Home Loan Interest Rates December 2019

Introduction

In this article you will find the Interest Rates on Home Loan of Major Banks in India. These interest rates are as on last updated by the respective websites.

Interest Rates on Home Loans of Major Banks (December 2019)

• Home loan can be used for purchasing a new house, construction of house on a plot, home improvement, extension and renovation of your existing house.
• These rates can vary depending upon the value of the property and your repayment capacity. Higher the loan amount, higher will be the rate of interest.
• You can choose the bank which provides lowest interest rates and also which you think has good reputation, great service and easy accessibility.

Given below are the interest rates for home loans offered by major banks for December 2019 :

Note:-

• The above details are as specified by the banks on their website.
• Some banks have only mentioned a range of the interest rate offered by them. For a more detailed specification will have to contact the bank.
• The above way of presentation of interest rates is not common to all the banks. It has been standardized for a neat presentation of interest rates. Some banks may have presented the information differently.

Summary

• Punjab National Bank and State Bank of India has lowered its interest rates for home loans up to Rs.30 lakh.
• Canara Bank , Union Bank of India, Oriental Bank of Commerce and Indian Overseas Bank also offer comparatively lower interest rates on home loans provided by them.
• The above list of interest rates on home loans of major banks can help you decide which bank to choose. You can choose the bank which provides lowest interest rates and also which you think has good reputation, great service and easy accessibility.

5 Borrowing Lessons For Financial Well-being

Introduction

In this article, we will discuss 5 borrowing lessons (lessons while taking loans) for financial well-being. These borrowing rules will help you to ensure your financial freedom and your long-term financial health.

Important Borrowing Lessons For Financial Well-being – To Ensure Your Financial Freedom

• It is true that loans are helpful in meeting your key financial goals in all stages of life. These crucial goals might be financing for :
  1. Need-based goals like your dream home, building up the capital for your business, children’s education, children’s marriages
  2. Want-based goals like world travel, buying second house
  3. Luxurious Lifestyle goals like buying big car
  4. Emergencies if any
• Thus, loans allow you to make crucial decisions and help you meet your financial goals without waiting to accumulate the required money for the above mentioned things.
• Lets discuss key borrowing lessons in detail to ensure your long-term financial health.

1. Opt for loan tenure wisely

• While calculating your monthly EMI figure, loan tenure plays a major role. Opting for lower loan tenure means higher EMI, which also leads to lower interest cost.
• On the other hand, when one opt for higher tenure in order to reduce the monthly EMI need to be paid, he/she actually increases the interest cost of loan on account of higher loan tenure. And here power of compounding of will hurt your investments in the long-term.
• Thus, one should ideally decide loan tenure on the basis of repayment capacity and contribution required for other financial goals. Opt for a shorter tenure if you can comfortably repay your EMIs by the due date without sacrificing your contribution towards other financial goals.

2. Compare Loan offers of banks or lenders

• Before you opt for any bank or lender, it is very important to conduct a thorough research. You should compare lenders based on different parameters to avail the best deal.
• One shouldn’t take the decision only on the basis of competitive interest rates on loans offered by banks.
• Several factors other than interest rates, such as prepayment charges, processing fee etc. would also determine your overall cost of the loan.

3. Don’t make inquiries at multiple lenders

• Whenever you make a loan or credit card enquiry, lenders fetch your credit report to evaluate your creditworthiness.
• Such lender-initiated requests are treated as hard enquiries for which credit bureaus reduce your CIBIL credit score by a few points.
• Hence, initiating multiple enquiries within a short time span will lead to faster reduction of your credit score.

4. Monitor guaranteed or co-signed loan account

• Guaranteeing or Co-signing loan account makes you equally accountable for its timely repayments. Any defaults or negligence in such loan accounts will equally affect the credit score of the co-signor or guarantor.
• Hence, you should not co-sign or guarantee loans unless you are sure of the repayment capacity and creditworthiness of the primary borrower. Once, you co-sign or become a guarantor of a loan, observe it carefully to ensure timely repayments.

5. Don’t miss EMI payments

• Any delays or defaults in making loan or credit card repayment :
  • Attract fines and penal interest rates
  • Impact your credit score adversely
• Your repayment track record is widely believed to receive the maximum weightage of all the other factors considered by the credit bureaus in calculating your credit score.
• Thus, any delay or default in making loan or credit card repayment is reported by the lenders to the bureaus, which then reduce your credit score accordingly.

Disadvantages of Compounding on Your Personal Finances

Introduction

Power of compounding can hurt your investments and may work against your personal finances. We know very well the benefits of power of compounding for your investments. However, the compounding can also have negative consequences for your finances.

How Power of Compounding Can Hurt Your Investments?

Here we are going to discuss three scenarios in which compounding can work against you and can become your biggest enemy as far as your personal finances are concerned.

