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What Is The Difference Between Home Loan Vs Loan Against Property?

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Home Loan and Loan against Property are as different as their name suggests. However, it is easy to get confused between the two. A home loan is a loan taken for the purchase or construction of a new home. The property does not belong to you before taking the loan.

A Loan against property is a loan taken by mortgaging your home or any property for any other purpose. Both loans are popular and taken for different purposes. But borrowers thought that aspects of both are the same. In this article, we discuss the price difference between these two types of loans to clear your confusion. It is advisable to use the loan against property EMI calculator before opting for the property loan to now the EMI payments. Also, the home loan calculator is present on lender’s website to know the EMI amount.

Difference Between Home Loan Vs Loan Against Property:

  1. Purpose: This is the primary foundation on which the two types of loans differ from each other. A home loan as a specific purpose. It is an unsecured loan. It can only be used to buy a new property or for the construction of a new home. Loan against property is a loan that can be taken for any intents or purposes. It is a secured loan that mortgages any land or property already in your name. You don’t have to specify the purpose when applying for a loan against property. It can be used for funding higher education, purchase of a vehicle, or planning a wedding, except for speculative purposes.

  2. Rate of Interest: This is another crucial factor in differentiating the two types of loans. A home loan has a low rate of interest. In the current scenario, a home loan interest rate is decided by the Marginal Cost of Fund based Lending Rate. The rate of interest usually falls between 8.5-12%. The approval and the interest rate mostly depend upon the credit profile of the borrower and the tenure. There are several government schemes such as PMAY, which help borrowers incur savings while applying for a home loan. Whereas, a loan against property has a higher rate of interest. It usually ranges from 10-15%.

  3. Loan Amount: When buying a home or beginning construction of one, a borrower can get an approval of 90% of the property’s current market value. The rest needs to be offered as a down-payment. When it comes to loans against property, the borrower can apply for a loan between 55-70% of the market value of the property. The current market value of the property depends on several factors such as the property’s age and location in both types of loans.

  4. Tax Exemptions: Taking loans can greatly benefit your tax returns. Home loans are eligible for tax exemptions on both the principle as well as the interest components. A principal amount of up to Rs 1.50 lakhs is eligible for tax deduction under Section 80 C of the Income Tax Act. The interest paid on home loans can also enjoy tax benefits under Section 24(b). It works a little differently for Loan against property. If the mortgage loan was used for business purposes, the interest and the incidental costs could be claimed for benefits under Section 37(1) of the Income Tax Act. If the loan was used to purchase another property, the interest can be claimed for benefits under Section 24(b).

  5. Loan Tenure: Both, home loans and loans against property are labeled as long-term loans. A borrower can choose up to 30 years to repay their home loan. However, this is a little shorter for borrowers of loans against property. They have only up to 20 years to repay their loans. Home loans differ from LAP in terms of risk too. A borrower runs the risk of losing their property on defaulting their EMIs on loan against property. A loan against property calculator is essential to know the EMI payments required to pay each month.

Irrespective of their differences, both these types of loans are easy to get and are swiftly approved by lenders.

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Finance

Tips to Help Motorists Secure Auto Insurance Quote Online

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Auto Insurance Quote Online

Car insurance coverage can cover the individual driver, passengers, the other motorist and pay for loss and damage costs in the event of an accident. A car insurance policy is an essential cover in most states. It is essential to shop before securing a cover from any provider because the cost for quotes varies. 

One of the most convenient ways to shop with minimal movements is online. Today, many insurance providers engage their clients online, allowing them to renew expired policies or purchase a new one. You can engage hershey auto insurance on their online platform and see how convenient it is. 

How to get an auto insurance quote 

You can get a free quote by using either of the following:

  • Quote comparison tool
  • Auto insurance broker
  • Direct online quote
  • In-person quote
  • Quote by calling

What next?

All of these methods of acquiring auto insurance quotes are effective n-but may vary in few ways. However, the basic requirements are the same. Make sure you have:

  • Personal information- for the multiple drivers in your household including teenagers. You’ll need to know their date of birth and occupation.
  • Information about the car in question- the model, make, vehicle identification number (VIN), and mileage.
  • Average miles per year
  • Record of your driving history and that of the multiple drivers’ too
  • Updated coverage details

How often should you shop for auto insurance quotes?

Insurance companies are in a competitive field and so quote costs get revised often. Motorists are advised to shop every 12 months when renewing their policy. It is also crucial to shop if you’ve moved to a different location or gotten married.

Comparison helps you find a different rate allowing you the opportunity to make a better purchase. When shopping, compare the difference in the limits, deductibles, and the cover.

The following issues can inform your decision to shop even when your policy runs valid:

  • Change in your marital status
  • Age bracket changes-e.g. from a teen to an adult driver
  • Moving in with family and deciding to combine policies
  • Move to a different location, thus different ZIP code.
  • A significant change in your credit score
  • Change to a job that needs less driving
  • Three years have elapsed since you violated traffic regulations or found at fault in an accident.

Should your current insurance provider operate in your new location, there’s no need to shop. Similarly, if you’re comfortable with the services offered, you do not need to change or shop.

Factors that determine auto insurance rates

One of the most significant factors to consider when shopping is the financial status of your insurance provider. A reliable insurance provider honors claims without fail. 

On your part, you must also be a keen driver, have a clean credit record to attract discounts.  A risky client pays more for auto insurance cover. 

Parting Shot

Car insurance cover compensates for your loss and damage in the event of an accident. Secure the best auto insurance cover by shopping online and comparing what each provider has to offer. When you settle for one, you can minimize the cover’s cost by asking for a discount, giving evidence for good credit history, safe driving record, and leveraging on your loyalty.

