

Choose the best option which suits your needs, situation and specially finances. A variety of factors like the ones mentioned above matter a lot in making the tough decision. Always remember, do not buy a property just for having it in your investment portfolio. You should determine completely if you need to buy a house or you are really happy with paying a monthly rent and saving side by side.

Tips For Selecting Small Business Credit Cards

Business credit cards are a popular credit source and a simple yet powerful form of finance for businesses.

Particularly for small businesses, having a separate business/corporate credit card offers the following advantages:

• Identification and tracking of business expenditure
• Understanding cost reduction possibilities
• Operations optimisation and enhanced efficiencies
• Availability of annual and quarterly statements for tax reporting
• Access to  high credit limits suitable for businesses
• Reward programs offering redeemable points for travel and other business purposes. 
• Giving employees the benefits of a credit card for business purposes, while keeping track of their expenditures

If you are a small business owner and looking to achieve the above mentioned business advantages, taking time out to scrutinise available options to pick the right business credit card and it can help you reap major dividends.

Here is some helpful information when considering a credit card for a small business:

Check your credit score

If you plan to apply for a new business credit card, ensure your credit is in good shape. Get your credit report and check your  score - this will indicate your current financial standing. Errors in your credit report, if any, should be reported to the credit bureau and fixed at the earliest. An error-free credit report improves your credit score, which in turn helps you get better credit terms and better rewards, leading to big savings.

Get a credit card in line with your requirements

Your new credit card should fit your exact business needs. For instance, if your business is such that it requires extensive interaction with international clients/companies, or needs frequent overseas travel, it is best to get a card with the following features:

1. No foreign transaction fees
2. EMV chip and PIN authorisation system
3. Air Miles-based rewards system  

If your usage is going to be sparse, it does not make sense to sign up for a card with a high minimum spend limit.

Several cards come with a host of benefits including insurance and travel-related benefits, but they carry high annual fees. If these benefits are not required, get a different card with zero charges and annual fees.

Record keeping

A primary reason for getting a credit card for small business is to facilitate record keeping. These cards help you keep your business and personal expenses separate, simplifying things further, and becoming particularly helpful during tax times. Many small business credit cards also offer additional business finance-management tools.

Documents for business credit card application

Different banks have different criteria, and depending on the type of business organisation, the documents required may vary. Listed below are some common documents business persons need to submit along with their business credit card application to banks:

• Proof of identity
• Proof of age
• Proof of residential address
• Proof of income, usually balance sheet and P&L account
• Trade license
• Proof of Business turnover
• MOA in case of multiple owners of the small business

Eligibility

1. Small businesses, corporate entities, limited companies, government-run companies, sole proprietorships and partnerships can easily qualify for small business credit cards.
2. Business credit card issuing banks require eligible businesses to have a  specified turnover, profits and  a satisfactory operations track record as per their internal requirements.
3. Multiple business cards are available for anyone requiring a separate expense accounts.

Benefits of a business credit card

Higher limit: Business credit cards provide higher credit limits compared to personal credit cards. Therefore, business-related expenses and high-value purchases can be made comfortably without maxing out your card.

Keeping track: Business credit cards help keep better track of business expenditure. Some credit card companies offer itemised bills, enabling business owners understand each business expenditure. These cards also offer the option to have a cap on spending limits so the chances of fraud on the corporate card are decreased.

Versatile: Apart from business operations, corporate credit cards can be used to pay for repair and maintenance, utilities, travel, etc. These cards also allow employers to impose restrictions on cardholders to spend only on particular categories, and allow them to specify the extent of expenditure too.

Better rewards: Credit card companies provide better rates on business credit cards, along with better point systems and good offers. Some credit cards offer reward points (if affiliated with an airline, reward points can be converted to air miles and used to purchase air tickets), cash back, discounts, etc. Employees can redeem their rewards in lieu of gifts, discount vouchers, air miles and more.

Establishing company credit history: By taking a business credit card, you build a business credit card history - something most investors scrutinise before investing, as it clarifies your financial responsibility. Even banks can understand your financial standing by looking at your credit card statements, and they will grant business loans accordingly.

Dual benefits: Employees enjoy cashless transactions, while employers get a detailed spend analysis each month.

Transparency: Monthly credit card statements offer transparency, facilitate easy cost analysis and expenses tracking and help streamline budgets too.

