Loan Services
Loan Services
Loan consultancy involves providing guidance and assistance to individuals or businesses seeking financial loans. These consultants are experts in the field of finance and work to match borrowers with suitable lenders based on their specific needs and financial situations.
Loan consultants often analyze the financial standing of their clients, assess their creditworthiness, and provide personalized recommendations to improve their chances of securing a loan.
They help clients navigate the complex world of loans, offering advice on the types of loans available, interest rates, repayment terms, and eligibility criteria.
In addition to connecting borrowers with lenders, loan consultants may also assist with the application process, helping clients prepare necessary documents and ensuring they meet all requirements. Ultimately, their goal is to simplify the loan process and increase the likelihood of clients obtaining the financial support they need.
- Creditworthiness
- Loan Types and Terms
- Lender Relationships
- Market Conditions
Loan consultancy is a collaborative effort between financial experts and those in need of financial assistance. It streamlines the loan acquisition process, providing a bridge between borrowers and lenders while empowering clients to make sound financial decisions.
Make your dream home a reality with our leading home loan services. Paisa Nivaran has tied knots with an array of banks providing nimble and hassle-free mortgage loans. Unlock home credit loans with a host of benefits, like low housing loan interest rates and smaller EMIs to space out your payments over a longer tenure.
Home Loan Features and Benefits
Home loan offers numerous benefits to the borrower including lower interest rates, tax benefits, flexible repayment time frame and much more.
1) Attractive Interest Rates
Home loans are accessible at lower interest rates than other types of loans. Obtaining a home loan is better than going for any other loan type to purchase your dream property. Housing loans are offered at cheap interest rates since the lenders do not want to deal with missed EMIs and unpaid dues.
2) Due Diligence Of the Real Estate Property
The finest aspect about housing finance is that the bank will carry it out if you missed out to determine the property’s validity. Furthermore, while evaluating the house loan documentation, bank employees conduct legal checks to verify that the borrower is not defrauded. Due diligence evaluates areas where the bank approves the transaction and alerts you if your property purchase is risky in any aspect.
3) Tax Benefits With Housing Loan
People who have mortgages are eligible for income tax benefits. The deduction of income tax is a fantastic benefit of getting a property loan. It is available for the interest paid on a yearly basis. The amount of interest paid is subtracted from the income tax that must be paid.
4) Flexible Home Loan Repayment Period
Another feature that distinguishes a home loan from other types of loans is the payback period. You can request longer payback terms whenever it is most convenient for you. One can stretch the loan repayment tenure up to 25 to 30 years. The monthly instalments decrease as the repayment period lengthens, easing the EMI burden on the borrower.
5) Availability of Home Loan Balance Transfer
A housing loan allows you to transfer the remaining loan balance from one lender to another. There could be a variety of reasons for this, including interest rates, service fees, an unpleasant customer experience, among others.
6) Capital Growth
As per real estate data, the cost of properties has been constantly rising over the last decade. According to analysts, the capital appreciation of the real estate properties is significantly greater as compared to the paid interest amount. It therefore serves as a lucrative opportunity for property owners as now they can sell them for a higher profit.
Home Loan Tax Benefits
The repayment of a home loan consists of two parts: repayment of the principal amount and the interest rate. When filing income tax returns, these parts are claimed as a home loan interest deduction or a tax deduction.
Section 80 EEA allows you to claim tax benefits for the interest component paid on a house loan. This part offers house loan borrowers tax incentives of up to INR 1.5 lakhs on the interest rate they must pay.
| Particulars | Quantum Of Amount Deduction |
| Under Section 24 |
a. For self-occupied property: Rs. 2,00,000 b. For non-self occupied property: No set limit |
| Under Section 80 C |
a. For self-occupied property: Rs. 1.5 Lakhs b. For non-self-occupied property: Rs. 1.5 Lakhs |
| Under Section 80 EEA |
a. For self-occupied property: Rs. 1.5 Lakhs b. For non-self-occupied property: Rs. 1.5 Lakhs |
Reasons of Home Loan Rejection
Some of the home loan rejection reasons are given below:
- Unpaid dues and other ongoing debts
- Applicant’s address present on the defaulter’s list
- Applicant’s age does not come within the eligible age range
- Credit score below 600
- Multiple rejected loan applications
- Frequent job change
- Faulty repayment of ongoing debts
- Absence of required documents
How to Close Existing Home Loan?
