Tips to lower your EMIs in case of cash crunch

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.

How to invest for people in their 20s

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.

How to save money by refinancing your home loan?

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.

The Best Tax-Saving Investment Options

We all wait till March before starting with our tax-planning. As a result, we rush through our investments before the financial year is over. In the process, we end up making poor investment choices that do save tax but do not offer attractive returns. Hence it is advisable to start our tax-planning way in advance.

Once you have decided to begin with your tax-planning, you must know where to invest to get the best possible returns. Here are some best investments.

ELSS: Nothing beats the returns from equity-linked savings schemes (ELSS), if you can handle the risk. There are many ELSS funds that have managed to give superlative returns. Choose funds with a track record of at least 5 years. The main advantage of ELSS is that it has only 3 years lock-in period, which is the least.

Insurance: Besides protecting you against unforeseen events, insurance also helps you save tax. But don’t buy insurance simply to save tax. Instead calculate how much insurance you actually need and find out if you have a shortfall. Only then, buy the insurance. If possible, opt for term plan, as it is the cheapest policy offering you highest possible life cover.

PPF: One of the oldest and the best debt products, PPF is totally exempted from tax. The sum invested, the interest earned and the maturity amount are all tax-free. However the maximum amount you can invest is only Rs. 70,000 in one financial year.

Home loan: The principal portion of your EMI for the home loan can help you in reducing your tax liability.

Premium towards medical insurance: Now you can get a deduction of up to Rs 15,000 towards the medical premium paid. This insurance could be for you or your dependants (spouse and children). If you are paying premiums for your parents, you can get further deduction of up to Rs. 15,000 ( up to Rs. 20,000 in case of senior citizens).

The way to do the tax planning smartly, is to contribute the maximum amount towards your PPF. Then invest the rest as per your financial needs. E.g. if you don’t have adequate insurance cover, first buy insurance before considering other investment options.

Your checklist to switching your home loan lender

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.

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