1. Interest on Loan & Credit Card

Loan

• In case of loans, the interest on the principal amount is charged by compounding it frequently over a particular period. Basically, compounding works when you earn the further interest income on the interest income reinvested earlier.
• In case of Investments, you keep the interest income reinvested to earn more interest income on it and make work the power of compounding in favour of you.
• However, when you have to pay interest on a loan or other credit facility, then compounding will work against you.
• If you look for the loan with longer tenure to reduce the EMI (Equated Monthly Installment), it is going to translate into higher compounding effect. Since you will be paying more as interest over the longer tenure.

Credit Card

When you use credit card and don’t pay off the entire amount by the initial due date, you are setting yourself up to pay compound interest. Here’s a very simple example showing how it works :

• You can see how adding the interest back to the balance and then charging interest on that new balance can add up quickly. The above case is oversimplified for the sake of understanding.
• You can get one thing clear that if you do not pay your dues on time, the interest that is due and unpaid will add up to the principal outstanding, And it also become eligible for interest payment, thereby increasing the outstanding amount exponentially.
• In this example, no payments are made, so the remaining balance continues to rise. In the practical scenario, you would make payments so the balance would decrease.
• It is important that one should know and make sure what the lender is charging and over what period. 

Common Thought Process of People While Looking for a Loan

• Most people are aware of the cost of carrying unpaid balances on credit card and the burgeoning interest cost.
• However, in case of EMIs, people will still look for the lower EMI with longer tenure. They don’t think about the extra interest they will have to pay over the longer tenure of the loan.
• Thus the impact of compounding goes up depending upon the frequency at which the interest rate compounds.

2. Effect of Inflation

• Inflation is also an important parameter which damages your final investment corpus. The value of money reduces each year than the previous year by the rate of inflation.
• Thus, with each passing year, the purchasing power of the same money reduces in line with the inflation. For Example, 7% inflation means that you have to pay 175% more for the same expense in 15 years.
• Therefore, Inflation is the most critical parameter while investing for the long-term financial goals like Retirement planning, Children Education, Children Marriage etc.

3. Cost of Investments

• we can come across the negative side of compounding when you pay high costs, fees and taxes on your investments.
• By deducting these costs, fees periodically from your investment amount reduces sum of money that is actually invested and available to compound and grow over time.
• Over a longer investment horizon, the opportunity cost can have a significant impact on the final corpus. For example, a 2% annual cost paid over a 15-year period can reduce the final corpus by as much as 12%.
• Investments where tax is deferred to when it matures is more beneficial. It is because the returns are available to earn returns and compound till maturity. Investments such as bank deposits like fixed deposit, Recurring Deposit. where tax is deducted periodically, reduces the return that is available for compounding.

How to Make Compounding Your Friend?

• Time is the biggest parameter which determines the negative consequences the compounding can have on your finances.
• The longer the tenure for which you take a loan or don’t repay it, the greater will be the impact. So to reduce the impact of compounding, one should :
  1. Take a loan of shorter tenor
  2. Repay the loan on time
  3. Consider prepayment of loan
• Invest in a way that your money earns more than the rate of inflation so that the real rate of return is higher.
• Invest in products where the costs and fees are low and taxes are applicable at the time of redemption.

Conclusion

• Compound interest is great when it works in your favor in investments, but it can also be your biggest enemy when it works against you in loans and other debts.
• The key is to figure out how you can let it work in your favor. If you stay on top of your loan payments and always keep an eye on your investments, then compound interest can be your best friend when it comes to wealth.
• Having control of your personal finances makes it easier to navigate the road as you look towards the future.

Stock Portfolio Based on Children Consumption Theme

Introduction

In this article, we are going to discuss 5 Stocks for Your Kids on Children’s Day Special. You can use a Stock portfolio based on children consumption theme to build your children’s portfolio to meet their long-term financial goals.

5 Stocks for Your Kids on Children’s Day Special

• As we all know Children’s Day is celebrated on 14th November in India. So, on the occasion of Children’s Day, we are trying to construct a stock portfolio according to the Children consumption theme.
• We always suggest you to invest in consumption driven companies or businesses. It is because you use these products over the many years and this consumption theme is going to continue for many years in the future also in your routine life.
• We are applying the same logic in the children products also. What are the products used by children, which businesses are listed is all that we are going to discuss in this article.
• Can we build such kind of portfolio for the children containing these children products stocks? It can be used meet the long-term financial goals of your children such as graduation, post graduation and marriage etc. You should always approach your financial advisor before taking any investment related decisions.
• If you have not yet done children education planning, you can create a basic financial plan on our website. It is absolutely free.

Let see which are these 5 stocks for your kids.

1. Kokuyo Camlin Ltd

• Kokuyo Camlin Ltd is engaged in manufactures and trades in scholastic products, writing instruments, notebooks, marker pens, inks, fine-art colours and accessories, hobby colours, pencils and other stationery products.
• In May 2011, Kokuyo Company Limited of a Japanese business house Kokuyo group acquired a controlling stake in Camlin Limited. And thus the name of the company has now been changed to Kokuyo Camlin Limited.
• A strong brand has been already created by Camlin with a kind of monopoly in inks, fine-art colours and accessories, pencils and the other stationary products. It is having more than 50% market share in the stationary products used by Children.
• Market Capitalization = Rs.720 Cr, Small cap company. However, the business is steady growth driven and is going to have a stable earnings.
• With a kind of promotions to the children from their parents for art oriented career options nowadays, such businesses are going to have great days ahead.