A home loan can be closed either on the completion of the repayment tenure when you have successfully paid the entire loan amount or via foreclosure.
If your repayment tenure is completed, you just need to visit the lender and fill out the required form for loan closure. Once you are done, the lender will provide you with the loan closure certificate and your property documents that were kept as mortgages at the time of loan approval.
If you have decided to repay the loan amount before completion of loan tenure, i.e. loan foreclosure, you will have to pay associated foreclosure charges.
Once you pay the outstanding amount and the foreclosure, your debts will be cleared. The bank will process your foreclosure application and provide you with a loan closure certificate.
Home Loan: Service Charges And Fees
Following fees and charges are associated with home loans throughout the loan tenure:
| Processing Fees | It is a one-time charge that the borrower is liable to pay to the bank or finance provider. Processing fee is charged for recovering the expenses incurred to process the home loan. It is non-refundable and is paid in advance. |
| Application Fees | It is also termed as administrative fee or login fee. The administrative fee is non-refundable and is charged before applying for a home loan. It is charged prior to loan approval. It can range from Rs. 2,500 to Rs. 6,500. In case of loan approval, the applicant will have to pay the applicable processing fee which will be computed after deducting this amount. |
| Prepayment or Foreclosure Charges | Lenders also term it as Pre Closure Charge or home loan closure charges. Home loan prepayment charges are applicable when a borrower decides to pay the loan amount in one go prior to the end of their tenure. Many banks and financial institutions don’t charge foreclosure fees specifically for floating-rate loans. It can range from 2 to 6 percent of the remaining loan amount. |
| Partial Prepayment Charges | Banks usually impose this charge when the borrower pays off a specific part of the outstanding balance amount. Afresh, floating interest rate home loans are exempted from this charge. If applicable, the part-payment charge varies from 0.5 to 2% of the outstanding loan amount. |
| Conversion Charges | Also known as Switching Fee, conversion charges are applicable when the borrower converts the floating-rate loan to a fixed-rate loan or vice versa. |
| Repayment Mode Swap Charges | This charge is imposed when you opt for a changed repayment method and dates. The charged amount for every request is Rs. 500. |
| Max Tenure of Any Home Loan | All major lenders offer house loans with a maximum repayment tenure of 30 years. The longer the repayment tenure, the lower the monthly instalments, which makes a loan tenure of 25 to 30 years quite appealing. |
| Maximum / Minimum Loan Amount From Bank | The maximum and minimum home loan amount that banks offer depends upon the property costs as per current market trends. At maximum you can get 85% of the property cost as loan amount based on property location, and your credibility. At minimum, you can loan 75% of the property price. |
Types of Home Loan
A housing loan isn’t simply for the purchase of a house. There are several types of home loans, and each has different interest rates.
1) Home Construction Loan
Many prefer to build their own homes rather than buying one. In such cases, the loan amount is determined by the overall building cost, the property’s age and any additional charges. Another benefit is that the entire loan amount can be accepted all at once or in instalments as needed. The rate of interest is determined by the loan amount and typically ranges from 6.85 to 9.50 percent.
2) Home Loan
The bank will lend the borrower up to 85 percent of the house’s cost at an interest rate ranging between 9.85 to 11.25 percent. This form of home loan is available from almost all banks that offer loans.
3) Land Purchase Loan
This is an option that banks and NBFCs offer to borrowers. The bank will lend up to 85 percent of the land’s value, with an interest rate ranging from 6.75 to 12.09 percent, depending on the area and credit score. Land is a good investment since a home can be built later after saving money. Additionally, land purchase loans are available at lower interest rates compared to other loan products.
4) Home Improvement Loan
A home renovation loan can be used to remodel your property. It can be used for a variety of purposes, including repairing flaws, painting, updating home interiors, waterproofing and much more.