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Finance

Working Capital Loan – Everything You Must Know | Of Business

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Working capital credit

Working Capital Loan: Vital Aspects You Should Know

The primary goal of running a firm is making profits, but the underlying motive from the get-go is to never run into cash flow deficiency. But, as your business evolves and grows, deficiencies in working capital can become a recurring problem. And it’s in these stages of scaling that companies, especially small and medium ones, struggle predominantly. To that end, a working capital loancan relieve the financial distress caused by cash flow deficits and allow your business never to lose the positive momentum. However, it’s crucial to know the dynamics of this financing option to manage working capital more deftly.

Working Capital Loan: Meaning

It’s a short-term financing facility that allows businesses to fund their day-to-day operations. A working capital credit is excellent for resolving cash flow problems spontaneously, without any hassle. Several financial institutions in India, like banks and NBFCs, offer these loans.

Working Capital Loan vs. Term Loan

Take a look at their differences and how each of them are ideal for different use-cases.

Tenure – Financial institutions usually grant such loans for a repayment period of up to 5 years. However, it involves a shorter payment term for working capital credit, typically, 3 to 6 months.

Purpose – Companies avail a term loan to undertake significant business expenses that will have a long-term bearing. Working capital credit is usually acquired to meet the operating expenditures of a business, like buying equipment.

Eligibility – Financiers usually expect businesses to satisfy rigorous criteria to be eligible for a term loan. But, the eligibility criteria for working capital credits are less rigid and are easier to qualify.

Working Capital Loan: Types

1.    Equipment Loan

As the name suggests, this loan type is specifically customized to provide financial assistance to companies to buy new equipment or machinery. Such a loan usually entails an end-use restriction, meaning you cannot utilize the quantum for anything other than purchasing equipment.

2.    Bill Discounting

Numerous enterprises use the bill discounting service to finance their various working capital needs. With this facility, you can release the amount blocked up in unsettled invoices ahead of their maturity dates.

3.    Overdraft

It’s a line of credit extended by banks to various businesses. You can avail this facility if you are on good terms with your bank. An overdraft facility allows you to draw cash from your account even when its balance reaches zero but is capped at a predetermined limit. You can thus address your working capital concerns efficiently with such a line of credit.

Working Capital Credit: Eligibility Criteria And Documents Required

The eligibility criteria for a working capital finance depend on the type you’re availing and also on the financial institution. Usually, the parameters based on which a financier extends working capital finance are

  • Business vintage
  • Clientele
  • Annual turnover
  • Credit rating
  • The credibility of owners/directors

To give you a rough idea, a financier would usually be lenient to provide you with a working capital loan if your company holds a robust credit rating. You may need to furnish documents for verification. Hence, it is essential to keep all relevant papers handy. With such information in tow, you can easily apply for a working capital credit that suits your financial requirements.

Wrapping Up

Cash flow scarcity is a commonplace occurrence in any growing business, and a working capital creditis an ideal device to alleviate such monetary crunches. Working capital requirements will naturally vary across companies, and by gathering information about its features and different types, you can use this credit facility optimally.

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Things to Know Before Applying for Personal Loan

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An easy way to deal with financially difficult times, a personal loan could help manage expected and unexpected expenses as well as consolidate your debts. Whether it is paying for emergency medical bills, dealing with home renovation expenses, or funding your dream vacation, a personal loan does not have any end-use condition and can be used for any purpose. 

While they do not require any security or collateral, one must be aware of numerous visible and hidden charges associated with it before filing the online personal loan application. While the loan amount offered by the bank may vary depending on the candidate’s eligibility and requirement, one must perform an in-depth investigation of various associated factors such as credit score, processing fee, foreclosure charges, EMI amount, etc. before making a final decision.

Scroll down to know more about the things one should know before applying for a personal loan.

Things to Know Before Applying for a Personal Loan:

  • Compare Interest Rate

The rate of interest on the personal loan varies from bank to bank and one should perform a thorough research of comparing the interest rates offered for the same loan amount as it plays a crucial role in deciding the final repayment amount. Along with it, the borrower should also pay attention to whether the interest rates are fixed or floating during repayment tenure. Complete information about the interest rates can be gathered from the official bank websites or through the respective customer support services. 

  • Evaluate Multiple Charges 

While availing a personal loan from any issuer, the borrower should be aware of all the charges associated with it such as processing fee, foreclosure charges, late payment fee, etc. The bank usually levies a heavy fee to new borrowers and one must bargain to get a clear estimate of expenses and plan finances accordingly. In addition to it, make sure to identify any concealed charges such as cheque bounce charges, loan cancellation charges, etc. to avoid any mishap at a later stage.

  • Maintain good credit

A good credit health validates your ability to handle debts while a low credit score demonstrates bad debt management which might affect your loan application. Hence, you should pre-analyze your credit history and make sure to keep your CIBIL score above 750 to avoid any rejections. One can maintain a healthy credit history by paying their credit card bills in full and on time as well as not exceeding more than 30% of the credit utilization ratio.

  • Evaluate the EMI amount

EMI amount management is a key factor to focus upon while submitting an online personal loan application. The EMI amount can be calculated in advance based on the eligibility, loan amount, interest rate, and repayment period to close the loan on time.

  • Avoid fake loan offers 

The lenders offer gimmicky schemes on personal loans to the borrower which might provide a low rate of interest initially but prove to be a financial burden in the future. Be sure to read the fine print to understand the terms and conditions mentioned in the loan agreement carefully as most of the hidden costs and obligations are buried in the paperwork.

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