2. Nestle India Ltd

• Nestle India Ltd is an India-based company engaged in food business. It is one the biggest players in FMCG segment which has a presence in milk & nutrition, beverages, prepared dishes & cooking aids & chocolate & confectionery segments.
• Nestle has created brands like Nestlé Milkmaid, Nestlé Everyday, Maggi Noodles, Maggi Soups, Polo, Kit Kat, Nescafe & many more.
• As per the market-wise position Nestlé stands first in instant noodles & ketchups, second in healthy soups, No.1 in instant coffee, & No.2 in overall chocolate category.
• Market Capitalization = Rs.1.37 Lakh Cr, Large cap company.
• With the increase in the disposable income, the instant premium consumption food consumption theme is going to build ahead. So, the company is getting a good earnings growth visibility in future.

3. P&G

• Procter & Gamble Hygiene and Health Care is engaged in the manufacturing and selling of branded packaged fast moving consumer goods in the femcare and healthcare businesses.
• Pampers and Vicks are the two key products of P&G with respect to the kids. Both the brands are having a great penetration and market share.
• Superior product propositions and technological innovations have enabled P&G to achieve market leadership in a majority of categories it is present in.
• Market Capitalization = Rs.35,645 Cr. The positive impact of corporate tax rate cut is supporting to enhance the profitability of the company.

4. MRF – Funskool & Sports

• Funskool is India’s leading toy manufacturing company promoted by the MRF group. It has been pioneering the concepts of quality and safety in toys and has been instrumental in raising the quality standards of toys in the Indian Market.
• The Funskool consistently create toys that become the firm favorites of children across the world by understanding the changing needs of children over the years.
• The Indian toys industry will continue to see revolutionary changes. So Funskool will continue to be in the forefront of this dynamic environment, offering the best learning and entertainment options to children in this world.
• Market Capitalization = Rs.27,000 Cr, Mid cap stock. Along with the more than 505 market share in Tyre business, the company is trying to develop a cash flow granual with Funskool brand.

5. ITC Ltd

• ITC has a diversified presence in FMCG, Hotels, Packaging, Paperboards & Specialty Papers and Agri-Business. But as concerned with the children products, it is expanding its business in stationary and paperboards.
• It has built a premium brand of notebooks – Classmate. An exquisite range of finely crafted professional stationery – Paperkraft.
• ITC’s paperboards’ technology, productivity, quality and manufacturing processes are comparable to the best in the world, under the brand
• Market Capitalization = Rs.3.12 Lakh Cr, Large cap stock.

RD Interest Rates of Top Banks November 2019

Introduction

In this article you will find the Recurring Deposit (RD) Interest Rates of major banks in India. These interest rates are as on last updated by the respective websites.

Recurring Deposit

What is Recurring Deposit (RD)?

• A Recurring Deposit, commonly known as RD, is a unique term-deposit that is offered by Indian Banks. It is an investment tool which allows people to make regular deposits and earn decent returns on the investment. 
• Due to the regular deposit factor and an interest component, it often provides flexibility and ease of investments to users/individuals.
• However, it is essential to know that RDs are different from Fixed Deposits/FDs . RDs are flexible in most aspects. An RD account holder can choose to invest a fixed amount each month while earning decent interest on the amount. RDs are an ideal saving-cum-investment instrument.
• Most major banks in India offer Recurring Deposit Accounts, with a term that often ranges between 6 months  to 10 years, also providing individuals with the opportunity to choose a term according to their needs. However, the interest rate, once determined, does not change during the tenure.
• On maturity, the individual will be paid a lumpsum amount which includes the regular investments as well as the interest earned.

Below are the Recurring Deposit (RD) Interest Rates offered by major banks for various durations :

Recurring Deposit Interest Rates for tenure up to 2 years

Recurring Deposit Interest Rates for tenure from 2 years up to 10 years

Notes :

1. Citibank provides RD’s with minimum tenure of 1 year and maximum tenure of 2 years.
2. All the banks mentioned above offer 0.50% extra interest rates for senior citizens.
3. Only Bandhan Bank offers 0.75% extra interest rates for senior citizens. And Axis Bank provides variable higher interest rates for senior citizens.

Summary

• IndusInd Bank, Yes Bank, IDFC First Bank and Bandhan Bank provide the highest interest rates 7.25% on RD’s for 1 year tenure (12 months).
• Yes Bank  provides the highest interest of 7.50% for the tenure of 24 months.
• HDFC Bank, Kotak Mahindra Bank, IndusInd Bank, Yes Bank, DBS Bank and IDFC First Bank provide higher and competitive interest rates on RDs.