What is a Home Loan?
A home loan has a precise purpose related to a house. It can be the purchase, renovation, or construction of a property. We all know that it is a significant expense to purchase a property. Everyone doesn’t have that kind of amount with them at once to spend.
Therefore, they take a home loan and pay the bank or the financial institution in Equated Monthly Instalment (EMI).
What is a Personal Loan?
A personal loan can be taken for various purposes. It can aid a cash crunch or help fulfil a goal where you need some money to be infused. The common reason why people take personal loans are travelling, marriage, higher education, medical, or any other kind of emergency. It is also paid via EMIs.
There is a vast difference between a personal loan and a home loan apart from the basic purpose. Let us explain the 5 fundamental aspects of the personal loan vs home loan in detail in upcoming sections:-
1. Loan Amount
A personal loan is taken to fulfil a minor requirement of cash. Say for a holiday, renovation, or an expensive phone. Thus the loan amount for a personal loan typically ranges from 50 thousand to 25 lakhs. The loan amount depends on the credit score of a person.
On the other hand, a home loan is taken for a significant amount that ranges from 5 lakhs to 10 crores. It depends more on the value of the property rather than the credit score. 80% of the value of the property can be taken as a loan by an individual.
2. Rate of Interest
Personal loans are known for their convenience but also higher interest rates. Its basic rate of interest ranges between 11-25%. A poor credit score or longer tenure can eventually raise the interest. One reason for its higher interest rate is that it is an unsecured loan.
Home loan interest rates are lesser than the interest rate for a personal loan. The usual rate is 8-12%. The tenure for the loan is of many years, and it’s a secured loan. So the interest rates are lesser than personal and many other loans.
3. Loan Repayment Tenure
Personal loans are provided for a short-term period. Its tenure ranges from 12-60 months. But generally, institutions prefer a short time period, for example, 6 months. One reason for giving personal loans for smaller tenure is that lenders don’t want to risk their principal sum by lending for a longer time.
In contrast, home loans are given for even 30 years of tenure. The amount is more in the home loan case, and the risk is minimal as the loan is secured through the mortgage. So institutes are generous in providing longer tenures for repayment of home loans.
4. EMI Amount
The amount of monthly instalment for the same amount can be more in a personal loan. The reason is that a personal loan is given for a limited time for a maximum of 5 years period.
In the case of the home loan, the EMIs are spread out for many years. Thus it becomes easy to minimise the EMI amount. Therefore it won’t be easy to purchase a property with a personal loan instead of a home loan.
5. Tax Rebate
Under section 24 of the income tax act, a certain type of buying, construction, and renovation through personal loans comes under tax rebate. Other than that, there is no tax relief for the repayment of a personal loan.
Home loan repayments fall under tax deduction through sections 80C, 24, and 80EE of the income tax act. Banks can charge up to a maximum amount of 3.5 lakhs as interest on a principal amount for a home loan.
Top Future Generali Life Insurance Plans you should know about
Life insurance policy can be the best friend that you have, in a time when you are not there for your family. The insurance sum assured will be paid out to your beneficiaries and they can pay off any debt that you have left outstanding or go on to secure their future. For a sole breadwinner of a family the life insurance plan is a valuable tool that they can invest in, to create a Plan B for their family when life throws an unexpected surprise in the form of a disease or an accident. Apart from life risk there are also riders which can be added, providing extra cover in case of a partial or complete disability, or in case of a critical illness. One of the best providers of life insurance in India is Future Generali life insurance. Let us take a look at some of the best insurance plans offered by Future Generali.
Future Generali Care Plus Plan
This is a pure plan term policy that provides guaranteed sum assured to the beneficiary of the policy on the demise of the insured within the term plan. This term insurance policy offers two choices to the policyholder, which includes the Classic option and the Premier Option. Under the Classic option, the beneficiaries will get a sum assured of less than INR 25 lakhs; and under the Premier option, the beneficiaries will a sum assured of more than INR 25 lakhs. For the Classic option, the sum assured starts from INR 10 lakhs, and for the Premier option, the sum assured starts from INR 25 lakhs. Under this plan, there is no maximum cover. The term of the policy is from 5 years to 30 years and the maximum coverage age is 65 years for each of the options. There is no maturity cover or surrender benefit offered to the policyholders. The policyholder can choose to pay the premiums on a monthly, half-yearly, or yearly basis. Non-smokers can enjoy a rebate on the premiums. The minimum age to purchase this policy is 18 years while the maximum is 65 years. The premiums you pay under this policy qualify for tax benefits under the Income Tax Act, 1961. On paying extra premium along with the premium for this plan, you can avail of the accidental death rider benefits.