Required Home Loan Documents
To avail of a home loan with utmost ease, you need to prepare the below depicted documents:
Documents for Identity Proof
| PAN and Aadhar Card | Applicant’s Passport |
| Voter ID Card | Driving Licence |
Documents for Address Proof
| Utility bills (electricity or telephone bill) | Salary slips of last 6 months and Form 16 |
| Identity proof that contain address, like Aadhaar Card | Bank account statements |
| Income proof and employment proof |
Other Documents
| Passport-size photographs of the applicant | For self-employed, business continuity proof will be required (5 years) |
Owning a car was once a luxurious commodity to have. But in today’s economically developing world, a car is a necessity and convenience to travel from one corner of the ever-expanding city to the other.
Though everybody may not have enough cash to purchase the car with a lump-sum payment, numerous lenders can help you realise your dream of buying the car through a car loan.
Applying for a car loan is now hassle-free, easy, and paperless. Just make a few clicks, and you can submit the car loan application form online. Almost every bank today offers car loans at attractive interest rates. Based on one’s affordability, it is now quite easy to take a car loan and then pay EMIs without really biting into a person’s finances.
Features and Benefits of Car Loan
- Get financing for purchasing new and used cars.
- The financing can go up to 85%-90% of the on-road price of the car. Some banks offer up to 100% financing on the vehicle’s on-road price to certain conditions.
- The loan tenure can range from one year up to seven years.
- The loan amount can be up to three times the annual income of the applicant.
- Some lenders offer instant financing facilities for cars.
- You may get additional discounts and offers if you choose to purchase a car from the dealer or manufacturer the bank has a tie-up with.
- The car purchased through financing will be held as collateral until the loan is repaid.
- The repayment structure most commonly followed for a car loan is equated monthly instalments (EMI).
Factors Affecting Car Loan
- Credit score
Your lender will enquire about your credit score to understand your creditworthiness. Based on your report and score, the lender will take a call on the loan amount they are willing to lend you and the associated terms and conditions. - Debt-to-income ratio
Lenders assess your income and the commitments you have to cater to at the end of the month to see if the new car loan and its EMIs fit in your budget. The lender will determine your ability to take a new loan and stand by it through the debt-to-income (DTI) ratio. If you have a high DTI score, you will get a lower loan amount irrespective of your income. There is the risk of your loan terms being stringent. - Down payment
Every car loan comes with a defined . Margin, here, means the amount of money or the percentage of the on-road car price that you will have to pay from your pocket. Though there are 100% financing loan schemes available in the market, they are subject to conditions.
It is always favourable for you to save some money and use it as a downpayment so you can borrow less and pay less interest to the bank, reducing the total cost of car ownership. Lenders also prefer that you make a certain downpayment from your end. This gives the lenders a sense of guarantee that you are good at planning and managing your money well and will not bail out of the repayments suddenly. - Age of vehicle
In the case of used car loans, the age of the vehicle matters a lot in deciding the interest rate; it is a deciding factor in accepting or rejecting the loan application.
Eligibility Criteria
Certain eligibility conditions should be met to go for a car loan, and one must make sure they have a proper understanding of that. Let’s see what these factors that will decide if you are eligible to buy a car are:
| Details | Salaried | Self-employed |
| Age | 21 – 60 years | 18 – 65 years |
| Annual income | Rs 25,000 | Minimum turnover of Rs 40 lakh |
| Credit Score | 700 | 700 |
| Loan Tenure | Up to 7 years | Up to 7 years |
| Loan to Value Ratio | Up to 100% | Up to 100% |
Documents Required
- Photo ID and Age Proof
- PAN card
- Passport
- Driving license (mandatory)
- Signed application form
- Three passport size photographs
- Residence Proof
- Valid passport
- Voter ID card
- Driving license
- Postpaid utility bill (gas bill and electricity bill)
- Updated passbook or bank account statement
- Notarised registered rent agreement
- Bank statement for the last six months
- Salaried individual
- Last three months’ salary slips
- Form 16 or Income Tax Returns
- Self-employed individual
- Balance sheet and profit and loss account, computation of income for last two years.
