All posts by ANAND BHIDE

If you receive a bonus, incentive, or other extra income, you may consider using a part of it to repay your personal loan early. This can reduce the amount on which future interest is calculated. However, paying early is useful only when it fits your finances and the loan terms.

Before making a payment, keep enough money aside for regular expenses and emergencies. Then check how much of the payment will reduce the principal, whether any charges apply, and whether the lender will reduce the EMI or the remaining loan tenure.

What Is Prepayment of a Personal Loan?

Prepayment means repaying the entire outstanding personal loan before the scheduled end date. It is also called foreclosure or early closure of the loan.

Once the lender processes the payment, the loan account is closed and no future EMIs are due. You will usually need to pay the outstanding principal, any interest due until the closure date, and applicable charges, if any. Ask for a foreclosure statement before making the payment so you know the exact amount.

What Is Part-Payment of a Personal Loan?

Part-payment means paying an extra amount towards your loan without closing it completely. This amount is over and above your regular EMI and is used to reduce the outstanding principal.

Do not confuse part-payment with paying future EMIs in advance. A true part-payment reduces the principal amount, which can lower the interest payable for the remaining period. Check with the lender that the payment will be treated as a principal reduction.

Benefits of Pre and Part Payments of Personal Loan

Prepayment and part-payment can reduce the cost of a personal loan, but the outcome depends on the amount paid, the timing of the payment, and the terms of your loan agreement.

Reduction of EMI and Loan Tenure

When the principal comes down, the lender can either reduce your EMI or shorten the remaining loan tenure, depending on the available option. Reducing the EMI can make your monthly budget easier to manage. Reducing the tenure usually helps you save more on total interest because the loan ends sooner.

Ask the lender what will change after the payment and request an updated repayment schedule. This avoids confusion later.

No Pre-payment Charges

Do not assume that every personal loan allows free prepayment. Whether a charge applies depends on the loan type, the interest-rate structure, the date of sanction, and the terms stated in your sanction letter or Key Facts Statement.

Before paying a large amount, it helps to understand what a personal-loan prepayment penalty means. Compare the applicable charge with the interest you expect to save. If the loan terms allow a charge-free part-payment, the saving can be more meaningful.

Credit Prospects

Prepaying a loan does not guarantee an instant rise in your CIBIL score. What matters more is your overall repayment history, existing debt, credit utilisation, and payment behaviour.

A loan closed after regular, on-time payments can reflect responsible repayment. But do not miss an EMI while the prepayment request is being processed. Continue paying as scheduled until the lender confirms the revised EMI or loan closure.

Before You Make a Prepayment

Use a prepayment when it reduces your debt without leaving you short of money for essentials or emergencies. Check the interest saving, charges, minimum part-payment amount, and any lock-in condition before proceeding.

A simple way to decide is to request a written calculation from the lender. It should show the amount going towards principal, any applicable charges, and the revised EMI or tenure. Once you have the figures, you can decide whether part-payment, full prepayment, or continuing with the existing EMI is the better choice.

Frequently Asked Questions

Q1. Can part-payment reduce loan tenure?

Yes. A part-payment reduces the outstanding principal. Depending on the lender’s process, it can reduce the loan tenure or lower the EMI.

Q2. Does prepayment help save on interest costs?

Yes. Paying down the principal early can reduce the interest charged over the remaining loan period. The actual saving depends on the payment amount, timing, and applicable charges.

Q3. Which is better: increasing the EMI or making a prepayment?

Both can reduce your outstanding loan faster. Increasing the EMI works well for a steady rise in income, while a part-payment can suit a one-time bonus or lump sum.

Q4. Does prepayment reduce my CIBIL score?

Prepayment does not usually reduce your CIBIL score by itself. Continue paying EMIs on time until the lender confirms that the loan has been closed or revised.

Q5. Is prepayment good for a personal loan?

It can be a good option when the interest saved is higher than any applicable charge and you still have enough money set aside for emergencies.

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Manage your Finance

When To Finance Your Business With A Personal Loan

September 7, 2016 ANAND BHIDE Leave a comment

Thousands of new and innovative ideas are being constructed into business ventures every year. India’s business sector is gaining momentum having more than 4,000 startups to its credit during the year 2015.

With the call for business development comes the need for finance. There are many business loan products available in the market today for small, medium and large businesses. But the business has to satisfy many criteriums to avail a business loan. Instead, for certain business needs, availing a personal would be a better choice. But, under what circumstances should you use a personal loan for business purposes? The answer to the question can be derived from the following:

Documentation and Loan Amount:

Application for personal loans involves minimum paperwork and can be done online. In case the loan amount required is small, you would not like to go through lengthy procedures to procure a loan. Personal loan satisfies your immediate cash requirements with minimum documentation.

