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How to Build your zero credit score?
WHAT DOES ZERO CREDIT SCORE MEAN?
Based on an individual’s credit information, the credit information bureaus determine the credit rating. A credit score of zero means that a person’s credit is zero if the history is too young. A zero credit score is the unavailability of the credit history determining the credit rating. A zero credit score is not bad as it may take some period to build up the credit history. It is essential to know How to Build your zero credit score.
Credit information companies (CICs), also known as credit bureaus, are essential players in the financial industry. They serve as go-betweens, in obtaining and organizing credit-related data for people and companies. Their function is to provide information that banks, mortgage lenders, credit card issuers, and other financial organizations need to make loan choices. The list of 4 credit bureaus in India includes TransUnion CIBIL, Equifax, Experian, and CRIF Highmark.
A credit score is declared by these four credit bureaus by reviewing a person’s personal loan repayment history. Online loan apps like Zap Money offer instant personal loans for people with excellent credit scores.
REASONS WHY CREDIT SCORE IS ZERO:
The credit score is zero or NA (not applicable) if the credit history is six months old. This is because there is not enough information available to the reporting agency to calculate the credit history. If the person has recently obtained a personal loan, credit card, or other type of credit their score may be zero. There are ways to build up the credit score from zero to 750 which is considered a good credit score. Unless the credit score is negative there is nothing to worry about, rather wait patiently to build up the score.
DISADVANTAGES OF ZERO CREDIT SCORE :
A bad or zero credit score can cause a lot of disadvantages as follows:
Credit card/ Loan rejection:
Financial companies and banks prefer to avoid risks by lending money to borrowers or businesses with low credit scores. This results in the rejection of a loan or credit card applied by borrowers.
Increase in interest rates:
Having a low/ no credit score indicates the ability to pay back the credit. Financial organizations are cautious about providing loans in such cases. Therefore higher interest rates are applied to the borrower as compensation.
Entrepreneurial problems:
Entrepreneurs who wish to begin a business with zero credit score will face difficulties in acquiring a loan, resulting in the risk of the new company’s plans and strategy.
Problems in building credit:
Borrowers with zero credit score may face difficulties and it can be challenging to build their credit score. It becomes necessary for the borrowers to consider other credit-building choices, that are secured with specific credit cards which becomes a hassle.
Rental issues:
Renting property becomes a problem for people with no credit score as landlords might verify credit scores before renting. People may be asked to pay a large security deposit to offset the dangers associated with low/ no credit score.
HOW TO BUILD A CREDIT SCORE :
Here are a few ways to develop the credit score history from scratch:
Review your CIBIL credit score:
Information mentioned in the credit report regarding default or late payments should be reviewed regularly. Any problems mentioned in the report can be fixed immediately after contacting the bank.
Avoid applying for multiple loans:
Applying for multiple loans may convey the appearance that you need credit and are unable to manage your finances with your income.
Repay debts on time:
Regular repayment on loans and credit cards will help to build the credit score.
Prefer for small loans:
Smaller loans typically have shorter terms for repayment and help to improve the credit score and history when paid on time.
ADVANTAGES OF A GOOD CREDIT SCORE :
Improves Loan Eligibility: A good credit score will increase the chances of loan approval. Financial institutions and banks consider individuals as low-risk borrowers who have a credit score of 750+.
Lower Interest rates: Credit scores directly influence the interest rate as a higher credit score lowers the interest rate which helps to save the amount during the repayment tenure period.
Faster Loan approval: Quick approval of loans to borrowers with good credit scores is advantageous. Online apps like Zap Money provide instant personal loans, especially during time-sensitive circumstances.
Better financial opportunities: A good credit score opens up opportunities for individuals in the field of business when compared to others who have low credit scores.
Higher credit limits: Higher credit limits on loans and credit cards may be extended by the lenders when the credit score is good, which indicates responsible credit behavior. This may provide additional purchasing power and financial flexibility.