Some banks offering business credit cards:

1. Axis Bank
2. Bank of Baroda
3. Citibank
4. Canara Bank
5. HDFC Bank
6. Kotak Mahindra
7. State Bank of India

Table 1. Following is a comparison of business credit cards offered by two leading Indian banks*.

bank and card name	Features	advantages	disadvantages
Axis Bank - My Business Credit Card	1.Offers a comprehensive suite of privileges, designed specially to enhance business process efficiency 2. 1st year annual fee is zero 3. From the 2nd year onwards, annual fee is Rs. 499 4. Throughout the year, 20% cashback can be availed on base fare of flight tickets via www.ezeego1.com	1. Can be used to withdraw cash up to 30% of the offered credit limit from over one million Visa ATMs worldwide 2. Can be customised by getting the company name or cardholder’s designation embossed on the card  3. Offers 2.5% surcharge refund on fuel transactions in all petrol pumps across the country	1. Mandatory joining fee of Rs. 999
SBI Platinum Corporate Credit Card	1. Accepted at over 24 million outlets worldwide, including 3,25,000 outlets in India. 2. By applying monthly, weekly, and even daily limits on the card, usage can be kept within permitted limits 3. With the Visa Intellilink spend management tool, the cardholder can monitor and control his/her organisation’s expenses 4. The tool offers a user-friendly dashboard and a convenient real-time interface for expense management	1. No joining and annual fees. 2. Complimentary insurance cover – also covers the company’s corporate card liability against frauds by employees. 3. Interest-free credit period of 20 to 50 days – subject to previous month’s outstanding balance being cleared. Applicable on retail purchases only	1. High international ATM usage charges – per transaction charges can be as high as 3% of the withdrawal amount or Rs. 400, whichever is higher

*The above information is indicative and subject to change from time to time.

When applying for a business credit card:

• Talk to other business owners and find out which credit card companies offer the best services
• Compare your options, then zero in on the type of business credit card best suited to your business needs
• Check if you require supplementary cards in your employees’ names
• Read the credit card offer document carefully before signing
• Avoid business credit cards having a personal guarantee mandate
• Remember that corporate credit cards do not allow add-on card options for family members, they are meant for employees and co-owners only

Concluding

A business credit card is a good choice for most small businesses, especially those in their formative stages. However, these cards are most viable for businesses that manage debt well. From a long-term perspective, predicting this kind of debt management becomes difficult for new entrepreneurs, especially during the startup stage, when expenses outpace income by a long stretch.

Regardless of whether you are comfortable taking risks, or are a risk-averse entrepreneur - before zeroing in on a business credit card, it is advisable to weigh all pros and cons, understand the implications of the aforementioned factors and only then you can make an informed decision.

Why It Is Better To Finance Your Business With A Personal Loan

A personal loan is the easiest and quickest loan option in today’s market. It does not take a lot of days to get it approved and has a quick approval procedure if you fulfill the required criteria. Banks these days give you an instant Personal Loan approval on the basis of your credit score, employment status, repayment history (credit card payments), age, etc. While you can opt for a personal loan for many reasons, one of the reasons can be financing your business. Many would say to go for business loan if you are looking to fund your business but that can be tricky. Here are some of the reasons why a personal loan makes sense to finance your business.

To Start a New Business Venture:

When you want to start your own business, you will surely encounter some obstacles on the way. Taking up a business loan is a little hard for a brand new business organization. It is best to opt for a personal loan in the early stages of your business so you can get your business started.

The Amount Required Is Less:

A personal loan makes sense if the amount you require for your business is not substantial. A business loan is best if the amount you require is quite large. It would also take a lot of time as the procedure takes more days when compared to personal loans. Business loans also require a lot more documents when compared to personal loan. For a business loan, documents include business model, service taxes and more. A personal loan is quickly approved and is easily available.

No Collateral or Guarantor Needed:

For a business loan, your company’s reputation, credit history and cash flow are some of the factors that are considered. You will be asked to keep something as collateral too. Whereas in a personal loan, they are given to an individual. The bank or a financial institution will evaluate your personal income, credit history, bank details rather than that of your business. Personal loans are more flexible and allow you to use the funds as you wish to. In comparison with business loans where you have to keep something as collateral, personal loan do not ask for any collateral.