Interest rates:

Interest rates for personal loans are much lower than business loans. Banks also offer interest rates depending upon your relationship with them. Having an account with the bank from where you are taking a personal loan is an added advantage. As an account holder, you are treated as a privilege customer, and further consideration of interest rates are extended to you. Business loans also provide you with low-interest rates but those are loans secured against your business assets.

Collateral:

Personal loans are unsecured loans. No collateral or security is to be provided for availing the loan. Therefore, if you acquire a personal loan, no charge on your personal assets is created. You can further take a loan against such property (assets) separately for crucial business requirements. Some banks do provide business loans without collaterals but those are in the form of Overdrafts and the interest rates are much higher.

Credit assessment:

In the case of startups or new businesses, virtually, there will be no credit report or track record of the business. In such a situation you can opt for a personal loan and take advantage of you personal credit ratings and track record.

Business not liable:

Your business, being a separate legal entity, will not be affected by the personal loan transactions. The bank will not have any lien on your business assets to recover the personal loan, though you will be personally liable for the payment of your personal loan. A personal loan is an excellent tool for short-term financing of your business. It ensures the smooth functioning of your business without disturbing its financial structure.

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Manage your Finance

Is Converting Credit Card Debts Into Personal Loan Beneficial?

August 30, 2016 ANAND BHIDE Leave a comment

Availing a personal loan to pay your credit card debt has become a common tool to get rid of the debt spiral. Today, credits are easily available. There is absolutely no system to caution you about your credit management capacities. And access to multiple credit cards, coupled with the above, lands you in a debt pool sooner than you can imagine. Thereafter, all your energies are focused on clearing the debt amounts, which, in spite of all your efforts and inhibition, keep piling up. Your budget and savings derail and the situation continue to get worse. At such a juncture, a personal loan comes as a relief as it gives you the option of consolidating your many debts in one single debt. Moreover, the attractively low interest rates give you a sense of control and hope.

Converting your credit card debt into a personal loan may seem like a good move but without a proper debt repayment plan in place, it could only add to your problems.
Few things to consider while opting for a personal loan to deal with your credit card debts:

Clear Credit Track Record:

A good credit record assists you in satisfying both your personal and professional needs. For availing good products and offers, financial institutions need to be presented with a good track record that suggests that you have always been in a position to handle credit responsibilities effectively.

5-Year Plan

The strength of any financial plan can be determined by whether it can generate results within 5 years. You should plan your personal loan in a manner that it can be paid within the next 5 years at the latest. If not so, other options need to be considered.

Credit Counsellor

If you have determined that your debts are not manageable in your current financial scenario, it is time to see a credit counsel. It always makes one skeptical and a bit unsure to seek professional help for any matter whatsoever, and particularly for matters relating to credit. But such professionals exist and are well equipped with the knowledge and financial modules that will help you regain your financial soundness. These professionals are called “Credit counsellors”. They formulate debt repayment plan for you after considering your financial constraints. They also help you with your budgeting, saving and credit score improvement.

Debt repayment is a task which is easier said than done, but if you stick to your plans and have faith in the financial system, you will surely reach the shore of financial harmony.

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Beyond business

A catalyst in cause marketing through sport

August 29, 2016 ANAND BHIDE Leave a comment

The last few months, have made the internet a slightly more visually appealing place than it has been for quite some time now, especially when it comes to “inspirational” “motivational” or just human interest story telling. The digital A/V’s are compelling with real stories of grit, determination and focus- all of which lead to one road with success as the end destination. Right from a major apparel brand launching an amazing music video to converting a very commonplace hindi phrase into a brand led ad, scores of brands have jumped on the bandwagon of “content” and “Causea” marketing through sport this year. And that is anybody’s guess as to why. India has sent her largest Olympic contingent to the 2016 Olympic Games it’s a matter of pride and also getting your money’s worth while riding this Olympic sized wave!

Recently when South Africa played their fourth ODI against England at Johannesburg, to everyone’s surprise the Proteas turned up in a pink kit instead of their traditional green one. This was done to support World Cancer Day which was on the 4th of February. The ODI was called “Pink ODI” to engage and create awareness amongst the spectators about breast cancer. This is an exemplary example of cause marketing through sport where the campaign wasn’t anchored on a brand but the cause itself.

