by Vinaya HS on January 29, 2010
in Finance
This is a guest post from Shilpa at Under the Rainbow. Though Shilpa claims that “she knows zilch about financial planning,” her posts always prove the opposite. In this post she explains why you really ought to be careful when you act as a reference for someone else’s financial dealings.
I learned this lesson the hard way. A colleague of mine wanted a personal loan and asked me if he could use my name and number as a reference. Having known him for a long time, I agreed. A few months later he quit the company, quit the city, and changed his mobile number. We lost contact.
And then started a slew of calls from the bank wanting to know his whereabouts. Since I had no idea, I said so but the calls didn’t stop. Even now, after more than two years, I get these calls when I am in the middle of a meeting, driving, or trying to put my baby to sleep. Each time a different person calls and I have to explain the situation all over again.
No amount of mails, scraps, and pokes have yielded any response from this colleague. I do not want to change my mobile number because of someone else’s wrong doing. Sigh! I guess I’ll just have to answer these calls until the bank marks this colleague as a defaulter and forgets him.
In this day and age, you really need to be careful about who you act as a reference for.
Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.
by Vinaya HS on January 5, 2010
in Finance
That depends on where you are right now into the tenure of your loan, but the general answer is “as early as possible into the tenure of the loan.”
EMIs for personal loans — or any loan in general — are structured such that the interest component of the EMI forms a significant portion of the EMI early into the tenure of the loan. For example: in the first EMI for a personal loan of INR 300,000 at 18% over 36-months, the interest component constitutes nearly 41.50% of the EMI amount! At the end of 12- and 24-months, the figures are 31% and 17.60% respectively.
For this loan, at the end of 12-months, you’ve already paid 52.40% of the total interest payable (if the loan were to be serviced over its full tenure). Since there’s a significant amount of the interest yet to be paid, it would make financial sense to pre-close the loan at this point (even after including the pre-closure penalty).
However, at the end of 24-months, you’ve already paid 86.90% of the total interest payable. It would therefore make little sense to close the loan at this point — you have no significant financial advantage in doing so.
Look at these factors when you’re thinking of pre-closing your personal loan and decide appropriately. You might find this Personal Loan EMI Calculator handy.
Tip Tuesdays is my initiative to share practical personal finance tips — every Tuesday. I’d be delighted if you could share a tip or two from your own experiences. Drop a comment to submit your tip. And, as always, do spread the word if you find this useful.
by Vinaya HS on June 30, 2008
in Finance
- Download my Personal Loan EMI Calculator Excel workbook.
- This workbook has six sheets, one each for a loan duration ranging from one year to six years.
- Select the sheet corresponding to the loan duration you’re thinking of. For example: select the sheet labeled “3 Years” if you’re looking for a personal loan that you want to repay in 3 years’ time.
- You will now find two cells highlighted in yellow — one for the loan amount and the other for the interest rate. You need to provide your inputs in these two cells. Note that changing the data in one sheet will not affect the other sheets.
- The workbook automatically computes your Personal Loan Amortization Schedule.
- You can now Save/Print this sheet for your reference.
Let me know if you’re facing any difficulty. Drop a comment if you find this calculator useful.
by Vinaya HS on November 23, 2007
in Finance
All that is required is a bit of diligence from your side. Follow these simple steps and you are good to go.
Step 1
-
Ensure that you have received all the canceled post-dated checks that you had issued — as guarantee — to the bank/finance company when you took the personal loan.
Step 2
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Ensure that you have received the No Objection Certificate (NOC) stating that there are no dues pending on this loan account.
Step 3
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Store the above documents somewhere safe. A photocopy kept a different location wouldn’t hurt. I’m not being paranoid here — just that I don’t trust our modern-day banks to have their records straight.
That is all you need to do.
Related Post(s):
by Vinaya HS on August 27, 2007
in Finance
In a recent notification, the Reserve Bank of India (RBI) has noted that
It is understood that some banks are furnishing a copy of the loan agreement only on request made by the borrowers. In this connection, we advise that not furnishing a copy of the loan agreement or enclosures quoted in the loan agreement is an unfair practice and this could lead to disputes between the bank and the borrower with regard to the terms and conditions on which the loan is granted.
The RBI has therefore directed all Scheduled Commercial Banks and Financial Institutions to
…invariably furnish a copy of the loan agreement along with a copy each of all enclosures quoted in the loan agreement to all the borrowers at the time of sanction / disbursement of loans.
While the RBI does a decent job of posting such notifications on its website, it’s certainly not the most effective way to reach the intended recipients – the people who take the loans. After all, how many among you take time off every week to read up on the RBI’s website?
Maybe it’s time the RBI started a consumer-education initiative; a weekly front-page column in a few leading newspapers should be a good start. What do you think?
Previous issues of Know Your Rights:
by Vinaya HS on April 6, 2007
in Finance
Public Service Announcement
From a recent RBI circular:
Guidelines on Fair Practices Code for Lenders
Earlier, Banks/FIs were advised that loan application forms in respect of priority sector advances up to Rs. 2.00 lakhs should be comprehensive and should include information about the fees/charges, if any, payable for processing, the amount of such fees refundable in the case of non-acceptance of application, pre-payment options and any other matter which affects the interest of the borrower, so that a meaningful comparison with that of other banks can be made and informed decision can be taken by the borrower.
The RBI now says:
With a view to achieving greater transparency and in the light of experience gained, it has been decided that the above instructions will be applicable to all loan applications in respect of all categories of loans irrespective of the amount of loan sought by the borrower.
Banks/FIs were so far advised that in the case of small borrowers seeking loans up to Rs. 2.00 lakhs the lenders should convey in writing, within stipulated time, the main reason/reasons which, in the opinion of the Bank/FI have led to rejection of the loan applications.
The RBI has amended that to:
On a review, it has been decided that in case of all categories of loans irrespective of any threshold limits, including credit card applications, Banks/FIs should convey in writing the main reason(s) which, in the opinion of the Bank/FI have led to rejection of the loan applications.
Necessary modifications in the Fair Practices Code based on the above instructions, with the approval of the Board, should be carried out by April 30, 2007. The modified Fair Practices Code should be placed on the Bank’s/FI’s website and also given wide publicity.
