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Personal Loan or Overdraft Facility – What should you choose and Why?

Personal Loan

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December 29, 2018

overdraft facility

A need of cash can arise anytime. When you are in urgent need of cash, you either make use of an emergency fund or arrange cash from friends or relatives. When friend or relative is unable to help you can opt for either personal loan or overdraft facility from the bank. A personal loan is an unsecured loan. It is not secured against any assets such as car loan, home loan etc. If you opt for overdraft facility it is a facility to borrow money via current account. In this post, we will compare personal loan and overdraft facility and try to get an answer which one is best and why.

Personal Loan

The personal loan is a loan given by the bank without any collateral. It is known ad unsecured loan.
Income proof is mandatory to avail this loan. A personal loan is given by considering your income eligibility, credit history, and repayment capacity.
A personal loan can be used for any purpose including medical expense, marriage expense, home improvement, purchasing household items or to pay your credit card debt etc.
This loan is given to the salaried individual and self-employed.
Personal loan tenure is maximum 5 years.

Overdraft Account

Overdraft is facility provided by the bank on your account. In overdraft, you can borrow extra money from bank account.
The interest rate levied on the borrowed amount is fixed and not floating.
Overdraft facility is pre-approved facility provided to selected customers. Some bank requires customer application to avail this facility.
When you opt for overdraft facility your account is flagged as an overdraft account. As soon as you withdraw extra money overdraft facility is activated automatically.
The time required to borrow money from overdraft account is Nil.

Also Read – 5 Best Banks for Personal Loan in India

How Overdraft Facility Work?

Overdraft loan facility is like on-demand loan. In this facility, you are making an agreement with a bank to offer you extra money up to a specific limit. This limit is decided by the bank. Once this facility is provided you can withdraw extra money (over and above your bank balance). Once you withdraw extra money, it will show extra money as outstanding demand. When you deposit money, this demand amount decreases. The interest is applicable from the time you borrow the amount.

The certain bank asks for collateral such as fixed deposit, insurance policy, share certificate for availing overdraft facility.

Difference Between Personal Loan and Overdraft

Quick Fund Release and Simplicity

In a personal loan, you have to do a lot of paperwork. Every time you need money you have to do similar paperwork. Another thing is once your application is approved, it will take time to get an actual amount.

In overdraft facility, once your facility is approved you can withdraw money anytime. You need not to set up overdraft account every time you need money. It is a quick and easy way to get money.

Flexibility

Personal does not provide much room of flexibility. You need to pay money via equated monthly installment. Tenure of loan is fixed, and prepayment charges are applicable. This could be a problem in case you have variable income.

Overdraft facility is flexible in nature. You can avail overdraft anytime. There is no fixed repayment schedule for outstanding. You can make repayment as per your convenience.

Interest Cost

In a personal loan, the interest is applicable as soon as you opt for loan and money get transferred. You need to pay interest, Irrespective of usage. You also need to pay prepayment fee along with the principal and interest amount due.

In overdraft account, you need not pay interest on money you have not withdrawn from your overdraft limit. No additional fee or prepayment charge applicable on overdraft.

CIBIL Score Protection

If you take personal loan frequently, your CIBIL score gets affected badly. You have to be careful in making repayment of the loan. The adverse effect to CIBIL score may cause a problem in getting a loan or credit card in the future.

For overdraft facility, you will have a single loan and you will be making regular repayment. This will help in protecting your CIBIL score.

Management of Loan

If you are taking multiple personal loans, you must remember the repayment schedule of every loan. Apart from that, it is very difficult to manage multiple loans. In overdraft, it will be single account and it will be very easy to manage it.

Conclusion –

From the above discussion, it is but obvious that Overdraft account is a viable option compared to personal loan. However, if you avail personal loan make sure to clear your dues within time. This is to avoid prepayment penalty and adverse effect on your credit score.

Home Loan Comparison – How to select Best Home Loan?

Home Loan

Shitanshu Kapadia

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December 25, 2018

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home loan

How to do Home Loan Comparison? Who is Best Home Loan Provider? These are some common questions usually asked by home loan seeker. Let’s try to get answers to these questions. Well, buying a dream home is becoming extremely difficult today. Price of the properties is skyrocketing. If you have don’t have enough money, you have to take financial aid – Home Loan.

There are multiple home loan providers in India. Almost every bank and financial institution offer home loan to the customer. In order to help you in selecting the best home loan here is a loan comparison guide including Top 5 Best Home Loan Providers in India.