On the other hand, a brand like Tata Salt, who is an official sponsor to the IOA, released a series of ads talking about “Desh ka namak” and the pride that an athlete brings to the country. This is a classic case of content marketing, and we must say, a campaign excellently done.

Sport has the power to unite, inspire, seed hope and inculcate the habit of never giving up. It is the greatest source of entertainment for consumers and one of the most prevalent forms of communication for brands to market their product and reach out to their target consumers. The uncertainty in outcome creates a huge demand for sport and many brands have recognized it. What is fascinating is that companies no longer only want to be perceived as sellers but they have started to associate cause in which they believe. Take for example; one of the greatest clubs in the world, Manchester United with the biggest fan base in the world has not limited their presence on the field but has impacted lives. Manchester United Foundation uses football to engage and inspire young people to build a better life for themselves and the community they live in. Through this, the foundation has raised close to A£104 million. The foundation works closely with Aon, sponsor of training grounds of Manchester United Football club to bring a change to the community.

The new way of engaging the consumer with brands and adding value to the sport is through cause marketing. Marketers have used sports as a platform to create awareness, engage communities and raise funds for the cause that is close to their heart or what they feel is impactful and will bring people to support it.

In today’s era, it is essential for a brand to be socially responsible. With so much online chatter about giving back to the society and being a harbinger of change in any form, it is important for consumers to know that brands are not here for just profit, but also to make an impact in society for the better.

An example close to home is the “IndusInd Bank para champions programme” in association with GoSports Foundation. The programme supports the development of 15 para athletes. The bank is so committed to the cause of Sport, that they have a dedicated non- banking vertical called “IndusInd For Sports”. The vertical has even supported the upcoming shooting stars of our country by offering jobs at their branches through the M.P Shooting academy programe. The vertical is also used as a client and employee engagement tool through constant use of content marketing.

In India, cause marketing can be a great way of bringing community together through sports. An example of which is an unconventional sport, kabaddi getting its fair share of popularity in a cricket driven country. Kabaddi popularized as a sport because of the community engagement. It has managed to shape the lives of many players associated with it and further creating opportunities for many. The future of cause marketing looks bright, with engaging content and right cause; brands can communicate with their consumers not just as a seller of products but as a motivator of change.

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Credit Card

7 Tips to Derive The Best From Balance Transfer Credit Card

August 19, 2016 ANAND BHIDE Leave a comment

Balance transfer of your credit outstanding to a lower interest-charging credit card is a tidy technique to trim the debt fat that accumulates around the principal amount. Many leading banks offer attractive rates and payment options for balance transfer. Switching from a higher interest rate to a lower rate has become an easy affair with no documentation or procedural hassles. But there are few things to bear in mind while selecting a bank for transferring your balance.

Here are a few tips to be kept in mind to derive the best from your balance transfer:

EMIs:

Mostly, all banks provide balance transfer with the option of EMIs. Some banks provide for as long as 24 to 36 EMIs. While opting for longer EMIs, the interest rates should be considered since certain banks charge higher interest rates for longer EMIs as compared to smaller EMIs.

Balance transfer charges:

Balance Transfer Charges, or Processing fees, are applicable while transferring your outstandings. Different banks have different charges, and especially in the case of 0% interest rates. You need to be mindful of the additional charges, or you might end up paying the same amount or more in the long run.

Credit agency verification:

Attractive waivers and offers are available for balance transfers. But such waivers and offers are offered to those who have a good credit rating score. Every bank, before offering the balance transfer rates, considers the credit rating of the individual. A good credit rating goes a long way in giving your balance transfer the desired edge.

0% Interest rate:

You can consider the interest component charged on smaller and medium sized EMIs instead of bleeding out a big chunk of your savings in the short run for the seemingly attractive 0% which has transfer charges and processing fees involved.

Purchases not covered:

Certain banks do not cover certain purchases for balance transfer through EMIs. For instance, purchase of gold, jewellery etc. Also, certain banks do not provide the EMI facility on your corporate credit card in case of the balance transfer.

Pre-closure:

Most banks do not allow partial pre-payment or partial closure in case of balance transfer through EMI, but in the event of a pre-closure, a certain percentage, i.e., around 3% on the balance outstanding is charged as pre-closure fees. Such charges, and the stage at which you wish to avail the pre-closure, must be considered before making the final call.

Foreclosure and default:

In the event of foreclosure, the amount payable along with the interest component becomes payable immediately. As in the case of default in payment, the bank may call upon for a foreclosure which will mean immediate repayment of the entire sum due including interest, by the card holder.

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