Car Loan vs. Personal Loan for Car: 11 Points to Consider

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There are two funding options available when you want financing for purchase a car – personal loan or car loan. Basically both are personal loan only.

But there are two fundamental differences between the two in technical terms as follows:

  • Car loan can be used only for purchasing car (new or second hand). Whereas personal loan can be used for any purpose and there is no restriction on spend. E.g. modifying the car, add new accessories, etc.
  • In case of auto loan, vehicle is in the custody of the lender. And till the time, repayment is fully done, it remains in their custody. But in case of personal loan, the car will remain in the borrower’s name. This is because, this type of loan is an unsecured loan. i.e. lender do not ask for any collateral.

Due to the above two fundamental differences, what should be preferred when buying a car – personal or vehicle loan? The answer to this question depends on the benefits and cons of each.

Let’s understand this in detail below:

1. Loan amount: In case of car loan, the amount of finance offered is equal to the cost of the car. However in case of personal loan, you can even get higher sum depending on the evaluation done by the bank. And this money can be used for buying any car. In fact, if you are eligible to get higher sum; you can even purchase multiple vehicles.

2. Money saving on the interest: The most important factor to be considered when taking any type of credit, is the interest rate. If this is low, then you will save good amount of money. Personal loan rates are in the range of 11%-24% and 8%-11% in case of car loan. With such a high difference between the interest rates; auto loan is a clearly a big money saving option. And if you are an honest borrower; taking a car loan should not be a problem even if car is under the control of the lender for some period. One way to save money on interest rate, in case of personal loan is to get it against securities such as fixed deposit, LIC policy, mutual funds and others.

3. Poor credit score: If your score is poor due to past financial mistakes, then getting a personal loan will be difficult. Although there are other ways to get personal loan when score is poor. But you are more likely to get car loan, since your vehicle will be kept as collateral with the bank.

4. No credit score: There are many individuals, who have not taken any form of credit before. And even if they are earning good income, their credit score is not available at CIBIL. For such individuals, with no CIBIL score at all; taking a loan and regular repayment becomes an opportunity to start building credit score.

5. Building credit: If you get car loan when the credit score is bad; then it becomes an opportunity to rebuild the credit rating.

6. Down payment: No down payment is required in case of personal loan; whereas for car, down payment is must.

7. Used car: Personal loan can be used for purchasing second hand four wheeler. But very few lenders offer car loan for second hand car. Even if they do, the loan amount is calculated mainly on the basis of age of the car and depreciation value. So the finance offered is less than the actual value of the car. If the car is too old, then lender may not even offer auto loan. In this case, personal loan is the best solution. However careful evaluation will be required to calculate the actual amount you will end up paying on the interest. It should not be higher than the total cost of the second hand car.

8. Modifying and repairing the car: If vehicle modification is your objective after buying, then personal loan is the only option. You can use this money to modify the car as per your choice. Car loan cannot be used for repair. And car belongs to the bank, until you pay-off all the EMI. But in case of personal loan, car remains on your name.

9. Changes in RC book i.e. hypothecation removal: When auto loan is taken, the car is in the name of the lender. Even after the loan amount is fully repaid, it remains in the name of the lender until you get NOC from the bank. You have to then visit RTO and get the name financiers name replaced with yours. There is a small fee involved for removal of hypothecation. This is a very complicated process. No reasons required, when the name RTO comes up:)

Read more on car loan for low income earner.

10. Name change in insurance policy: You will have to also visit insurance company and show NOC from the bank and then get name changed in the policy document. This reads very simple but is a very painful and time consuming process. Moreover between complete loan repayment and changing name in the policy document, if any damage happens to the car, then claim process becomes very complicated.

11. Selling car during loan term: If you wish to sell the car during the tenure of the car loan, you cannot do it easily. This is because, the car is in the name of the financial institution who lent the money. You will have to first pay-off the entire loan amount, then only vehicle can be sold. This is not the case with personal loan. You can sell it anytime.

So prefer car loan when:

  1. You want to save money on interest
  2. No modification is required
  3. Personal loan is rejected
  4. Improve poor credit score
  5. Start building credit score when there is no score at all

Prefer personal loan for vehicle financing when:

  1. Higher loan amount is required
  2. You want to keep car in self-custody
  3. Modify the car
  4. Buy car accessories
  5. You do not have money to make a down payment
  6. You want to buy used car
  7. You want to avoid painful process of changing name in RC book and insurance document.
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Personal Loan: 18 FAQs – Process, Interest Rates, Charges, Closure

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Personal loan is the most attractive option to meet financial emergency or need. And there are many lenders providing the same in India, as the profit earned is high for them. Although it sounds simple to get a loan, however there are many commonly asked queries by readers of this blog. Listed below are the FAQs and simplified answers to each.