Home Loan Comparison – Factors for selection of Home Loan

For making home loan comparison first get all Home loan quotations and offers from banks or financial institutions from where you are planning to avail the loan. The second step is making a detailed comparison. You should consider the following factors for the selection of Best Home Loan.

Interest Rates

Bank offers two types of home loan – fixed home loan and floating home loan. The fixed rate is fixed in the total loan period. The floating rate depends on macroeconomic and market conditions. Over the long run, floating rate loan gives benefits of interest rate averaging. The rate of interest varies between 8% to 12%. Make sure to do a proper study to compare interest rates.

Fees

The second important factor for the consideration is fees. Home loan provider imposes various fees such as loan processing fees, prepayment fees, loan closure charges, late payment fee etc. You should compare all these fees carefully and decide the best bank for taking a home loan.

Interest rate history

The interest rate is primary factor you should consider before taking a home loan. Apart from this, you should also look at interest rate history. Look at past 10-year interest history before taking any decision. You can get this information from the respective bank site. Interest rate history helps you in taking better decision.

Principal Component in EMI

The principal component in EMI plays a crucial role in deciding best home loan providers. Most of the public-sector banks keep principal component as 45% of the EMI. In some banks interest component is bigger than the principal amount. You should select a bank with a higher principal component in EMI.

Reducing Balance

There are three methods used by banks for reducing balance namely – Daily reducing, monthly reducing and annual reducing balance. You should choose a lender which offers daily or monthly reducing balance.

Prepayment Facility

Prepayment plays a crucial role in the selection of home loan. You can reduce your home loan EMI burden by using prepayment facility. You should select a bank which provides a prepayment facility without any penalty.

Terms Condition

You should check for terms and condition document carefully. This is to make sure that bank has not placed any special terms and conditions against you.

Processing and Disbursement Time

Time taken for processing home loan is another factor for consideration. It plays a crucial role when you are in urgent need of loan. Apart from processing time, you should also check for the disbursement time.

Customer Support

You should also check for customer support and services offered by a bank or financial organization. It is advisable to go with a bank with excellent customer support.

Special Scheme/Offers

You can give priority to a bank or financial institution for a special scheme or offers provided by them. However, it is recommended to study the offer carefully before opting.

Top 5 Best Home Loan in India

Based on the factors mentioned above 5 Best Home Loan in India are given below.

SBI Home Loan

SBI is largest public-sector bank in India. The key features of SBI Home loan are given below.

Lower interest rates. Interest rate calculation on daily reducing balance.
No prepayment penalty charges.
Interest rate 8.85% up to 30 Lakh.
Zero processing fees.
Repayment up to 30 years.
Home loan available as overdraft.
Special loan offer for women.

HDFC Bank Home Loan

HDFC Bank Home Loan is next in the list of best home loan. The Key features and benefit detail of HDFC Bank Home Loan are given below.

Home loan with interest rate of 8.85-9%.
Flexible loan repayment options.
Maximum loan tenure 30 years.
Processing fee 0.5% of the loan amount.
Multiple home loan products.
Good Customer Care support

ICICI Bank Home Loan

ICICI Bank is one of the largest private sector bank. The key features offered on ICICI Bank Home loan are given below.

Interest rate 9.15% for loan up to 30 lakhs.
Flexible Loan Installment Plan facility available.
Loan processing charge 0.5% to 1% of the loan amount.
Quick loan processing as well as pre-approved loan facility.
Special loan offers on time to time.

Axis Bank Home Loan

Axis Bank Home loan is next in the list of best home loan. Key Features and benefits associated with Axis Bank home loan are given below.

Loan starting with minimum amount of 3 Lakh.
Attractive interest rate from 8.9% to 9.1%.
No Prepayment Charges.
Loan amount up to 90% of total property value.
Processing fee up to 1% of the loan amount.
Penalty interest rate @24% per annum.
Loan transfer facility available.

PNB housing finance

PNB Housing finance also offers very good home loan. Key features of PNB Housing Finance are given below.

Doorstep service for availing loan.
Loan tenure up to 30 years.
The Interest rate in the range of 9 – 11.25%.
No prepayment or foreclosures charges.
Multiple Loan options.
Funding up to 90% of property cost.

Frequently Asked Questions about Home Loan

Why new customer is offered with lower interest rate compare to existing?