Also Read :
Get 3000 quick personal loan from Zap Money
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How to get a 20000 PAN card loan instantly
Today, people’s financial requirements have increased, making it difficult to obtain a personal loan from lenders. Obtaining a 20,000 personal loan is a legitimate option, but the process of applying to several lenders may take some time. Fortunately, technological improvements have made it simple to obtain a personal loan by installing loan applications. With online loan apps, you may get a 20,000 personal loan using a PAN card instantly, making the entire procedure convenient and effective.
To ensure a smooth transaction and avoid last-minute delays, use a reputable loan app like Zap Money. This step protects you against rejection and makes sure that you receive the funds quickly.
In this blog, we will discuss How to get a 20000 PAN card loan instantly, eligibility criteria, EMI calculation, and interest rates.
How to Apply for a ₹20,000 Loan on PAN Card Online?
To apply for 20000 loans on a PAN card online consider these steps to have a straightforward process.
Reputed Lender:
Look for reputable banks or financial institutions to apply for a personal loan using your PAN card. Many lenders provide immediate personal loans without validating your profile. This kind of action should be avoided while obtaining a personal loan.
Check Lender’s website:
Once you have identified your lender, check their official website. Most lenders have user-friendly websites with clear instructions on the loan application process.
Fill out the Application Form:
Locate the loan application form on the lender’s website and fill it out accurately. You will need to provide personal information like your name, PAN card number, contact details, and employment details.
KYC Verification:
After you complete your application, the lender will begin the Know Your Customer (KYC) verification procedure. This involves authenticating your identity and financial information. You may be required to provide additional documents for this purpose.
Loan Approval:
Following successful verification, the lender will evaluate your application and creditworthiness. If you meet their requirements, your loan application will be accepted and the fund transferred to your bank account.
What are the Benefits of a 20,000 Loan on a PAN Card?
Pan card loan offers several benefits and makes them an affordable financial option for short-term loans.
Quick approval:
Online personal loans are considered quick loans. Loan app like Zap Money offers instant PAN Card loans within a short period.
Less documentation:
When you consider taking online loans, it requires less documentation compared to traditional loans. PAN card loans have minimal Paperwork and make the loan amount can be transferred instantly.
No collateral:
Usually, personal loans are unsecured which means you avail of loans without providing collateral or security to take a loan
Flexible Repayment options:
If you are taking a personal loan from Zap Money, you could have flexible repayment options including Monthly EMI. These methods can help the borrower to manage their Finances.
Reasonable Interest rates:
The interest varies from different lenders for short-term loans. In Zap Money you can avail yourself of a personal loan for reasonable interest compared to other banks and financial institutions.
Eligibility criteria for 20000 PAN card loan:
Criteria Description Age The applicant should be between 21 and 65 years of age. Income Proof The applicant must provide proof of steady income, such as salary slips, bank statements, or income tax returns. Credit Score A good credit score (typically above 700) is preferred by most lenders. Employment Status The applicant should be either salaried or self-employed with a stable income source. PAN Card A valid and up-to-date PAN card is mandatory for all loan applications. Residential Proof The applicant must provide proof of residence, such as a utility bill, rental agreement, or property documents. Existing Debt Lenders will consider the applicant’s existing debt obligations, such as other loans or credit card balances. Loan Amount The loan amount requested should be within the lender’s prescribed limits based on the applicant’s income and repayment capacity. Loan Purpose The purpose of the loan (personal, home, education, etc.) may have specific eligibility criteria. Collateral For secured loans (e.g., home loans), the applicant may need to provide collateral, such as property or assets.
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Personal Loan for 10000 – 15000 Salary Professionals
Need a personal loan? Professionals earning ₹10,000 – ₹15,000 monthly salary can apply now for quick approval and hassle-free process.
In an economy where inflation is constant, the cost of living tends to rise steadily. For individuals in this salary range, this can mean that a significant portion of their income is allocated to essential expenses such as housing, food, and transportation. With limited disposable income, saving money becomes a secondary priority, often leading to negligible savings.