1. Is personal loan easy to get in India?

There is no definite answer to this. If CIBIL score is good and income meets eligibility criteria of the lender, then chances of approval are high. But on the other hand, if the score is poor, you can still get loan, provided you meet other criteria. You can also get loan against securities, as mentioned in this article below.

2. Can I take personal loan for any purpose?

Personal loan has now become too personal. Individuals are using the money for almost every purpose such as buying gadgets, electronic appliances, wedding expenses, credit card bill payment, short term financial crunch, home renovation, business expansion, etc. While taking personal loan, you do not have to specify the reasons, so it’s your money and can be used for anything.

3. What is the process of getting the loan?

It is very standard in almost every bank. It is a five step process as follows:

  1. Apply for loan
  2. Submit complete verification documents
  3. Application review and other formalities by the banks. It may also include visit to your address by the bank’s investigative agency.
  4. Loan application status – approved or rejection is communicated by the bank
  5. Loan amount disbursal

4. Who offers personal loan in India?

There are seven broad categories of entities who offer financing:

  1. Public sector banks such as SBI, IDBI and others
  2. Private banks such as ICICI, Axis, HDFC and others
  3. Foreign banks such as HSBC, Bank of America, Citi Bank, American Express
  4. Co-operative banks
  5. Finance companies such as Bajaj Finance, Aditya Birla Finance, Tata Capital and others
  6. Peer to peer lending companies
  7. Private money lenders

5. How is the loan amount disbursed?

There are three options which varies for each bank – cheque, demand draft and direct bank transfer.

6. Why interest rates are high in case of personal loan?

This is because of the risk involved. Personal loan is an unsecured loan, i.e. banks do not ask for any collateral before lending money. So the risk factor is very high for the banks due to possibility of default or non-payment of dues, affecting their profits. So to lower the risk, higher interest is charged.

7. Why income is considered to be a deciding factor by the banks?

Income is the only proof based on which lenders evaluate the repayment capacity of the applicant and also calculate the loan amount. But this does not mean, low income earner cannot get loan. Check out personal loan for low income earners.

8. Can this loan be taken against any security?

Yes, you can take personal loan against securities such as property, car, gold, LIC policy, fixed deposit, shares, mutual fund and bike. This is helpful, even if CIBIL score is bad.

9. If loan is rejected, can I apply again with the same or other financial institution?

You should first understand the reason for rejection and then take further action. E.g. if the loan got rejected due to poor CIBIL rating, then your first objective should be to improve the score. Even if you apply for loan at some different lender, chances of rejection will remain as it is. Other alternate solution is to get loan from peer to peer marketplaces or co-operative banks.

10. When to prefer taking loan from co-operative bank?

Interest rate by co-operative bank is low compared to commercial banks. However there is a limit to the loan amount and you need to be a member of the bank, to avail loan. So if the fund required is less and you are a low income earner, then prefer co-operative bank. Read more about this.

11. Are there pre-closure and processing charges?

Yes, many banks charge these two fees.

12. What factors banks take into consideration while deciding on the loan amount?

The main eligibility criteria are – CIBIL score, income, age, profession (salaried or self earning), company you work for, qualification, work experience.

13. What are the two types of interest rates applied on personal loan and their pros and cons?

Fixed and floating/variable are the two types of interest rates applied by the bank. And each having its own advantages and disadvantages as mentioned below.

Pros and cons:

There is no change of interest in case of fixed. And till the time loan is fully repaid, the interest remain as it is. So budget planning becomes very easy. Opposite is the case with variable interest; the rates can change anytime and is dependent on market condition. So EMI can change multiple times and may go above or below the fixed interest.

14. Before applying for a loan, is there any planning required?

Yes, planning is must in any money related matter. You should consider following points before opting for personal loan:

  1. Evaluate your loan amount requirement
  2. Check your CIBIL score
  3. Compare product features offered by multiple lenders. Especially compare interest rate, prepayment and processing fees.
  4. Select the option which best suits your requirement.
  5. Ask lender about the post loan closure formalities and process.

15. If loan is rejected, does it affect CIBIL score?

Yes. And banks communicate the status to CIBIL. This is the reason you should do planning, as mentioned above. Get to know about personal loan for low CIBIL score.

16. Which is better – loan with low or high interest?

It depends on how much money you will end up saving on the EMI. Usually high interest is applied when tenure is short and vice-versa.

17. Once loan account is closed, what formalities should be done?

The most important thing to do when repayment is fully done, is to get loan closure letter from the bank. This is the only proof which states that you do not owe anything to the bank. Many people think that once the dues are fully paid, the obligation of the borrower ends. But legally, no due certificate or closure letter is the only document helpful in any future dispute with the bank or any incorrect information is present in the CIBIL record or when new loan is applied in the future. Once everything is successfully done, check your CIBIL score to confirm whether loan is marked is closed by the lender or not and that there is no due amount in the record.

