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Secured Loan – Loan Against FD

Loan

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May 3, 2021

Under financial crisis applying for loan against fixed deposit is one of the best option. Loan Against Fixed Deposit is also known as secured loan. It is one of the best way to get borrowing. Instead of closing your fixed deposit prematurely you can go for loan against fd. You can get around 90-95% of deposit amount as loan. If you have money crisis you should consider secured loan option. Here is complete information about secured loan (Loan against fd).

Benefits of Loan Against Fixed Deposit

Minimum or No Paperwork – Loan against fixed deposit can be given with minimum or no paperwork. Bank already have your details including documents such as income proof, residence proof, Income tax return detail etc.

Lower Interest Rate – Fixed deposit act as a security for your loan. In case you are unable to pay loan the fixed deposit amount can be used for paying loan amount. The interest rate on these type of loan is lower compared to personal loan. The EMI Payable on loan against FD is low.

Fast processing – The processing of loan against fd is very fast. Bank will not check for your credit score or income documents for giving loan. You can get loan within one or two days. Few banks provide online option for availing loan.

No Prepayment Penalty – In case you have taken personal loan you need to penalty in case you do prepayment. In case of loan against fixed deposit you need to pay any penalty for the prepayment made by you.

Loan based on Fixed Deposit amount – Loan amount in case of loan against fixed deposit depends upon fixed deposit amount. Higher the fixed deposit amount means higher the loan amount. You can get around 90-95% of deposit amount as loan.

Who can apply for Loan Against FD?

Loan against FD can be applied for all fixed deposit holders. Individual or joint fixed deposit holder can apply for loan.

This loan cannot be applied if the fixed deposit is taken on the name of minor. These type of loan cannot be applied on tax saving fixed deposit.

Loan against FD can be taken by both salaried and self-employed regardless of their profession. You need not to have decent credit score or income document to apply for this loan.

Documents required for Loan Against FD

You need to provide following documents in order to get loan against fixed deposit.

Application form
Fixed deposit receipt duly discharged in the favor of bank
Loan agreement acceptance

FAQ on Loan Against Fixed Deposit

(1) What additional charges to be paid to get loan against FD?

You need not to pay any additional charges such as processing fees to avail loan against fixed deposit. Interest rate is decided by bank.

(2) Can Minor gets loan against fixed deposit?

No, Loan against fixed deposit cannot be given to minor. This loan is given only to the person with age 18 years and above.

(3) What happens in case I am unable to pay my EMI?

If you fail to pay EMI for few months, the bank will use FD amount to make loan repayment.

(4) Can I get loan against FD on FCNR deposit?

You can get loan against FD on FCNR deposit. This loan can also be given on NRE and NRO deposit.

(5) Can I get this facility online?

Only few banks provide facility of getting this type of loan online. You may need to visit bank physically in order to get this loan.

Over to You

If you have fixed deposit and you have urgent need of money, you should opt of loan against FD. Loan against fixed deposit has multiple benefits compared to normal loan. You can get loan quickly and even interest rate is lower.

NFO (New Fund Offer) – Factors to consider before investing in NFO

Mutual Funds

Shitanshu Kapadia

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May 1, 2021

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NFO (New Fund Offer) – Factors to consider before investing in NFO

NFO stands for New Fund offer. It is like stock IPO. In IPO new stock is released for the first time investment. Whereas in new fund offer mutual fund is released for the investor by the mutual fund companies for the first time. The NFO remains open for fixed time duration. NFO price in mutual fund is generally fixed at Rs.10 per unit. On expiry of NFO period the fund is listed in the market. After listing of mutual funds investor can purchase fund from the open market. NFO are generally available at higher price after listing.

Types of NFO

Open Ended Funds

Open Ended funds is available for all the investors. Under this category the investors and NFO subscribers can sell/redeem their mutual funds unit anytime. Exit load is applicable on this type of funds. No lock in period applicable.