Professionals with limited earnings must be adept at budgeting to ensure that their monthly income covers all necessary expenses. They often must make tough choices, prioritizing certain expenses over others, which can lead to a stressful financial situation. The margin for error is small; an unexpected expense can disrupt their carefully planned budget.
What are Personal Loans?
Personal loans are a versatile financial tool offered by banks and non-banking financial companies (NBFCs) to help individuals manage their immediate monetary needs. Unlike secured loans, personal loans do not require collateral, making them an attractive option for those who may not have assets to pledge. The approval of a personal loan primarily hinges on the borrower’s income level, credit history, and ability to repay the loan.
Lenders examine these elements to determine the risk of lending money. A steady salary ensures the lender of regular repayments, whereas a strong credit history demonstrates responsible credit management. The repayment capacity is assessed to verify that the borrower can make the monthly payments without financial burden.
Personal loans are versatile, as they can be used to pay a wide range of personal costs. This includes dealing with medical situations, which can occur suddenly and necessitate a swift financial response. They can also be utilized for home improvement projects, allowing homeowners to improve their living space without having to save up money. Other typical uses include financing weddings, schooling, travel, and debt consolidation.
Interest Rates on Personal Loans
Interest rates on personal loans are determined based on several factors, including the lender’s policies, the borrower’s creditworthiness, and the overall market conditions. For individuals with lower incomes, lenders often perceive a higher risk of default due to the borrower’s limited financial flexibility. As a result, these borrowers may face higher interest rates compared to those with higher incomes and better credit profiles.
However, the interest rates are not set in stone and can sometimes be negotiated. It’s important for borrowers to get around and compare the offers from different financial institutions or online websites. Online loan comparison tools can be particularly helpful in this process. By comparing, borrowers can find the most competitive rates that reflect their creditworthiness and income level.
Loan Repayment Conditions
A personal loan’s repayment conditions determine how long the borrower must repay the loan and how much they will pay each month, often known as the Equated Monthly Installment (EMI). The EMI is an important consideration because it must fit into the borrower’s monthly budget. If the EMI is set excessively high, it might put a strain on the borrower’s finances, potentially leading to missing payments and a lowered credit score.
To avoid this, borrowers should carefully assess their repayment ability before taking out a loan. They should use EMI calculators to calculate their monthly payments for various loan amounts, interest rates, and repayment durations. This allows customers to select terms that are in line with their income and expenses, ensuring that the loan is sustainable over time.
Building a Credit Score
Maintaining a strong credit score is very important for obtaining loans and favorable financial terms, and even people with low incomes can do this by following a few important procedures. It is critical to pay your bills on time, including credit card payments and utility bills, because they build the foundation of your credit history. Maintaining a low credit utilization percentage, ideally below 30% of available credit, demonstrates competent credit management. Regularly monitoring your credit report for inaccuracies and remaining informed about your credit status can help you avoid surprises and handle issues quickly.
It’s also good to have a diversified credit mix, such as a credit card, personal loan, and auto loan, as this can demonstrate your ability to manage different types of credit responsibly. It is important to avoid making too many credit applications, as each hard inquiry can have a minor impact on your credit score. Finally, managing existing debts sensibly, prioritizing high-interest obligations, and exploring debt consolidation if it offers better terms can all help you establish and keep a healthy credit score, ensuring you remain an appealing option for lenders.
ZapMoney’s Instant Loan for Salaried Professionals
ZapMoney offers personal loans with affordable interest rates and flexible repayment plans that may be adapted to individual financial needs.
The application procedure is supposed to be transparent, with borrowers fully informed about the terms and circumstances of their loans. Furthermore, ZapMoney helps users create a solid credit history, which is useful for future financial undertakings.
This dedication to customer service and financial empowerment distinguishes ZapMoney as a strong candidate for anyone seeking rapid financial aid without the lengthy procedures often associated with traditional lending organizations.