18. How to pay EMI i.e. which payment mode?

There are multiple options available mainly – cash deposit in bank or ATM, cheque, demand draft, direct debit, online transfer, app.

If you have any more questions related to personal loan, then please mention in the comment section below. It will be answered as early as possible.

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Education Loan for Medical Studies (MBBS, MD & others): Get Upto 75 Lakhs

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In India, the cost of medical education degree like MBBS, MD, MS and others is extremely high. And there is no control by the government over such a high education cost that too for medical career which is a noble career. Although the fees in government medical college is within reach of middle class family, but not everyone gets admission due to the quota system & limited seats even if the student is meritorious. So the option left is private medical college. But in these educational institutions, the fees is extremely high. The annual tuition fees (in lakhs) are:

  • Government medical college: Between Rs. 30, 000 to 1, 00,000
  • Private medical college: Average 12 Lakhs

The above fee does not include management and NRI quota which are separately charged by private colleges. And hostel and other fees are excluded. This is very depressing especially for an intellectual middle class student and their parents to secure an admission into their preferred area of interest.

So how can deserving students interested in medical studies pursue their dream when they do not have strong financial support? The answer is education loan.

Almost every prominent bank in India offers education loan for medical study. Here’s the table showing list of prominent banks offering financing to medical students, maximum loan amount and repayment period.

Name of Financial InstitutionMax. Loan Amount Offered for study within India/AbroadMaximum repayment period in years
State Bank of IndiaAbove 7,50,000 (7.5 Lakhs & above)12
Bank of Baroda (Baroda Gyan)Rs. 25, 00,000 (25 Lakhs)NA
Canara Bank10, 00,000 (10 Lakhs)15
Axis Bank75, 00,000 (75 Lakhs)NA
Bank of India10, 00,000 (10 Lakhs)NA
HDFC CredilaNo upper limit12
HDFC Bank10, 00,000 (10 Lakhs)15
Punjab National Bank20, 00,000 (20 Lakhs)15
Andhra BankNo upper limitNA
Karnataka Bank10, 00,000 (10 Lakhs)5 to 7
Indian Bank20, 00,000 (20 Lakhs)10 to 15
Syndicate Bank20, 00,000 (20 Lakhs)NA
UCO Bank30, 00,000 (30 Lakhs)15
Allahabad Bank50, 00,000 (50 Lakhs)15
Bank of Maharashtra20, 00,000 (20 Lakhs)15
Corporation Bank20, 00,000 (20 Lakhs)15
Dena Bank25, 00,000 (25 Lakhs)15
Indian Overseas Bank40, 00,000 (40 Lakhs)5 to 7
Oriental Bank of Commerce25, 00,000 (25 Lakhs)15
Punjab & Sind Bank20, 00,000 (20 Lakhs)15
United Bank of India20, 00,000 (20 Lakhs)15
Federal Bank20, 00,000 (20 Lakhs)5 to 7
Karur Vysya Bank20, 00,000 (20 Lakhs)5 to 7

Things medical students should keep in mind before taking loan for education in India or abroad:

Fees covered: Apart from the tuition fees, there are many other expenses involved such as fees for – laboratory, library, examination, equipments, hostel, etc. Check with the bank, whether these fees are covered or not. Because when all these fees are added, the overall education cost goes up drastically.

Payback or repayment period: Always look for a loan with longer payback period. This is because if someone wishes to pursue further education after MBBS, then making repayment will be difficult, assuming there is no income after bachelors degree.

Top-up loan for higher medical studies: There are many students wanting to pursue higher education after the first course and need second loan. In such cases, ask your bank to not charge additional interest on this second loan. At the same time, extend the repayment period further.

Loan disbursement: Get clarified with the bank on the disbursement timeline and process.

Read about education loan against property.

Moratorium period: This is the period during which no repayment is required after completion of education. This should be on the higher side. Generally grace period of 6 months is provided by most of the banks. Post which your repayment starts.

Interest rate: This should be as low as possible. Your objective should be to save as much money possible. Because loan amount for medical student is anyways very high and repayment is always a herculean task. So try to save money on education loan by asking the bank to lower the interest rate. If you are a top scorer and secure admission in high rated institution, then chances of lowering the rates are high.

Check out 13 reasons why education loan get rejected.

Acceptable Collateral: If you get admission in government college, then nothing better than that. In this case, since the medical fees for the complete course would be less than Rs. 7.5 Lakh, requiring no collateral. However, if you get admitted to private college; then you might have to keep residential house/flat, non-agricultural land, FD in favor of concerned financial institution. So read the fine print on collateral very carefully.

Processing and prepayment charges: Bargain with the bank to keep these two charges NIL. Since you already have such a big amount to repay, you deserve complete freedom to not pay the charge.