Freedom of Using the Amount As You Wish:

In a business loan, there are very strict terms how you use the money. You cannot use the money as you wish to. A business loan is taken so that companies can pay for expenses that they are unable to pay. They are used to pay for salaries until the company is stable. They are also used to fund office supplies and projects. You also have to show the lenders where you used the borrowed money. While in a personal loan, the amount is given to an individual. There are no questions asked where the money is going to be used. It is your wish how you use the money in helping your business grow.

A Personal Loan can do you no harm unless you do not make the monthly payments and pay your dues on time. You do not need to be afraid of a Personal Loan anymore. All you need now is to research about which bank gives you the best option on easy approvals, hassle-free documentations and lowest Interest Rates. You can compare all this on several online loan aggregators, such as www.paisabazaar.com and know more. Each bank has a different set of payments options and pre-closure rates. Make sure you find everything before going in for the loan which will only benefit you. Consider these scenarios to learn if a personal loan is the right match for your business.

Reverse Mortgage: How It Can Cushion Retirement

In an endeavor to provide a cushion to individuals who are in their golden years, the reverse mortgage loan has been introduced by a number of leading banks in India. It is a type of mortgage in which retired homeowners can borrow money from banks or NBFCs against the value of his or her home. No principal or interest is required as part of this loan until the borrower dies or the property is sold.

How does a reverse mortgage work?

Most people purchase a home with a regular or forward mortgage that allows them to borrow money from a lender as a lump sum and then make monthly payments to pay off the debt to steadily build equity of the new home. Gradually the loan is paid off and individual acquires complete ownership of the home.

A reverse mortgage works differently. Instead of you making a payment to the lender, the lender will make a payment to you as per the total value of your home. It is for you to decide whether to accept the cash as a single lump sum amount, or as monthly installments.

During the tenure of your reverse mortgage, your property will continue be titled by your name i.e. you will retain ownership of the house. You will be charged interest only on the payout you receive, and both fixed and variable interest rates options are available to borrowers. As the loan tenure progresses, your debt increase and your home equity decreases proportionately.

In case you shift to another house or pass away, the lender has the authority to sell the home to recover the money that was reimbursed to you. Once the lender’s cost of lending has been paid out, any equity left in the home is given over to you or your heirs. The lender can ask a re-evaluation of the property used in the reverse mortgage every 5 years. Also note that despite receiving a reverse mortgage, you remain responsible for paying insurance, property taxes, and maintaining your home. In case you fail to meet such obligations or if your property falls into poor condition, your reverse mortgage loan can become outstanding i.e. the lender may ask you to start paying back the amount borrowed as part of the reverse mortgage plan.

How to get a reverse mortgage?

In order to qualify for a reverse mortgage in India, a few qualifying criteria need to be met and those are as follows:

1.   The applicant must be an Indian citizen and aged 60 years or above.

2.   In case of married couples as co-borrowers, one of the applicants needs to be at least 60 years of age, while the spouse cannot be less than 55 years.

3.   The applicant for a mortgage loan must be the owner of the residential property i.e. flat or house located in India.

4.   The applicant must possess a clear title of the property as proof of ownership of the house being used for the reverse mortgage.

5.   The property must have a residual life equal to or greater than 20 years.

6.   The property used for the purpose of a reverse mortgage needs to be the primary permanent residence of the applicant(s).

7.   Commercial properties are not allowed to be used for the purpose of a reverse mortgage loan.      

Charges for Availing a Reverse Mortgage Loan

Just like any other loan, the applicant is liable to provide a range of payments as fees to the loan applicant. The following are some key costs involved in availing a reverse mortgage loan:

1.  Origination Fee
2. Appraisal Fee
3. Assessment Fee
4. Documentation Fee and
5. Commitment fee in case of an un-drawn loan.

These charges are mentioned to the borrower at the time of applying for the reverse mortgage loan and may differ from one lender to another.

Special Considerations in case borrower outlives the Loan Tenure

The standard tenure of the reverse mortgage loan is 20 years and in some cases, the borrower may outlive the 20 year loan tenure. During the loan tenure, the borrower may choose not to service the loan as long as the property continues to be the primary residential address of the applicant. At the end of the 20 year tenure, the periodic payments made by the lender will cease, however, the interest will continue to accrue on the total amount lent even beyond the 20 year tenure. In case of the applicant’s demise or if the residence is no longer the primary residence of the applicant, the loan will be repaid through the sales proceeds of the residential property used for the reverse mortgage loan.