ZapMoney’s lending approach provides a practical and immediate money resource for both unexpected emergencies and planned expenses.
Users can apply for loans ranging from ₹3000 to ₹1 lakh with minimal documentation.
Interest rates for loans begin as low as 18% per year, which is considered moderate for personal borrowing.
Credit History: ZapMoney also helps users build and improve their credit score, which is essential for financial stability.
Repayment: They provide numerous loan repayment alternatives, making it easier for borrowers to manage their budget.
Transparency: ZapMoney prioritizes complete transparency in their loan processes.
Powered by Monexo. ZapMoney is a brand of Monexo Fintech Private Limited, which is an RBI Licensed NBFC-P2P, ensuring that it is regulated and respects the criteria established by the Reserve Bank of India.
While personal loans offer a solution, it’s important to borrow responsibly. Professionals should only take out loans that they can afford to repay, and they should have a clear plan for repayment. Overborrowing can lead to a debt trap, which can further exacerbate financial stress.
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Personal Loan vs Credit Cards. Which is right for you?
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Instant 10000 Loan for Students Online
Follow these simple steps to get INR 10000 loan for students online quickly without the need of salary and at competitive interest rates.
It can be difficult to get your head around the financial system as a student in India, but personal loans provide a workable way to close the funding gap between your desired level of education and the amount of money needed to pursue it. In contrast to school loans, which are designed exclusively for educational costs and frequently have lower interest rates, personal loans offer a more extensive and instant financial support network. They can be used for many things, such as managing living expenditures during hard times financially or paying for books and equipment.
Understanding the Personal Loans for Students in India
Like school loans, personal loans for students in India are a flexible financial solution that provides instant access to money without adherence to usage criteria. These loans, which cover a range of immediate educational expenses like textbooks, project materials, and living expenses during financial problems, can be obtained for as little as ₹10,000 to ₹2 lakh. With their fast disbursement dates, set interest rates, and EMI repayment options, they give students the financial management skills they need to succeed. To guarantee a seamless loan application procedure, students must be aware of the higher interest rates in comparison to college loans as well as the lender’s eligibility requirements, which usually include age, credit history, and income.
Access your financial needs before applying
It’s crucial to consider all your educational costs before pursuing personal loans for study. The cost of study materials, tuition, and any additional fees for travel, lodging, and any required extracurricular tutoring or coaching should all be included in this thorough financial assessment. To ensure that you get enough money to cover all stages of your educational journey without overborrowing or failing to meet your academic needs, you must have a clear grasp of these financial commitments to determine the proper loan amount to apply for.
Major Benefits of Student Personal Loans
Here are few benefits of student personal loans:
Flexibility in Application: In contrast to education loans, which are typically confined to tuition fees and other direct educational expenditures, personal loans are available for a variety of uses, such as living expenses during financial emergencies and textbooks, stationery, and project materials.
Loan Amount: Depending on the borrower’s needs and the lender’s policies, the loan amount for personal loans can vary greatly, ranging from ₹10,000 to lakh or more.
Quick Payment: The speed at which personal loans are disbursed is one of their primary benefits for students. Because these loans frequently have few requirements for proof and can be funded very fast—sometimes even within a few hours of the application being approved.
Flexibility in Repayment: Most personal loans have set terms and interest rates that must be paid back in equal monthly instalments (EMIs). Students can manage their monthly budget and organize their finances as a result.
How to Secure the Loan in Case of Ask for Co-Signer?
Because many students in India lack credit history and may have unstable finances, getting a loan as a student frequently requires the presence of a co-signer or guarantor. Someone who consents to assume repayment of the loan if the principal borrower—in this case, the student—fails to do so is known as a co-signer or guarantor. This gives the lender a safety net and may be a deciding factor in the loan’s acceptance.
Importance of a co-signer or a guarantor:
Creditworthiness: An applicant for a student loan can greatly improve their chances of approval by providing a co-signer or guarantor with a solid credit history. They serve as evidence to the lender that the loan is a prudent financial decision.