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Medical Loan for Surgery/Treatment: 8 Ways to Arrange Money

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The cost of medical treatments/operatives or surgery in India has risen drastically in last decade or so. Although India is considered to be the preferred destination for medical tourism and ranks in top 5 countries; the cost is still very high for an average Indian. This is because for a global tourist, the treatment cost (in dollars) they pay in their native country is high. Whereas, the same treatment cost is converted to Indian currency is very little for these tourists.

So how can a common man arrange money for expensive medical operations especially during emergency? Because arranging such a huge amount of money is very difficult.

Best option to arrange money is to take loan for medical treatment. Medical loan for surgery is basically a personal loan taken for treating health problems. In India, there are various options available to get medical loan for treatments.

Listed in the below table are the financial institutions or lenders who offer loan especially for medical operation:

Non-Banking LendersTrust / Charitable FundGovernment Funds/Schemes
Arogya FinanceNargis Dutt Memorial Trust (for cancer)Prime Minister National Relief Fund
MYA Health CreditYuvraj Singh Foundation (for cancer)Schemes under the Ministry of Health and Family welfare
Healthy Heart for AllThe Cancer Patient Aid Association
Bajaj FinservCancer Care Trust
hCueYoddhas (for Cancer)
First Hand Foundation (for Cancer)
Indian Cancer Society
Local NGOs
Narayana Multispeciality Hospital

1) Non-Banking Lenders:

Above listed non-banking lenders are medical loan providing companies operating on a core belief of providing quality healthcare for every India at affordable price. Apart from loan, they provide many other healthcare services.

How is the money paid to the borrower by non-banking lender?

Once you apply for the loan online and the application is approved, the money is directly paid to the hospital. All these financiers have direct contact with hospitals and doctors. Benefit of taking medical loan from such lenders are that there is no requirement to provide income documents or any form of collateral.

Other options to arrange money for medical treatment are:

2) Trust/Fund:

Above listed trust offer financial support especially to the poor people. There are many NGOs who get required support through local politicians. Narayana Multispeciality Hospital offers cheapest heart surgeries in the world.

Check out where to get low cost liver transplant in India.

3) Government Fund:

There are many government schemes such as Prime Minister National Relief Fund (PMNRF) and Schemes under the Ministry of Health and Family welfare which offer financial support to the individuals/families from the poor section of the society.

4) Personal loan from bank or finance companies:

You can also apply for a personal loan at private, public or co-operative banks and used the money for required medical treatment. However the problem with these financial institutions is that they offer loans only to select individuals depending on their evaluation criteria especially credit score.

Here’s the list of prominent banks or finance companies where can you apply for personal loan for medical treatment.

  • State Bank of India – Medi Plus Scheme
  • HDFC Bank
  • ICICI Bank
  • Bajaj Finserv – Has tie-ups with prominent medical centers and offers loan for various surgeries such as Bariatric, Laparoscopic, dental treatment, In Vitro Fertilization, eye care, stem cells and hair restoration.
  • Many other public, private or co-operative banks in India offer personal loan.

Typically this loan is unsecured, requiring no security by the bank. And no reasons for taking loan is required to be provided to the bank. However you can also get personal loan against LIC policy, equities, property, and fixed deposit which are nothing but loan with collateral.

5) Ask your friends/relatives:

This typically is the first option used to arrange money in the time of emergency. However not everyone has capacity to extend support due to personal obligations or kind of relation you have. Moreover many of the treatments required huge sum of money, which is actually not possible for a common man to arrange.

6) Peer to peer lending online marketplaces:

These are the online marketplaces where borrowers can apply for loan at multiple borrowers (mainly individuals). Interest rate can be bargained. P2PL have started gaining lot of popularity in the recent years due to less tedious application process, eligibility criteria and affordable rates compared to banks. Read more in detail about peer lending companies in India.

7) Health Insurance:

This is no doubt the must have component in every individuals financial planning kitty. Although it’s not an investment; but still it saves money. When the insured person is hospitalized, the treatment cost is bourne by the insurer. There are many medical insurance providers in India such as ICICI Lombard, Bajaj Allianz, Bharti AXA and others. The biggest problem with health insurance is that claim applications are not honored in many cases, due to the strict underwriting rules especially when the claim is made against pre-existing diseases. And claim made, within months of buying the policy are rejected due to the waiting period in many cases.

8) Private money lenders:

This should be the last option an individual should use. Because the interest rates are highest compared to banks/other financial entities or P2PL and others. And the recovery process is very substandard in many cases.

