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.

Raju is an engineering graduate working in an MNC. He earns Rs 50,000 a month. His company has given him a platinum credit card that allows him to spend as much as he desires. Raju takes full benefit of this card and spends all his monthly income on clothes, mobiles and eating out. He has totally ignored the concept of investing.

So if you are in this situation, here is how to invest if you are in your 20s.

• Buy a health insurance: Today health care has become expensive. A simple visit to a doctor can set you back by as much as Rs 500. Hospitalization, medicines, medical examinations have all gone up. This is where having a good health insurance helps. Besides paying for any health expenses, you’ll also save money on premium, if you start early. It also gives you tax benefit under section 80-D.
• Invest in equity mutual funds: Equities are the best bet to make money and become wealthy over a long haul. Also earlier you start you can get more by investing smaller amounts due to the power of compounding. Moreover in your young age, you have higher risk appetite, thus allowing you to go for aggressive investments. But a word of caution: DON’T GAMBLE OR SPECULATE.
• Buy your own home: Earlier you buy your home, sooner you’ll find you have exhausted repaying the loan. E.g. if you take a home loan of 20 years, when you are 25, you’ll find you are debt-free by the time you reach 45. This means you’ll be debt-free by the time you retire.

These are some of the useful investment option for people in their 20s. follow them and you’ll grow healthy and wealthy in your old age.

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.

You have bought a new home and have taken a loan on it. You pay an EMI which in the initial years comprises mostly of the interest. Now remember, interest is an expense that you’ll bear every month till the end of the loan tenure. So it is very important for you to save on your home loan.

Here are some tips to help you save on the home loan.

• Opt for a floating rate home loan. Usually floating rate home loans are cheaper than fixed rate loans.
• Use the loan comparison websites. There are many loan comparison websites that compare the loan offerings from various lenders. Go through these offerings and select the lenders offering the lowest possible interest rates on the loan.
• Read the terms of loan carefully. Does the loan prohibit you from prepaying it? Will you have to pay prepayment penalty to change the lender or to speed up the loan tenure? Does your lender offer you the latest terms that it offers to its new customers?
• If there is no prepayment penalty, try to prepay the loan whenever you have some extra cash. This will reduce the loan tenure and free you from loan quickly.
• Check out the processing fee, insurance charges and other expenses. All these expenses add up and increase the cost of loan.
• If there is no prepayment penalty, try to change the lender. This is because with stiff competition in home loan market, lenders keep on offering innovative products that can ultimately save you money.
• Try to take the smallest possible loan amount. This is because smaller the amount lesser the interest you end up paying.

Today debt is becoming common place all over the world. Even in India that originally boasted about having the highest savings rate in the world, debt is slowly spreading its tentacles. Many people, especially youngsters fall prey to the easy availability of the credit. If you are in this position, then here are some tips to get out of your debt.

• Inform your spouse/parents: This is the biggest mistake many people make. They hide their debt situation from their near and dear ones. Don’t do that. Discussing your financial problem with them will help you solve your debt problem.
• Draw a repayment plan: Chalk out a plan to repay your debt. Cut down on unnecessary expenses like shopping for latest gizmos, eating out at a restaurant or going to movies at a multiplex. Use the amount saved to pay off your debt.
• Switch over to low-cost loans: Replace the loans with high interest like credit card debt and personal loan to low-cost loans like loans against securities, NSC, KVP and mutual funds. It will save you the money by reducing your interest costs.
• Opt for one time settlement: Many banks would prefer settling outstanding dues with their creditors. They will try to offer you a settlement as they would be happy recovering even a part of their dues, instead of letting the entire sum go down the drain. If you get such an offer, opt for it. But ensure the bank gives you a settlement letter and declare the account closed.
• Restructure the loan: Banks let you restructure the loan,  in such a way that you pay higher EMIs when your financial condition improves. Write a letter asking the bank to offer you this facility.
• Declare bankruptcy: This should be your last resort and should be used when everything else fails. Approach the bank and declare your inability to pay and also tell them you don’t have any assets. The bank will then take up the matter with the court, who will then attach your assets like property. Then it will commence the liquidation procedure to pay the bank. It is a complex process that can last for 3 years.

We all know that interest rates on loans tend to fluctuate. Even a small reduction in rate in the interest rate on home loan can end up saving you a substantial sum of money. Moreover with the stiff competition prevalent amongst lenders, you are sure to get a far better deal, if you opt to switch your home loan lender.

However changing lenders is not as easy as it sounds. You need to be aware of some things before you take the decision of changing the lenders. Here are some things to watch out for.

Weigh the savings vis-à-vis the costs of switch over: When you decide to change your lender, calculate the costs involved in transferring the loan. Most banks charge prepayment penalty that can completely wipe out your savings. Also the new lender will charge processing fees in order to process the loan. Watch out for these costs before you decide to change over.

Loan tenure: If you decide to change the lenders, either your EMIs may reduce or the loan tenure can reduce, if your EMIs remain constant. Though you may have to pay foreclosure charges, it is still worth it, since the savings will be significant.

Find out the duration for which the low rate is applicable: Most lenders offer low rates for the initial few years, after which it reverts to the bank’s actual rate. Most of the times, this rate is higher than what you are currently paying, so watch out.

Use loan comparison websites: With the advent of technology, you can compare the loan offers from different lenders in the convenience of your home. You can also find out how much you will save by switching the lender.

Quality of customer service: Find out if the lender can provide you with good quality customer service. Check its reputation on various websites offering user reviews. It will give you an idea of what to expect after switching over.
 
While it is great to change lenders in order to benefit from lower interest rates, you should also look at the above factors to get the best deal.