Loan Terms: Because it lessens the lender’s risk, having a co-signer or guarantor may also assist in negotiating more advantageous loan terms, like lower interest rates.
Financial Stability: Guarantees that the loan will be returned are what lenders look for. This guarantee is offered by a co-signer or guarantor with a steady income, and it is especially crucial in situations when the principal borrower’s income is erratic or nonexistent.
Greater Loan Amounts: The participation of a co-signer or guarantor may be necessary for loans beyond a certain amount. It reassures the lender that there is a backup borrower who can pay off the debt even in the event of the original borrower’s default.
Guidelines when you have a co-signer or a guarantor:
Importance: A borrower’s creditworthiness is expressed numerically by their credit score. Lenders take this into account among other important things when assessing a loan application.
Impact: A better credit score might result in more favourable loan terms, like lower interest rates, as it shows a lesser risk to the lender. Over time, this might allow the student to afford the loans more easily.
Evaluation: When a student doesn’t have enough credit history, the co-signer’s or guarantor’s credit score is usually considered.
Student Loan Eligibility as per Zap Money
Zap Money is one of the best places to get a loan online quickly. Here are some basic requirements to get Rs. 10000 loan for students quickly:
Age Requirement: Users must be over 18 years of age. This is a common age restriction to ensure that individuals using financial services are legally considered adults.
Residency Requirement: Users must be Indian residents. This means that the financial services provided by Zap Money are available to individuals who are living in India.
Bank Account: A valid and active bank account is required. This is likely for transactions and fund transfers.
PAN Card: A Permanent Account Number (PAN) card is required.
Aadhaar Card: An Aadhaar card is required.
No Mandatory Credit Card: Unlike some financial services that may require users to have a credit card, Zap Money does not have this requirement. This could be advantageous for individuals who may not have a credit card but still want to access the services offered by Zap Money.
Students should be told the precise qualifying requirements established by the lending institution and these guidelines. These requirements may include age, educational background, and course of study, and risks. Understanding and following such standards can greatly enhance the likelihood of loan acceptance and guarantee that students can obtain the required funds for their academic pursuits.
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How to Get Personal Loan for Students in India
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How to get Personal Loan without Salary Slip
How To Get instant Personal Loan
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How to get a Consumer Durable Loan from a Personal Loan App
In today’s modern world, people are interested in buying new electronic products to fulfill their daily needs, but most people can’t afford them. With consumer durable loans, it is possible to buy new electronic gadgets and household appliances like washing machines, televisions, modular kitchens, and much more. You can take online consumer durable loans to avail yourself of new products ranging from Rs. 10000 to 15 lakhs, and these types of loans can come with a 0% interest rate or no-cost EMI.
Among many types of loan options, consumer durable loans from online mobile apps can be convenient and easy to access. In this blog, we will see what consumer durable loans are and learn how to get consumer durable loan from a personal loan app
What is a Consumer Durable Loan?
A consumer-durable loan is a type of personal loan offered by banks and other financial institutions. This type of loan is used to buy things like mobile phones, laptops, household appliances, and others. If you avail of a consumer-durable loan, you have options to choose a loan tenure repayment method. The EMI option lets you borrow money instantly through the Zap Money app and pay back the loan amount using a flexible payback plan, all based on your budget and convenience.
Benefits of taking an instant personal loan online:
Applying for a personal loan online allows you to apply for a loan paperless. Instant personal loans are available from online apps like Zap Money. These loans can help you with unexpected costs, automobile purchases, and other financial needs. Here are some benefits of getting a consumer durable loan from personal loan app
Convenience:
It is convenient to take an online personal loan from Zap Money at any time just by installing the app from the Play Store and filling in the required details, without having to visit a bank or office. This saves time and effort.
Quick approval process:
The time taken for online personal loans is less because online lenders have simplified application procedures and can render approval decisions more quickly. Some online loan apps like Zap Money can approve loans within a day or even a few hours.