I have taken home loan from the bank before 3 years. At present bank is charging me 11.5% interest rate. However, a bank is offering a new home loan with much lower interest rate 9.40% to new the customer. Why existing customer like me are charged with higher interest rate? This is a very common question. Answer of this question is quite simple. Bank is offering a home loan based on current applicable interest rate. The interest rate is variable and depends on multiple factors.

First, let us understand how bank decides home loan lending rate. As per new system introduced in April 2016 by RBI, all banks are using MCLR for a lending fund. MCLR is Marginal Cost of Funds based Lending Rate.

The calculation of MCLR depends on multiple factors like –

Marginal cost of funds
Operational Cost of banks
Cost incurred in managing CRR with RBI
Spread or Margin

As multiple variable factors are involved while calculating interest rate you will find a difference in Interest rate offered by various banks.

Home loan Interest rate = MCLR + Spread

So, if a bank has MCLR of 9.15% and spread of 0.25% the bank will offer home loan @9.4%.

The bank is offering lower interest rate to the new customer because MCLR or spread is changed or reduced.

Also Read – Home Loan EMI calculator Prepayment and Clousure

Why Bank take conversation fees to reduce home loan interest?

You can reduce your home loan interest rate by paying conversation fees to the bank. By paying this fees you can convert your existing adjustable rate to current adjustable rate. Bank will take conversation fees to fulfill gap of change in the spread.

You should avail this offer only if you have large outstanding loan balance or long tenure left for the repayment of a home loan.

Why reduction in outstanding is very low during the starting period of home loan?

If you carefully observe your home loan statement you will be surprised to note that reduction in outstanding will be very low during the starting period. This is because interest component will be very high at the initial stage. Interest amount will be calculated on the whole amount during the initial stage. In first five years, only a few percentage of EMI will go towards paying the principal. So, your principal will reduce at a lower rate.

Why you should make prepayment of Home Loan?

You should make maximum prepayment at the initial stage. The prepayment at initial stage helps to reduce the amount payable towards interest. A reduction in the amount paid towards interest means saving of money.

Over to you

Have you taken a Home loan from the bank or institution mentioned above?

Do share your experience in the comment section given below.

10 Most Profitable Renting Business Ideas

Business Ideas

Shitanshu Kapadia

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December 23, 2018

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renting business ideas

Profitable Renting Business Ideas – Looking for profitable renting and leasing business ideas? Do you want to start a renting business with small or big investment? If yes, you are at right place. In this post, I will be sharing 10 Most Profitable renting and leasing business ideas.

You must be thinking that why it is lucrative to start renting and leasing business. There are several reasons behind it. There are many people who cannot afford product or equipment, but they can pay the rent. The other reason is an occasional requirement of essential equipment which can be addressed by taking equipment/device/product on rent.

There are two types of products that are involved in the renting or leasing business. Movable assets and immovable assets. The capital requirement depends upon the product you select for the rental business. Make sure to carry out research before starting renting business.

Also Read – 200 Small Business Ideas with Low Investment

List of 10 Profitable Renting Business Ideas

ATM Space Rental

ATM Space Rental or retail space renting is most profitable business option. A retail space is always in demand. Banking organization always look for ATM space for ATM network expansion. Hence the demand of ATM space is very high. If you have enough capital you can plan to start ATM space rental business.

Audio Equipment Renting

High-end audio equipment always remains in demand. Any function such as domestic, social or corporate requires public address system and audio devices. If you have expertise in identifying and managing audio devices you can start audio equipment renting business.

Bus Rental

Bus Rental is a profitable business at the place where domestic travel is growing. This business demands substantial capital investment. People opt for bus rental for tourism and social functions like marriage.

Car Rental

Car Renting is the traditional business. This business has grown multifold due to Uber and Ola. Apart from normal car renting, luxury cars are also in huge demand. If you have capital for the investment you can start own car rental business.

Construction Equipment Renting

One of the high capital intensive business is construction equipment renting. A demand of construction equipment is at peak due to real estate and infrastructure development. Construction equipment’s are costly hence a majority of developer and company prefer to take these type of equipment on rent.

Decorators

Decorators deal with the supply of decorative materials, chairs, stage, and other social function related items. These types of items are always in demand especially during marriages, party, political party, conference etc. Thus starting own decorator business is a profitable affair. You need to invest a lot of money to start this business.

Also Read – 90 Business Ideas with low investment

Fancy Dress Renting Business

Fancy dress renting business is low-cost investment business. Fancy dresses are usually in demand at school for celebration of several events and even during several social functions. You can start own fancy dress renting business and earn a lot of money.