Closed Ended Funds

Closed Ended funds are available with fixed period 3-5 years. Investor cannot exit closed ended fund before specified lock-in period. In the simple words closed ended mutual funds have specific tenure and fixed maturity period.

Factors to consider before investing in NFO

You should consider following factors before making investment in NFO.

Fund House Reputation

Fund house reputation is utmost important before investing in NFO. The fund house where you are investing your money should have history of operating in mutual fund industry at least for 5-10 years. You can analyze the performance delivered by the fund house in various mutual funds in the same category. This increases your chance of getting higher returns from fund.

Theme of Fund

Theme of fund is another important factor to consider while making investment. There are many themes available in the market. The theme where you are investing your money should be evergreen and sustainable for the long term. You should consider fund for the time period of at least 5 years.

Fund objective

Fund objective is next factor to consider while investing in NFO. The fund objective contains information such as asset allocation, risk and other things. You should carefully study fund objective before investing in NFO. The fund objective help you to know that what fund manager is expected to do with your invested money.

Return Potential

You should check return potential of similar funds already available in the market. The NFO prospect does not tell anything about return however, you can set expected returns based on fund objective and other parameters.

Risk Factor

You should also consider risk factor while investing NFO. New fund does not have fund performance history this means it will be difficult for you to predict fund performance and associated risk. The fund may give you better return or may end up making losses.

Minimum Subscription amount

The fund offer document contains information about minimum subscription amount. The amount is in range of Rs.500 to Rs.5000. If minimum subscription amount is higher compared to what you can invest you should consider SIP option for investment instead of lump sum investment.

Market Condition

Market Condition is another important factor while making investment. The market condition should be stable or non-volatile while making investment. You may end up making losses in near term if you do not consider market condition while investing in NFO.

Steps to open Online Recurring Deposit (RD) in SBI

Banking

Shitanshu Kapadia

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April 28, 2021

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Steps to open Online Recurring Deposit (RD) in SBI

Recurring deposit is one of the most popular and secure investment option. In recurring deposit you need to invest a specific amount for the term period of recurring deposit. On the maturity investor will get maturity amount. This amount is comprising of principal and interest amount. It is like SIP investment of mutual fund where you invest money regularly instead of lumpsum.

Recurring deposit can be opened at public, private sector banks as well as at post office. Looking at safety it is advisable to open recurring deposit at either at post office or at SBI. Here is detail about SBI Recurring deposit and steps to open RD online at SBI.

Key features of SBI Recurring Deposit

Recurring deposit can be opened with 1 year to 10-year time period.
Minimum deposit amount is Rs.100 per month with no upper limit.
The rate of interest is decided by bank time to time.
Senior citizen will get additional interest rate of 0.5% compared to non-senior citizen
Penalty is applicable for late payment. The penalty amount is Rs.1.50 per Rs.100/-
Incase six consecutive installments are not paid deposit shall be closed automatically and balance will be credited to account holder.
Nomination facility is available for the customer.
SBI offers loan facility on recurring deposit. Amount is 90% of recurring deposit balance.
Premature withdrawal is allowed for the recurring deposit.
Deposit can be transferred from one SBI account to other.

Recurring deposit account can be opened by the individual citizen or members of HUF. You must have SBI account to open RD account. It is advisable to have stable income for opening this account. NRI can also open the RD account via NRO and NRE account.

Steps to open Online Recurring Deposit (RD) in SBI

Follow the steps given below to open RD account in SBI.

Sign in to online SBI account using internet banking user ID and password. Go to fixed deposit menu and click on the e-RD (RD)/ e-SBI Flexi Deposit option. Now select e-RD (Recurring deposit) you will be taken to the next step where you will be able to see various SBI accounts.

You need to select the account from which you want to open recurring deposit. The minimum tenure for the recurring fixed deposit is 1 year. You can check RD interest rate before making investment. On this page you will also able to select “Payable Principal and Interest” and check maturity amount.

Now click on the “I accept the terms and conditions” and click on “Submit” button. You will be able to see nominee detail specified in the saving bank account. You can continue with same nominee name in your RD account or you can change nominee name.