Competitive interest rates:
Online lenders often have less expensive operating expenses, which allows them to offer competitive interest rates compared to other lenders.
Transparency:
Normally online lenders provide clear information about interest rates, processing fees, and loan terms, making it easier to compare offers and choose the best option.
Flexible loan amounts:
Online lenders may offer a wider range of loan amounts, from small personal loans to larger sums, catering to various financial needs.
Automated process:
Most online personal loans come with an automated process for loan application, which can reduce errors and provide a more efficient and consistent experience.
However, it’s important to know when taking out a personal loan online, as there are also risks involved, such as dealing with fake lenders or falling into illegal loan apps. Choose reputable and RBI-registered online personal loan apps like Zap Money.
Check out the eligibility criteria for Consumer Durable Loans:
CriteriaDescription Age Minimum and maximum age limits, usually between 21 and 65 years old Employment Status Individuals must be employed and should have a stable source of income. Minimum Income A minimum monthly or annual income requirement, as specified by the lender Credit Score A minimum credit score requirement, often in the range of 650-700 or higher Credit History A satisfactory credit history with no recent defaults or delinquencies Debt-to-Income Ratio A maximum debt-to-income ratio, usually below 40-50% of monthly income Loan Amount Limits on the minimum and maximum loan amount that can be borrowed Loan Tenure The maximum repayment period allowed typically ranges from 1 to 5 years Residential Status Requirements based on citizenship or residency status Documentation Documentation like Aadhar card, PAN card, passport etc.
Factors Affecting Consumer Durable Loan Interest Rate:
Many lenders offer a 0% interest rate on consumer durable loans, but some lenders charge interest on these loans. The interest rates can vary based on various financial institutions and come with individual profiles. Certain key things should be considered that could affect the interest rate charged to an individual:
Credit score:
A credit score is a three-digit numeric expression to represent an individual’s creditworthiness ranging from 300 to 900. Credit scores ranging from 750 to 900 are considered good credit scores and can help the individual access a loan with a low-interest rate.
Higher loan amount:
Interest rates applied by the lender can be high when you apply for a higher loan amount. This happens because a higher loan amount can have more EMI payouts, which can increase the risk of default of the lender
Loan tenure:
Usually, long loan repayment tenure can result in a high rate of interest
Current debt:
If a person must take out a new loan and has a lot of debt already, the lender will charge a high-interest rate because the person has a high loan default rate.
Also read:
Debt-to-income ratio and types of Debt-to-income ratio
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Personal loan or EPF loan: Which is better in 2024?
What is Personal loan?
A Personal loan is a loan that does not require collateral or security and is offered with minimal documentation. It is a loan in which a lending institution, like a bank or Financial Institution, lends money to an individual. In return, you agree to repay this amount over a set time, often with interest and additional charges. Instant Personal Loans are versatile and can be used for various personal financial needs.
What is an EPF loan?
A EPF(Employees’ Provident Fund) is a form of social safety net into which workers must contribute a portion of their salaries and employers must contribute on behalf of their workers. Both the employee and employer contribute to a fund that aims to provide financial support to the employee when they reach retirement. It is managed by the government, with set minimum and maximum contribution levels.
Difference between Personal loan vs EPF?
Criteria Personal loan EPF Purpose Used for personal expenses, such as medical emergencies, home renovation, or debt consolidation Used for short-term financial needs, such as cash crunch situations Eligibility Based on the borrower’s creditworthiness, income, and repayment capacity Based on the balance in the EPF account two years before the loan application Security No collateral required Secured loan against the EPF account Use of funds No restrictions on use of funds Can be used for specific purposes, such as cash crunch situations credit check limited flexibility in terms of loan amount and repayment options Flexible loan amount and repayment options depending on the lender’s offerings
What is the Instant Personal loan application Process?
Check Eligibility:
It is important to assess eligibility before applying for a instant personal loan. Factors such as your credit score, income and existing liabilities play an important role in determining your creditworthiness.
