Job layoff, medical crisis or any unforeseen emergency tends to scuttle our budget. In this case, it can play havoc with our monthly installments of our loans. This can be particularly disastrous if the loan is home loan, as it can lead to loss of your home. So if you are in this situation, or credit card debt, which can easily spiral out of control; here are some tips to beat the cash crunch.

• Sell off some of your assets.
• Pay part amount of the total EMI to lower the interest due.
• In case of a credit card debt, convert it into a personal loan due to its lower rate of interest.
• Avail of loans against assets like FDs, gold and shares and property.
• But if all these fail, the last option is to seek help from the debt counseling centers or approach the bank directly. Most banks are willing to help out customers in distress to recover at least a portion of their dues.

We all know that when we take a loan, we have to pay it back in monthly installments, also called as equated monthly installments or EMIs. But do you know there are 2 types of EMIs? Are you aware about how to select the most suitable one for you? Well, here is what you need to know about EMIs

There are 2 types of EMIs: flat rate EMI and reducing balance EMI. In case of the flat rate EMI, the interest is charged on the total loan amount. The principal and the interest is spread over the entire tenure of the loan. The figure that is derived is your EMI. In case of reducing balance EMI, you pay the interest on the outstanding balance. This balance can be calculated on the daily basis, monthly basis or yearly basis.

Of these, flat rat EMI works out to be quite costly. This is because you pay the interest on the entire sum. As a result, even if you have managed to pay a part of the amount, you still have to pay the interest. Reducing balance method is cheaper as you pay interest only on the unpaid part of the loan. Ideally opt for daily reducing balance system or monthly reducing balance system.

Normally home loan is the most preferred method for funding your home. However don’t go and take the loan offered by the first lender. Instead follow these tips to save your money and trouble, while getting yourself a good deal.

• Shop around for a good deal. While it is common to run to your local banker for a loan, it is advisable to look around for good bargains. To save time and trouble, visit numerous loan comparison websites that let you compare the loan offers given by various banks and financial institutions. You can read the terms and conditions and other details and also apply online for the loan.
• Check the reputation of the lender. Always select the reputed lender to prevent any problems later on.
• Decide whether you want to opt for fixed or floating interest rate. While fixed interest rate is normally higher than the floating rate, you do away with the uncertainties in your monthly installments. This lets you plan your household budget properly.
• Find out the processing fees, prepayment penalty and other charges. All these charges do add up and can make the home loan expensive.
• Determine the tenure of the loan. For that take into account your income potential for the next few years as well as other expenses like your car loans, credit card bills and other expenses. Also take into account the expected expenses on property like furnishings, stamp duty, registration, brokerage etc.

Follow these tips to save money on your home loan and save yourself from the hassles later on.

The face of banks has undergone massive change. Unlike the days of the old, today they offer not only the traditional banking services but also other features like financial planning, investment advice etc. While it tends to make you think that these services are free, they do come at a cost. Here are some hidden fees that not many are aware of.

1. Minimum balance charge: Your bank’s sales executive may have sweet-talked you into opening an account with them. But see what happens what happens if you fail to minimum balance. You’ll be slapped be minimum balance charge ranging from Rs 20 to Rs 750.

2. Chequebook: Use cheques over a specific no and you’ll end up paying for the excess usage. These fees range from Rs 50 to Rs 200 for each chequebook.

3. Closing the account: Try closing the account within 6 months of opening and you end up paying even for saying adieu. The charges range from s 50 to Rs 200

4. Certificates: Ask the bank to give you any documents like attestations or certificates, you will be charged Rs 50 to Rs 250 for it.

5. Bounced cheque: If your cheque bounces, you end up paing anything from Rs 50 to Rs 500 for it.

6. Cash transaction at your non-home branches: While banks claim to offer you any branch banking, try banking in any branch that is not your home branch, you’ll end up paying charges for it.

7. ATM: Try withdrawing cash at other banks’ ATMs, you’ll have to pay Rs 10 to Rs 100 for each transaction, after the initial 5 free transactions are over.

8. Account statement: Normally one statement is sent free every quarter. But if you want more than that, you will end up having to pay Rs 50 to Rs 500 for each statement.

9. Debit card charges: Banks have started offering debit cards which are chargeable in place of ATM cards which were free. The cost ranges from Rs 100 to Rs 500 per annum.

10. NEFT/RTGS charges: Banks have now started levying charges for using NEFT/RTGS. This means if you use this service 10 times and the bank charges you Rs 10 per transaction, then you end up paying Rs 100 a month.

Besides there are numerous charges like DD charges, outstation cheque clearing charges etc. So think carefully before using any of the conveniences offered by the banks.

Today Indian market is flooded with a wide array of credit cards. There are plain vanilla cards, premium cards, co-branded cards and charge cards like Diners International and American Express cards. All this is enough to make your head spin. So how do you select the right credit card?

First determine if you shop at a particular store or use services of a particular service provider regularly. E.g. if you shop regularly at Westside, you can choose HSBC Westside co-branded credit card. This will help you get discounts and special offers when you shop at the store or use service provider’s services, thus saving you money.

Are you looking to earn money on your shopping? Then go for cash back cards. Here you get a certain percentage of the amount spent as cash back.

Are you a frequent traveler? If yes, then opt for cards that reward you for every rupee spend on your tickets. It will help you get rewarded for making business trips.

Similarly if you drive a car, take a card that will help you save money or get rewarded every time you fill your car at the petrol pumps.