Cost of surgeries and treatments in India:

Following surgical procedures or treatments cost very high in India. And listed in the below table are the average price patient has to pay. The cost varies depending on the city and hospital and other procedures involved in the treatment:

Surgery/Operative/Treatment ProcedureEstimated Cost in Rs. (average)
In-Vitro Fertilization1,50,000 per cycle (1.5 Lakh)
Angioplasty2,00,000 - 3,00,000 (2-3 Lakh)
Chemotherapy30,000 – 40,000
Angiography25,000 – 40,000
Kidney TransplantOver 10,00,000 (10 Lakh)
Liver transplant Over 25,00,000 (25 Lakh)
Open heart surgeryOver 4, 00,000 (4 Lakh)
Bariatric surgery Between 3, 00,000 – 4, 00,000 (3-4 Lakh)

Medical loan can be used for any purpose such as surgeries, therapies, day care procedures and many other health treatments. Please check with above listed financing companies on eligibility criteria.

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Fixed Deposit: Minimum Deposit by 25 Indian Banks

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FD or term deposit is preferred mostly by investors who do not want to take risk with their hard earned money. The main reason is that fixed deposit offers guaranteed returns which are higher than the interest received on savings account. That is FD safeguards investor’s money. Moreover the tenure for FD is very flexible ranging from minimum 7 days to maximum of 10 years for most of the banks in India. Although the interest offered is low compared to other types of zero risk investments.

There are multiple prerequisites for opening a fixed deposit account such as:

  • Depositor needs to have an account with the same bank in which he/she wants to open the account.
  • Applicant should be minimum 18 years old.
  • Another important criteria is the minimum deposit amount required to open the account.

Check out FD maturity value for 5 years and 6 months.

Here’s the table showing minimum amount required for fixed deposit account by 25 banks in India along with the interest rate offered:

Name of BankMinimum Amount (Rs.)Interest RateMinimum TenureMaximum Tenure
State Bank of India10003.75%-4.25%7 Days10 Years
IDBI Bank100004.25%-6.9%15 Days20 Years
ICICI Bank100004%-7.5%7 Days10 Years
HDFC Bank50003.5% to 6%7 Days10 Years
Axis Bank100003.5% to 6.75%7 Days10 Years
Andhra Bank1000004%-7.5%7 Days10 Years
Union Bank of India10005%-6.8%7 Days10 Years
Bank of India100004%-6.7%7 Days10 Years
HSBC Bank India100003.15%-5%7 Days6 Years
Kotak Bank100003.5% to 6%7 Days10 Years
Punjab and Sind Bank10004%-7%7 Days10 Years
Deutsche Bank200008% for 5 Years7 Days5 Years
Canara Bank10004.20%-6.9%7 Days10 Years
Syndicate Bank10004.75%-6.7%15 Days10 Years
Indian Bank1004%-6%7 Days10 Years
Citi Bank India10003%-5.75%7 Days10 Years
Indian Overseas Bank10004%-6%6 Months10 Years
Royal Bank of ScotlandNA3%-4.25%15 Days5 Years
YES Bank100005.75%-7.10%7 Days10 Years
IDFC Bank100004%-7.20%7 Days10 Years
Federal Bank10003.5% to 6.5%7 Days10 Years
DBS Bank India100004%-6.7%7 Days5 Years & above
Bank of Baroda10004.5%-6.5%7 Days10 Years
RBL Bank100005%-8.15%7 Days10 Years
Punjab National Bank10004.25%-6.7%7 Days10 Years

FD is best recommended for investors who want protection plus returns from their investments. It is avoided by high risk takers mainly due to low returns and money being locked; which is not the case with high risk-high return investments such as equities and mutual funds.

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Fixed Deposit for 6 Months: Maturity Value 5.16 Lakh @ 6.5%

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Individuals who want peaceful sleep with their investments, always look for products with guaranteed returns. And for such people, there are multiple instruments such as recurring deposit, sukanya samriddhi yojana, and national pension scheme and few others. Each of these products has a limitation of fixed tenure which is normally in months/years.

However there is one investment product – fixed deposit, which scores over others in terms of the flexible tenure which can be as low as 7 days to maximum of 10 years along with fixed interest rate and any amount can be deposited, although there is a minimum sum requirement by every financial institutions. Moreover the interest is paid every month or annually. And you can have multiple FD accounts.

Listed in the below table is the maturity value calculated by FD for 6 months:

Name of Bank6 Months Interest Rate %Interest Earned
On 5 Lakh FD (Rs.)
Maturity Value On 5 Lakh FD
Compounded Quarterly (Rs.)
Interest Earned
On 2 Lakh FD (Rs.)
Maturity Value On 2 Lakh FD
Compounded Quarterly (Rs.)
UCO Bank, Corporation Bank, Standard Chartered Bank6.5163825163826552206552
Union Bank of India, Axis Bank, Indus Ind Bank, ICICI Bank, HSBC6.25157475157476298206298
Dena Bank, Kotak Bank, Punjab and Sind Bank6151125151126045206045
Deutsche Bank5.7143515143515740205740
Canara Bank, Syndicate Bank5.5138445138445537205537
Indian Bank5.25132115132115284205284
Citi Bank, Indian Overseas Bank5125785125785031205031
Royal Bank of Scotland4.9113135113134525204525

Point to remember: Interest rates are subject to change. You can get updated rates either on bank’s website or by personally visiting the bank.