Medical Equipment Renting Business

Specialized type medical equipment such as a waterbed, wheelchair, and walker are usually in demand. The client mostly prefers these types of equipment on rent as the requirement is for a limited period. This makes medical equipment renting business a lucrative business option.

Office Space Renting

Good Office space are always in demand. If you have a provision of huge capital you can start an office rental business. You need to select space carefully preferably nearby market.

Office Equipment Renting

Office equipment renting is another lucrative business idea. This business can be started with a moderate investment. Many start-up companies opt for office equipment on rental. Thus office equipment renting is a very good business option.

What do think about renting business ideas mentioned above? Do share your feedback in the comment section given below.

Multibagger Stocks for 2019 by Vijay Kedia & Porinju Veliyath

Stock Market

Shitanshu Kapadia

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December 21, 2018

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A Multibagger stocks are stocks that generate multifold returns for the investors. A multi-bagger stock can help you in generating massive wealth. You can become crorepati by investing in multi-bagger stocks. However, it is very difficult to find a stock with multibagger potential. You need to do immense research and consider multiple factors for identification. Instead of doing a self-identification of stock it is recommended to take help from stock market experts. Vijay Kedia and Porinju Veliyath are well-known stock market experts in India. They are known for identifying future multibaggers. Here is a detail of multibagger stocks for 2019 suggested by Vijay Kedia and Porinju Veliyath.

multibagger stocks

Multibagger Stocks for 2019 by Vijay Kedia & Porinju Veliyath

Multigagger stocks by Vijay Kedia

During a recent interview of Vijay Kedia published on Moneycontrol, he recommended four potential multibagger stocks. All these four stocks are from his own portfolio holdings. These stocks are Everest Industries, Repro India Ltd, Sudarshan Chemicals Industries, Vaibhav Global.

Vijay Kedia explained that these stocks are good buys for 2019 because they are doing well and moving into a high growth era.

Also Read – Top 20 Best Mutual Funds SIP to invest in India for 2019

Vaibhav Global

Vaibhav Global is multinational electronic retailer and wholesaler of fashion jewelry and lifestyle accessories. Vaibhav Global has an innovative business model for selling jewelry. They have a dedicated TV channel called Liquidation Channel for selling jewelry and other products. Vaibhav Global has generated nearly 5600% returns in the past 10 years. Vijay Kedia is holding this stock in his portfolio.

Everest Industries

Everest Industries is next stock recommendation. This stock is also recommended by Porinju Veliyath. Everest Industries is in the business of building solutions ceiling, flooring, and pre-engineered buildings. Building a solution market is growing at a faster rate. A new program by the government of India “Housing for all by 2022” would drive additional demand for building products and provide a business opportunity for a company like Everest Industries. Vijay Kedia is holding a large stake in Everest Industries.

Repro India

Repro India is all time favorite stock of Vijay Kedia. Repro India is in print, content, and fulfillment solution business. As per Kedia, Repro India seems to be next disruption replacing book into digital content. You can get good returns from Repro India.

Sudarshan Chemical Industries

Sudarshan Chemical Industries is in the business of chemical. It is next high-conviction stock of Vijay Kedia. Sudarshan Chemical is on the expansion path and they are also increasing their global presence. Vijay Kedia’s portfolio contains large holding in Sudarshan Chemical.

Multibagger stocks by Porinju Veliyath

In the recent interview of Porinju Veliyath on ETNow he recommended hotel stocks for the investment in 2019. He has not given name of any stock as potential multibagger for 2019. He said 3&4 Star hotel operators are in a sweet spot. F&B at 5% GST. Room rates are mostly below Rs.7500 (18% GST). Margins to go up. Advantage at the expense of 5 Stars. Few listed companies in the space look attractive.

3&4 Star hotel operators are in a sweet spot. F&B at 5% GST. Room rates are mostly below Rs.7500 (18% GST). Margins to go up. Advantage at the expense of 5 Stars. Few listed companies in the space look attractive. Am I missing something?

— Porinju Veliyath (@porinju) November 10, 2017

Few recommended best stocks from hotel industry are Royal Orchid, Indian Hotels, Lemon Tree Hotels, TajGVK Hotels & Resorts etc.

Over to You

Do you think these multibagger stocks for 2019 will generate good returns in the future?

Do share your thoughts in the comment section.

(The views content and recommendations expressed in this post are of leading stock market experts and do not represent those of Moneyexcel.com. Please consult your financial adviser before taking any position in the stocks mentioned)