Some cards offer you the facility to convert your purchases into EMIs without paying any interest. This is useful if you shop a lot on your card. Others offer you discounts for eating at certain restaurants, shopping at certain stores etc.

Take these factors into account when you apply for the credit card.

Whether you are looking for a credit card or any type of loan, having a good credit score has become mandatory. You can get your credit score from CIBIL But what do you do if your credit score is poor? How do you improve it so that you can get credit easily?

• Ask for you credit report annually. Go through it carefully. If you notice any discrepancies, get them rectified immediately by contacting the bank. Point out the discrepancy to the bank and ask them to notify the discrepancy to the CIBIL. However if the bank does not help you out, get in touch with banking ombudsman and CIBIL. Show them the proof that you have cleared your outstanding dues.
• Pay your bills on time. Whether it is your credit card bill. Loan EMI or electricity and telephone bill, ensure you pay it on or before the due date. Use automatic payment facility like Bill Pay which will automatically debit the amount from your bank a couple of days before the due date. This is a sure shot way to enhance your credit score.
• Make sensible use of credit cards. A credit card is a useful tool to help you enhance your credit score. Pay your bills in full by your due date. Don’t use the card up to the maximum credit limit. This shows that you can handle credit sensibly.
• Keep your debts low. Even if you manage to pay all your debts on time, having debts far below your income will show you are responsible in managing your money.

Follow these tips and see your credit score improve.

Rohit had taken a home loan from a bank for a period of 20 years. The rate of interest on the loan was 13%. When his friend told him that his bank was offering home loan at 11%, he decided to switch over to the new lender. This is called as refinancing the home loan.

Why refinance? For one, it reduces your EMIs. Lower EMIs means you save money. Also you have the option of changing from current high-interest floating rate to low-interest fixed rate. Lastly, your loan tenure will also decrease, thus enabling you to repay your loan faster.

How to refinance your home loan? Well, here are some steps that you need to follow to get your home loan refinanced.

• Check your present home loan: Find out how much you are paying for your current home loan. Check the charges levied by your home loan lender.
• Understand your need: Are you looking to refinance in order to save money? Do you want to speed up your repayment tenure?
• Select the suitable refinance lender: Compare the offerings of various lenders available at various online loan comparison websites. Check the interest rate, terms and conditions and charges and fees of different lenders. Also check out the customer service of selected lender.
• Give the lender an estimate of the value of your property: Show the lender estimated worth of your property and how it has increased over the time. The lender will take into account this value before approving your loan. You will also have to submit details of your income, expenses and other liabilities. This will help the lender decide the amount you are eligible for.
• Start the closure procedure with your current lender: Once your loan is approved, start the closure procedure with your current lender. Your new lender will process your loan after receipt of valid documents.

With effect from 1^st July 2010, base rate system has set in. Base rate has replaced old system of benchmark prime lending rate (BPLR). The problem with BPLR was that banks lent money to large corporates at rates lower than BPLR. This meant large corporates got money cheaply, while others had to pay interest at rates over BPLR. RBI has introduced base rate with the aim of introducing transparency in the lending system.

So how will you as a home loan borrower be affected? It is likely the home loans will go up. This is because banks won’t be permitted to lend below base rate. Now home loans are very competitive and banks have been lowering their interest rates to attract more customers. Now all that is slated to stop. So you will end up having to pay more.

There are many instances in our lives when we may experience sudden cash crunch. It could be due to sudden illness, job loss, death of the main earning member in the family. In such a situation, it is very easy for us to opt for a personal loan in order to tide over our crisis.

Why personal loan? This is because personal loan is easily available. There is no need to submit excess documentation as well as collateral. In certain cases, you can get the loan within 2 minutes on the telephone. Moreover unlike other loans, you are free to use the money for any purpose. You don’t have to declare your purpose to the bank.

But is it right for you? You need to ask this question because as the personal loan does not need any collateral, it becomes an unsecured loan. Any unsecured loan carries high rate of interest than a secured loan like car or home loan. This means EMIs in this case will be higher. You should be comfortable repaying the EMI, failing which you wil be labeled as a defaulter.

So what should do? If you are not able to pay the high EMIs, you can consider other options. Do you have an FD with a bank? If yes, then you can take a loan against FD, as its rate is slightly higher than the rate of FD. If you have shares, you can avail of loan against shares. Nowadays many banks also offer gold loans against your gold jewelry.

Why go for these loans? Simple, they are cheaper. Interest on any secured loan is cheaper than an unsecured loan. This will lower your EMIs and thus save you money.

Looking for a loan with low rate of interest? Then opt for gold loan offered by banks against the gold jewelry. The bank uses your jewelry as collateral and will lend you money against it.

Why gold loan?

The interest rates charged on this loan are at least 5-8% cheaper than the personal loan. Also unlike a personal loan, a gold loan does not have any elaborate documentation so the loan processing time is shorter. Also you can avail of this loan even if your credit record is poor. You just have to show your income proof to avail of the loan.

Why avoid gold loan?

If you are taking a loan from a cooperative lender, then you must be a member of the bank. Also some smaller banks may not return your ornaments, so you stand to lose your jewelry. If you have taken a loan from a particular branch and defaulted on it, then the branch may not return your ornaments. So in this case, it is advisable to approach another branch of the same bank or another bank altogether.

Also the tenure of the gold loan will vary from bank to bank. In case of HDFC Bank, the tenure is annual while it is monthly in case of Mannapuram Finance. The benefit of of monthly tenure is that you can get higher amount with every rise in gold prices.