Prepare your documents:
Gather necessary documents such as identification, address, income information and work history. Having these documents ready will ensure a smoother application process.
Compare lenders:
Research and compare different lenders to find the best interest rates, terms and loan options. This step is important so you can make an informed decision about the loan of your choice.
Apply online or in person:
You can apply for a personal loan online through the lender’s website, mobile app or by visiting an office in person. The application usually involves filling out a form with personal and financial details.
Submit your application:
After completing the application, submit it along with the required documents. Some lenders may require additional information or verification before processing your application.
Wait for approval:
The lender will review your application, credit history and documents to determine if your application is approved. Approval times may vary, but usually takes 1-2 business days.
Receiving the money:
Once your application is approved, the loan amount will be transferred to your bank account. The time it takes to receive your money can vary depending on the lender and your bank’s processing time.
Loan repayment:
Make repayments according to agreed terms to avoid penalties and maintain good credit. Late or late payments can negatively affect your credit history.
What is the maximum loan amount for Personal loan and EPF loans?
Maximum Loan Amount for Personal Loans:
The maximum loan amount for personal loans can vary depending on the lender, borrower’s creditworthiness, income, and repayment capacity.
·Lender companies like Zap Money offer instant personal loans of up to Rs. 1 lakh with minimal paperwork and quick disbursement of funds.
Maximum loan amount for Personal loan:
For Housing (purchase, construction): Up to 90% of your EPF balance (including employer and employee contributions) can be borrowed.
For Housing (repair, renovation): Up to 75% of your EPF balance can be borrowed. For Medical Expenses (self or dependent): Up to 90% of your EPF balance can be borrowed.
For Education Expenses (self or dependent): Up to 90% of your EPF balance can be borrowed.
For Marriage Expenses: Up to 50% of your EPF balance can be borrowed.
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Learn about down payments in loan EMI
What are down payments in loan EMI?
Down payment in loan EMI are the initial payments that the customer makes during a big purchase such as a vehicle, home, or real estate purchase. Down payment in loans EMI can be made by credit cards, cash, cheque, or funds from personal loans.
The down payment amount varies based on the loan type and the borrower’s profile. Usually, the upfront payment covers 10% of the total cost of the product.
The down payment is non-refundable. This payment gives security to the lending institution as the customer pays a portion of the purchase price upfront.
Advantages of a down payment in loan EMI’s:
There are certain advantages of making a down payment on a loan EMI on big purchases. Those advantages are listed below:
Lower monthly payments:
To lower the amount of the mortgage or loan that needs to be taken from the bank, paying a high down payment is advisable. Thus it lowers the monthly installment that is partial and principal interest on the loan.
Avoiding private mortgage insurance:
Certain lending institutions demand the customer provide a security or guarantee when the customer makes a low down payment on a loan EMI in case of default. Hence to provide insurance for the lender, the customer needs to obtain mortgage insurance.
More equity in the purchase:
How much ever the percentage of down payment is made by the customer, that much percentage of the purchase the customer owns. For better understanding, if a customer makes a down payment of 25%, the customer owns 25% of the purchase immediately. The other 75 % is owned by the lender.
Future borrowing capability:
Choosing a higher down payment on a loan EMI reflects the impression that the customer has a strong credit profile. This action ultimately helps in securing additional loans in the future.
Faster ownership:
Making a down payment in a loan EMI on the purchase provides ownership authority faster and easier within a minimum amount. Thus documentation of the purchase can be done quickly.
The disadvantage of a down payment in a loan EMI:
Everything comes with both advantages and disadvantages. The disadvantages of a down payment in loan EMI are mentioned below:
Financial stability:
Paying a higher down payment on a loan EMI might reduce the amount available for other expenses or financial requirements. When payments including down payment in loan EMI are not managed properly there is the risk of affecting and damaging the credit profile.
More time to save money:
Paying a higher down payment in loan EMI results in the depletion of savings. To recover from the depletion of savings might require more time than usual.