You can see rate of interest, investment amount, maturity date and maturity amount on the confirmation page. Once details are found ok you can proceed by clicking on the confirm button. You can get view/print option. Next step is to select deposit monthly amount and installment date. The amount will be debited from the bank account. The auto pay service for the recurring deposit will be enabled and amount will be debited from the account.

You can also open recurring deposit offline. You need to visit nearest SBI branch physically. You need to fill up physical document and provide required documents to open recurring deposit.

TDS on the Recurring Deposit

The interest received on the recurring deposit is subject to TDS. TDS of 10% is applicable on the interest amount. If the interest received on the recurring deposit is less than Rs.10000 no TDS is applicable. You need to provide PAN card copy else TDS of 20% is applicable. If your income is less you can submit Form 15G to avoid TDS.

Top Index Funds 2021 – Should you Invest?

Mutual Funds

Shitanshu Kapadia

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April 25, 2021

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Top Index Funds 2021 – Should you Invest?

Index funds are specialized mutual funds that try to replicate popular stock market indexes such as Sensex, nifty etc. All the stocks in the index funds are in same proposition as that of index. The fund manager does not act as active fund manager. He simply copies respective index in order to build fund portfolio. The fund portfolio always remains in sync with index. Whenever changes in the composition of index is done the fund manager buys or sell the stock from the portfolio to make adjustments. These funds are likely to give same return as that of index. However, there will be associated tracking error. In this post, we will discuss about type of index fund and investment benefits.

Let’s try to understand index fund with example. Suppose one fund is tracking BSE Sensex. As BSE Sensex comprises of 30 stocks, so the fund also contains same stocks in same proposition. If index includes equity and other instruments such as bond the fund manager invests in other instrument also.

Who should Invest in Index Funds?

Index funds are fund for the risk averse investor. The investors looking for predictable return in equity market with diversity can opt of these funds. As Index fund track market index and managed passively, risk will be less. The investors looking for higher returns should go for actively managed fund. Actively managed funds will give better return compared to index fund in the long term.

Index fund also carry market and volatility risks and advisable for the long term investor only. There are three types of index fund available for the investors.

Fund that track Sensex – 30 Stocks
Fund that track Nifty – 50 Stocks
Index Plus fund – Portion of fund in index and reminder is actively managed

Things to consider before investing in Index Funds

Important things to consider before investing in Index Funds are given below.

Tracking Error

The return generated by index fund are not at par with that of index. The deviation is return is known as tracking error. The tracking error should be checked before investing in index fund. The lower the tracking error better is fund performance.

Performance of Fund

Performance of fund is extremely important while selecting any fund. You should check historical performance and compared with benchmark index. Additionally, you should also do peer comparison while selecting fund.

Expense Ratio

Expense ratio is another important factor to consider before investing. The expense ratio of the fund should be low. Lower the expense ratio better is fund performance. Avoid selecting fund only on the basis of expense ratio.

Top Index Fund 2021

HDFC Index Sensex Fund

HDFC Index Sensed Fund as the name suggest this fund track S&P BSE Sensex subject to tracking errors. This fund is ranked moderately high. Expense ratio of this fund is very low 0.3%. CRISIL rating of this fund is 3 Star. The fund gives returns nearly equals to S&P BSE Sensex.

SBI Nifty Index Fund – Direct Plan

SBI Nifty Index Fund track Nifty 50. This fund is very high risk rated fund. Expense ratio of this fund is 0.1%. It is CRISIL 3 star rated fund. Fund capital is 1000 Cr+. It is passively managed fund. This fund has given return nearly equal to Nifty.

UTI Nifty Index Fund – Direct Plan

UTI Nifty Index also track Nifty 50. It is moderately high rated fund. The fund capital size is 3000 Cr+. Expense ratio of this fund is very low 0.1%. It is CRISIL 3 star rated fund. Tracking error of this fund is very low. This fund gives returns higher than the category average return.