Check out fixed deposit for 5 years and the maturity amount.

Disadvantages of fixed deposit:

Every investment has pros and cons. And FD too has its own set of limitations as follows:

  • Returns are low due to low interest rates offered.
  • Money gets blocked and premature withdrawal results in penalty.
  • Interest income is taxable. TDS is applicable on the interest accrued.
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FD for 5 Years: Invest 5 Lakh & Earn 7.42 Lakh @8% Interest

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Money lying idle in your bank account is a total waste even though you get interest on the savings account. Instead you should make money out of it by investing in secured instruments.

Now there are two different categories of investors:

No risk takers –

Who give high priority to money safety and low priority to the returns. That is they are ready to get low returns. Few of the zero risk investment products are – Fixed Deposit, Sukanya Samriddhi Yojana, National Savings Certificate, Public Provident Fund, Savings Account, Recurring Deposit and others.

High risk takers –

Who want high return but are ready to risk their money. Investment instruments are ELSS, equities (India and abroad), mutual funds, currency markets, and commodity market.

In this article, we’ll discuss about the highly preferred investment product – fixed deposit. Also called as term deposit. Investor has to put his/her money with the financial institution for a pre-fixed term and get interest on the deposit which is typically in the range of 6.5%-8%.

Let’s consider Rs. 5, 00,000 kept in fixed deposit for 5 years. Table below shows the interest earned along with the maturity value compounded quarterly from various banks in India:

Name of BankInterest Rate %Interest Earned in Rs.Maturity Value in Rs. (Compounded Quarterly)
Deutsche Bank8242973742973
Ratnakar Bank7.5224974724974
Punjab National Bank7.2214373714373
Saraswat Co-operative Bank7.15212621712621
Dena Bank, Lakshmi Vilas Bank, Tamilnad Mercantile Bank, Punjab and Sind Bank7207389707389
IDBI Bank, Canara Bank,Central Bank of India, Bank of India, Union Bank of India6.9203921703921
Oriental Bank of Commerce, UCO Bank, Axis Bank, Indus Ind Bank, ICICI Bank6.75198749698749
Bank of Baroda, State Bank of India, Andhra Bank, Allahabad Bank6.5190209690209

Note: FD interest rates keep changing time to time. Check with the bank the current interest rate before locking-in your money.

More features of FD account:

  • There is a minimum amount (which varies for each bank) to be deposited in the account
  • You can deposit money for minimum 7 days and maximum upto 10 years
  • The returns are taxable, if the interest income is greater than Rs. 10, 000.
  • TDS is applicable on the interest earned
  • Interest rates can change anytime
  • You can get personal loan against FD
  • There is a premature withdrawal charge
  • Auto renewal facility is available
  • NRI can also open FD account
  • Senior citizens are offered slightly higher interest rates
  • Nomination facility is available
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6 Ways to Get Personal Loan for Jobless/Unemployed

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Steady income is the most important decisive factor when it comes to personal loan. Based on your income, application is either approved or rejected. However there might come a time when you go jobless. And not being in job/unemployed is very common scenario in today’s world.

And in such situations, shortage of money is obvious assuming you have a very limited savings. But at the same time, when you apply for loan; the application is going to get rejected, as there is no income.

Personal Loan for Individuals with No Job

So can you get personal loan when jobless i.e. at a time when you badly need the money? Answer is YES, it is possible. Because your income is not the only factor, on the basis of which loan application is decided. There are several other factors such as:

  • Credit history
  • Employment history
  • IT returns

Now there could be various categories of jobless as follows:

  • Who have been in job earlier but are currently unemployed
  • Who are searching for job for the first time especially recent graduate
  • Who were in business earlier but are now looking for the job

In this article, we’ll discuss about the first category of individual i.e. who were earlier getting steady income but due to some reasons, they are currently jobless and seeking for personal loan.

Ask your existing bank:

If you were getting steady and high income earlier and had excellent repayment history with your bank (especially bank with whom you had salary account), then you should first apply for the credit at the bank. The three other factors mentioned above such as credit history, employment history and income tax returns, can come to your rescue at this point.

Especially a good credit score, proves that you are not likely to default in the future. And assuming your income was high, it is likely expected that your future income will be mostly on the higher side and repayment will be done in a timely manner. There is also a possibility that, interest on loan might be on the higher side, but still you will get access to cash, in the financial crunch phase.