Factors affecting down payment in loan EMI:
There are certain factors that are interconnected when it comes to a down payment. Those factors are listed below:
Credit score:
A credit score is an important factor when it comes to loan approval or down payment on a loan EMI. Making a down payment on a loan EMI is also a factor which reflected in credit scores.
Income:
Income represents the customer’s repayment potential. It assists the lender in determining whether the customer is able to repay the debts on time or not.
Resale value:
The down payment value is directly proportional to the resale value of the purchase.
For example, if the customer’s purchase is a vehicle, then after a period of time the value of the purchase gets reduced. As such, if the customer defaults on their loan, the lender may not be able to recover all their dues. In this case, the lender might demand a higher down payment.
Also read:
What are the different types of loans in 2024?
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Understanding No Cost EMI
In today’s world, people are more attracted in buying things on EMI, where they may settle their amounts later through monthly installments. Paying money in small portions helps the individual to balance their budget and other expenses.
However, before paying the sum, one needs to understand the differences between EMI and No-cost EMI by considering their pros and cons.
What is an EMI?
Equated monthly installment is shortly known as EMI. It is a method through which the borrower pays a fixed amount to the lender at the end of each month to repay their personal loan or debt. For example, to buy a phone on EMI with a debit card, the entire cost can be paid in monthly installments.
EMI is considered one of the popular repayment methods that calculates both the interest and the principal portions. Towards the end of the last payment, the individual can get a Non-objection Certificate (NOC) from their lender to close their EMI.
What is No Cost EMI?
No-cost EMI is where the individual purchases a product such as a no-cost EMI bike and pays the amount through monthly installments with no additional charges beyond the purchased price.
No-cost EMI, often known as zero-cost / interest-free EMI, has grown increasingly popular in both online and offline retailers.
Factors to Consider while Looking at No Cost EMI
Budget: Calculate the total amount of cost that needs to be paid at the end of every month to align with your budget. Check whether the scheme includes any penalties for delayed payments.
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What is Prepayment Penalty in Personal loan?
Understanding refund procedure: If you are not able to pay the monthly installments, you may have to return the product to your lender. It may take days based on the lender’s policies.
Timely payments: You need to pay the amount within the given time frame to avoid issues with your credit score. Late payments may reduce your credit score and decline your opportunities to get future loans.
Difference between EMI and No Cost EMI
S.No EMI NO COST EMI 1. Additional expenses, such as interest and principal, are included. There are no additional fees included. 2. Credit card companies and banks offer EMI. No-cost EMI is Offered by NBFCs like Bajaj Finserv 3. The product’s total price may include additional charges which differ from MRP. The overall cost of the goods acquired through no-cost EMI is comparable to its MRP.
Pros and Cons of No Cost EMI
S.No Pros Cons 1. Customers can get premium and luxurious products without having to pay the full price. All products are bought under no-cost EMI. Therefore there are few restrictions for some products to be acquired through no-cost EMI payment. 2. Credit cards are not required during the payment process. Some institutions offer no-cost EMI tied to specific credit cards which limits the accessibility for others. 3. It is Budget-friendly as it reduces the amount into smaller parts. This helps the individual to enjoy their other necessary expenses without any sacrifices. Some financial companies may ask for processing fees which at times may be included in the product cost itself.
Important documents that are required to get a payment through no-cost EMI includes:
Identity Proof: Identity provided by the government such as an Aadhar card, license, or passport is required. It is possible to get mobile EMI on an Aadhar card.
Address proof: Any document that verifies your current address such as utility/rental bills should be provided.
Income proof: Documents like bank statements, and salary slips should be provided to ensure your EMI payment.
Eligibility criteria :
Income: The individual should have a regular source of income.
Age: 21 to 65 years
A good credit score above 720 is a must.
People’s consumption changes frequently, and no-cost EMI is considered as one of the most flexible ways through which long-term payments can be made easily.
But the decision is up to the individual to choose their flexible mode of payment considering its pros and cons.
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