Future Generali Flexi Online Term Plan
With the Future Generali Flexi Online Term Plan, you can enjoy flexible coverage options. As you buy this plan, you will be able to make your own plan which can be Increasing income Protection + Basic Life Cover Policy or Fixed Income Protection + Basic Life Cover Plan. As a policyholder, you can choose between increasing income protection or fixed income protection. Under the fixed income benefit, the beneficiaries will receive a monthly income which will be fixed until the policyholder who is not there anymore turns 60 years old. Under the increasing income protection, the sum assured will increase after a point of time, which actually helps in a situation of inflation. Under the Future Generali Flexi Online Term Plan, the policyholder can choose both the income protection cover as well as the basic cover.
As you buy one such plan, you make sure that the beneficiaries of the policy will get a lump sum benefit under the basic cover and along with this, also get monthly payments regularly. As the entry age is concerned for this term insurance plan, the minimum is 18 years while the maximum is 55 years. For the income protection option, the minimum age is 22 years while the maximum age is 55 years. The starting maturity age for the basic life cover is 28 years and it goes up to 75 years. However, 75 years is for the non-smokers, while for the smokers, the maximum age goes up to 65 years. The maturity age of the income protection plan is from 45 years to 65 years. The term of the policy ranges from 10 years to 75 years; while for the smokers it comes down to 65 years.
Like these, there are several term insurance policies offered by Future Generali Life Insurance. You can come across all of them by visiting the IIFL website. You can compare them with the other plans available in the site and choose the one that is apt for your family.
Things You Must Know About Goods and Services Tax in India
Introduced in July 2017, GST is termed as “one nation, one tax” reform where all prevalent indirect taxes are eliminated and combined into a single tax system. It replaced multiple taxes such as excise duties, service tax, sales tax, VAT and many other taxes.
Types of GST
Apart from knowing what is GST, borrowers need to know the types of GST and how they function. Following are the types of GST-
- Central Goods and Service Tax (CGST): For products and services on the intra-state
- State Goods and Service Tax (SGST): Like CGST, SGST is levied on products and services within the state
- Integrated Goods and Service Tax (IGST): Applicable on supply of products and services in case of export from and import to India.
- Union Territory Goods and Service Tax (UGST): Imposed on the supply of products and services in any Union territories.
Business owners must note that every buyer, seller and service provider must register themselves under GST.
How does GST work?
While knowing about what is GST, borrowers must know that it is levied in the states where goods and services are consumed and not manufactured. It is imposed at every selling point and is included in the price of the consumer purchases products.
Any eligible organisation under GST must register their business through the GST portal started by the Indian Government.
Individuals just need to know how to register for GST online for a successful registration process. After this registration, the respective entity will receive a registration number called GSTIN.
Thus, GST shows transparency and accountability on the taxes imposed on the goods and services supply. Presently, when a consumer purchases a product, state taxes are labelled on the product rather than multiple taxes. This new tax regime is likely to manage the tax burden, boost central and state revenue and increase the country’s GDP.
But every change comes with certain pros and cons, and similarly, there are certain advantages and disadvantages of GST. Following are some of them-
Subsumes indirect taxes in India
India had multiple indirect taxes on various supply chains that increased tax burden of the citizens. To remove such taxes and make a unified taxation system for goods and services, GST had been implemented. It had significantly reduced tax compliance on individuals and eased tax administration system of the Indian Government.
Remove cascading effects
One of the fundamental objectives of GST is to remove the cascading effects of taxes. Initially, due to various indirect tax laws, taxpayers were unable to reduce tax credits of one tax against another. For instance, the excise duties paid could not be reduced against VAT paid during the selling of manufacturing products.
This resulted in the cascading effects of tax. But as per new tax regime, the tax is levied on the net value at each supply chain.
Eliminates tax evasion
Apart from knowing what is GST, individuals must know that GST laws in India are far stricter than compared to other indirect tax laws. Under GST, taxpayers are eligible for claiming input tax credit on the uploaded invoices by the respective suppliers. In this way, there will be fewer chances to claim input tax credits on fake invoices.
Increased taxpayer base
With the implementation of GST, India’s tax base is widened to a greater extent. Under the old tax regime, there was a separate threshold limit for business registration depending on the turnover.
Since GST is a consolidated tax imposed on goods and services, it has significantly increased tax-registered business. Besides, the stringent rules encompassing input tax credits have brought several unorganised sectors under the taxation system. Thus, borrowers need to know the steps to file GST return online to avoid legal hassles in their business.
Therefore, individuals must know that businesses successfully registered under GST can secure a business loan much faster than unregistered businesses. Reputed lenders like Bajaj Finserv extend substantial loan amounts at competitive interest rates to eligible business owners.