If commercial banks deny your application then you can also try to get loan from co-operative banks. The chances of approval are high as their eligibility criteria are not very stringent.

Peer to peer lending companies:

Another quick and easy option for unemployed individuals to get personal loan is from peer to peer lending companies (also called as P2PL). The prime objective of P2PL marketplaces is to make access to credit in a seamless and affordable manner. When we say affordable, it means the interest rate offered is less compared to the commercial banks. People with no job in hand currently, should definitely approach these online money lending marketplaces. There are many individuals who are ready to borrow their money with interest rate less than the banks. Read more on P2PL benefits.

Ask your friends/relatives:

Ideally this should be / is the first option, an individual takes into consideration when in need of money. However not everyone has capacity to provide helping hand even when mutual trust exists. But what you can do is, ask your acquaintances to lend money but in return of interest. Chances are quite higher that, you may get money. Because your acquaintance has some monetary advantage. Many times, people have in mind that what will I gain after lending the money? So being practical helps in such conditions.

Against fixed deposit:

If you already have fixed deposit with the bank, then loan against FD is another feasible option, provided you do not want to break FD to raise the money. It is actually a loan against security. In this case, security is the money you’ve kept in fixed deposit. And the credit you can get is around 75%-80% of the money kept with the bank and an additional interest of 2%-3% is charged.

So if the FD interest rate offered by the bank is 10% and bank charges 2% additional borrowing charge then you will have to pay 12% rate per annum, which is monthly 1%. So as you can see, the interest rate offered is very less than the standard loan rates which are typically above 15%. There are few more benefits apart from lower interest rates such as:

  • No pre-payment and processing charge, with most of the banks
  • Repayments are flexible with an option of paying either lumpsum or in instalments

Against life insurance policy:

Similar to loan against FD, if you have life insurance policy on your name, then you can get loan against life policy as well. And the benefit remains the same as mentioned above i.e. low lending rate. However remember that, the policy is transferred in the name of the financial institution and post that only, the loan is granted. The lending rate is calculated on the basis of two factors: premium amount and the number of times premiums paid till the time of application.

Private money lenders:

These private financiers offer loans especially to local borrowers. However the interest rate are very high and many of operate without getting license from the government. And most importantly, the kind of harassment borrower faces in an event of non-payment of dues, is very bad.

So basically the above listed six options to get personal loan for jobless individuals has its own pros and cons. But remember one thing – always have a good credit history. It is very important for a good financial future.

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26 Differences/Similarities: Commercial Vs. Co-operative Banks

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There are 4 different categories of banks in India. These include:

  1. Commercial Banks – Includes scheduled and non-scheduled banks
  2. Co-operative Banks
  3. Regional Rural Banks
  4. Payment Banks – This new category of the bank was very recently approved by the Reserve Bank of India.

Although most of the banks offer similar kind of services; there are key differentiating factors. In this article we’ll discuss the differences between commercial and co-operative banks.

Listed in the below table are the similarities and differences between these two categories of the banks:

Sr. No.FeaturesCo-operative BankCommercial Bank
1Governed by whomCo-operative Societies Act of respective state and Banking regulation actBanking Regulation Act
2Functioning objectiveGoal is mutuality and self help. Profit is not the objectiveWealth generation
3Is there any voting power to borrowersYesNo. Borrowers are account holders.
4OwnershipMembers of co-operative societyShare holders
5Regulatory BodyReserve Bank of IndiaReserve Bank of India
6Interest rate on loanLowHigh
7Interest offered on depositsLowHigh
8Prepayment charges on loansNilYes
9Processing charges on loansNilYes
10Quantum of loan amount offeredLimitedCan be very high
11Loan disbursal processing timeSlowFast
12Eligibiiity criteria to get loanNot very strictVery strict
13Is membership required to avail loanYesNo
14Credit score checkYesYes
15Shares of bank required to get loan?YesNo
16Most prominent inMainly rural areas. But they also operate in urban areasMainly urban areas. But also operate in rural areas in small scale
17Range of services offeredLimitedBroad
18Credit recoveryWeakVery strict
19Operating scaleSmallLarge
20Area of operationLimited to city/state and to some extent outside of stateAcross country and outside India
21Target audienceMainly to farmers, small businessmen and rural industries.Mainly to individuals and businesses
22Governing ActCooperative Societies Act, 1965Banking Regulation Act, 1949
23Funds availabilityLimitedMassive
24Are they nationalised?NoYes
25Do they operate mutual fundsNoYes
26Who regulates lending and deposit ratesRespective banksRBI

The ultimate objective of all these banking entities is to increase financial inclusion by reaching people from remotest locations in India and offer various services such as loans, savings account, money transfer, credit cards and many others.

 

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Invest Rs.3000 per Month & Earn 16 Lakhs on Maturity

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Investment experts always recommend to start investing early in life no matter what the amount is – small or large. The golden rule of investing remains the same. That is – invest small/large but do it regularly for a long term.

Not everyone has financial capacity to invest large sum of money. So in this article, we’ll consider a small amount of Rs. 3000 invested every month and the expected returns from various investment products available in India.

There are two types of investors:

  • Zero or no risk takers
  • High/moderate risk takers

We’ll consider each of the above type and calculate estimated returns in various investment products:

Zero Risk Investments:

There are many instruments falling into this category which also offer decent returns.

  • Public Provident Fund (PPF): Rs. 3000 monthly investment in PPF for the standard period of 15 years will fetch return income of around Rs. 10, 80,000 (Rs. 10 Lakh, 80 Thousand). Here we have assumed average interest rate of 8.1%.
  • Sukanya Samriddhi Yojana: This scheme is especially for the girl child. A yearly investment of Rs. 36, 000 per annum (i.e. Rs. 3000 per month) for the tenure of mandatory 14 years, will fetch a return of Rs. 16, 61,207 (Over 16 Lakh) after 21 years @ interest rate of 8.2%. Read more on SSA.
  • Fixed Deposit: Investing in bank fixed deposit offers safety although the returns are low compared to other zero risk investment instruments. If you invest Rs. 3000 per month for a period of 1 year; then the return amount would be Rs. 38, 700.
  • National Pension System (NPS): This is another guaranteed return investment product offering interest of around 8%. If three thousand is invested for 25 years i.e. Rs. 9, 00,000; then the interest earned on the investment would be Rs. 19, 47, 558. Subscriber would receive monthly pension of Rs. 6, 700 after reaching the age of 60 years.
  • National Savings Certificate: If you invest Rs. 36, 000 lump sum for the lock-in period of 5 year, then the returns would be Rs. 53, 033. The current interest rate is 7.9%.

With above mentioned risk free products, the returns are guaranteed. And your money is completely safe.

High/Moderate Risk, High Returns:

Mutual funds: A monthly regular SIP of Rs. 3000 after a period of 5 years, will earn return amount of Rs. 2, 69,045. Here the average return considered is 12%. If we assume return of 15%; then the maturity value would be Rs. 8, 35,971 after a period of 10 years.

Here are the top rated mutual funds of 2017 with the returns they’ve given in the last 1 year:

Fund Name1 Year Return (%)
ICICI Pru Top 100 Fund (G)29.6
ICICI Pru Top 100 Fund - Direct (G)31.1
SBI Blue Chip Fund (G)20.8
SBI Blue Chip Fund - Direct (G)22.1
Kotak Select Focus Fund - Direct (G)34.9
Kotak Select Focus Fund - Regular (G)33.3

All of the above mentioned funds have been ranked No. 1 by CRISIL.

ELSS: The most favorite tax saving instrument preferred especially by salaried individuals, of course, who are ready to take a risk, is equity linked savings scheme. With a lock-in period of just 3 years, the returns are spectacular. So Rs. 36, 000 invested for a period of 3 year in Reliance Tax Saver (ELSS) Fund (G) i.e. investment of Rs. 1, 08, 000; then the expected returns after 3 year would be Rs. 1, 59, 103. Assuming 21% average annualized returns. There are many high return ELSS funds in the market.

Direct equity: Either you go SIP way or invest directly in equity either yourself or through the advice of the broker. Equities have given highest return, provided you regularly invested for a long term horizon.

Take example of State Bank of India. If you had bought SBI stock worth Rs. 36, 000 (assuming Rs. 3000 invested in phases) in May-2016 when the stock price was hovering at around Rs. 165; then the return in April-2107 would would be around Rs. 61, 000. Which is the nearly 75% gain. The current stock price in April-2017 is Rs. 286. So if you spread portfolio in the best expert recommended stocks or any other relevant sources, then in the long run the returns is most likely to beat other options. But remember that, stock market investments are highly risky, as market conditions keep on changing.

So here’s the summary showing the returns you can expect after investing Rs. 3000 every month for the mandatory tenure or for long term in the above listed products.

Investment ProductReturn on Maturity/Interest Income Earned
Sukanya Samriddhi YojanaRs. 16, 61,207
Public Provident FundRs. 10, 80,000
National Savings CertificateRs. 53, 033
National Pension SystemRs. 19, 47, 558
Bank Fixed DepositRs. 38,700
Mutual FundRs. 8, 35,971
ELSSRs. 1, 59, 103
EquitiesRs. 61, 000

There are many investment options in India, however the ones mentioned in this article are most preferred and widely recommended by the experts. Real estate is one such investment which in comparison to any investment instrument offers, the highest return. However investing in real estate requires lot of money. So this is the reason, it is not covered in this article.

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