Further, borrowers can also avail pre-approved offers on a wide range of financial products such as business loans, personal loans, credit cards etc. These exclusive offers not only accelerate the borrowing procedure but also save time. Intending borrowers can check their pre-approved offer online by submitting their essential credentials.
Now when borrowers know what is GST, it will help them to know the importance of it. It will benefit them and the country at large.
13 Most Important Things To Know Before Investing in Bank Fixed Deposits
Bank fixed deposits are among the most popular investment choices. These investments instruments are common in India due to the liberty of choosing the interest payout frequencies, guaranteed returns, flexible tenures, safe and secure transactions, ease of execution and many other benefits. But there are also things to be careful about before investing in bank fixed deposits. Here is a list of 13 things you should know before you start investing in bank fixed deposits.
Choose net banking while depositing your money
It is best to choose net banking while dealing with fixed deposits because when your account matures, it will directly be credited to your account without any delay or hurdles. Also, in case of emergencies, you can redeem it instantly.
Know the maximum and minimum deposit limit
The government and private banks usually have different minimum deposit limits. For example, The minimum SBI fixed deposit amount is Rs. 1000. Private banks like ICICI have a minimum deposit amount of Rs. 10000 for its general customers and 2000 rupees for minors.
On the other hand, HDFC has a minimum deposit amount of Rs. 5000, which is lower than SBI fixed deposit but higher than ICICI.
Know the frequency of interest payment
Generally, interests are cumulatively paid on maturity of FD. But for regular income, one can change the frequency of interest payout to monthly, quarterly and yearly.
Decide on compounding interval
Generally, fixed deposits are compounded quarterly in all the banks by default. Interest rates differ when interests are compounded daily, monthly, quarterly, half-yearly and yearly.
Know the Interest Rates
- The interest rate charged on FD for specific citizens is generally higher than others. For example, SBI fixed deposit, PNB fixed deposit and ICICI fixed deposit provide an extra interest of 0.5% to the senior citizens. To be eligible for Senior Citizen, one must be 60 years or above at the time of opening a fixed deposit.
- For employees working in a bank and retired employees from the bank also enjoy the extra interest in their bank fixed deposits. For example, ICICI provides an extra interest of 1% to its employees and ex-employees on a domestic deposit of less than Rs. 1 crore.
- In some cases some citizens enjoy both the interest of senior citizens and staff and get additional interest rates than others.
Know about the different tenures of bank fixed deposits
Generally, the tenure of fixed deposits in most banks ranges from 7 days to 10 years. But some banks like the IDBI Bank and Ratnakar Bank offer a time period of 20 years. It is imperative to note that in IDBI Bank, the deposit for a tenure of 20 years allows regular payouts only and is not cumulative like in the other bank options. International banks like Citibank, Deutsche Bank, on the other hand, offer tenure of 5 years only.
Decide What to do After your FD Matures
After you open your bank fixed deposit account, you need to decide what to do with the money after it matures. If you do not give any instructions in the beginning, the fixed deposit is renewed by default. However, if you decide to do something else with the money, you can choose one of three options:
- You can choose to credit both the principal and interest in your interest.
- You can choose to credit the interest and reinvest the principal in your FD.
- Or you can re-invest both the principal and interest.
Know the benefit of partial withdrawal
An important characteristic of fixed deposits is that some banks provide the feature of partial withdrawals. In times of need, an individual with a fixed deposit of 10 lakhs may opt for a partial withdrawal of Rs. 1 lakh. The bank would keep Rs. 9 lakhs with the original terms and conditions and would break only Rs. 1 lakh. Banks like ICICI provide partial withdrawals in units of 1000 rupees.
Choose your nominee
Bank fixed deposits allow you to choose nominees, which allows you to choose different nominees for different fixed deposits.
You can take loans against FD
Getting loans against FD is possible in the form of overdraft facilities. The interest rates of such loans are 2%-3% higher than the FD interest rate.
Know about the taxes on fixed deposits
For filing income tax returns, income from fixed deposits is counted under “Income from other sources”. Interest income is taxed according to the income tax applicable to different individuals. If the FD is shared jointly, the tax liability lies with the first holder.
Know about tax saving FD
Under section 80C, there is a special category of fixed deposit which specialises in tax saving scheme. However, in this FD, one cannot break the deposit before maturing or take loans.
Beware of losing money in FD
DICGC (Deposit Insurance and Credit Guarantee Corporation) ensures that the fixed deposits in banks are insured. The insurance is limited to Rs. 1 lakh per bank account holder. Through this insurance, you will get only 1 lakh rupees. So, it is wise to invest in government banks and other big banks that are unlikely to shut down and keep your money safe.
Fixed Deposits are one of the safest investment options. You can rest assured of the returns. However, compare all FDs available before selecting one.
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