- Income Tax Returns – last two years for applicants, 26AS, Traces
- Business proof :
- Gomasta License, Registration Certificate, Service Tax Registration, among others
- IT Assessment/Clearance Certificate
- Income Tax Challans/TDS Certificate (Form 16A)/Form 26 AS for income declared in ITR.
Offering premium lending solutions, Pasia Nivaran assists diverse clients via comprehensive business loan services. Bridging the gap between lenders and loan providers, we ensure lightning-fast processing of business loans with minimal documentation and maximum efficacy.
Business Loan Features and Benefits
Business loans come with numerous benefits and features to help borrowers cope with financial obligations. The following are a few features that you unlock when you count on a business loan:
- Fast Disbursal: Generally, business professionals apply for a business loan when they need instant access to funds. One of the best parts of a business loan is that it comes with quick disbursal. You don’t have to wait for months to access funds. The amount is disbursed within 3 to 5 working days.
- Minimum Documentation: One of the foremost features of a business loan is the minimal documentation requirement. Banks and finance companies process business applications with little documentation. No hectic paperwork is required. With the online business loan application process, you get the option to submit a scanned copy of the documents, that’s all.
- Competitive Business Loan Interest Rates: Banks and financial institutions offer business loans at attractive interest rates. Debtors can get commercial loans without higher monthly repayments.
- No Prepayment Charges: Prepayment of business loans is permitted without additional fees or charges. However, this may vary from one bank to another.
- Flexible Repayment Tenure: In general, banks and financial providers offer business loans with flexible repayment tenure. You can choose your repayment tenure as per your choice. However, don’t forget that a longer repayment period results in an increased payable interest component.
- Collateral-Free Loans: The availability of unsecured business loans allows you to get collateral-free business loans. Such loans are time efficient and can be easily accessed without pledging any commercial or personal assets.
Factors Affecting Business Loan Interest Rate
Certain criteria are crucial in calculating the interest rates that apply. The following variables may affect the offered business loan interest rates:
1) Nature of Business
One of the essential aspects influencing the interest rate on your business loan is the type of business. Your business creditworthiness will decide what type of business loan you can get and at what interest rate. Your business should be involved with high-quality products and services. Additionally, the location in which you operate should not be on any blacklists.
2) CIBIL Score or Credit Score
A high CIBIL score can have a significantly positive impact on the offered interest rate. The lender will provide you with the lowest interest rate loan if your CIBIL score is high. On the flip side, they may charge you a higher interest rate or possibly reject your mortgage collateral if your CIBIL score is low.
3) Business Experience
The experience of the organisation is vital because a well-established enterprise is considered secure and risk-free. If you’ve been in business for a while, creditors may be willing to provide you with a business loan at a reduced interest rate to help you expand.
4) Repayment History
Another important aspect that determines business loan interest rates is your repayment history. If you consistently make your payments on time, you’ll have a better chance of getting a business loan with a reduced interest rate.
Business Loan Interest Rate
The business loan interest rate is determined by a number of factors, including the borrower’s financial profile, the purpose of the loan, collateral, the credit score or credit rating, and much more.
The following factors affect the business loan evaluation process:
- The financial feasibility of the business model.
- The amount of competitiveness in the industry.
- At the industrial level, the performance of the corporate entity.
- Annual turnover and overall business growth or expansion.
- Ratio financiers.
Banks decide the interest rates at which a loan can be issued to a borrower based on all of these indicators. The applicant’s personal creditworthiness is taken into account in addition to the business’s trustworthiness. Lenders typically offer commercial lending rates ranging from 7% to 21%.
Business Loan Documents Required
The following business loan documents are mandatory to avail of a loan with utmost ease:
- Form and Photographs: Duly filled business loan application form and 2 passport size photographs.
- Proof of Identity: PAN card, passport, Voter ID card, MAPIN Card or driving licence.
- Residence Proof: Voter ID card, ration card, utility bills, including electricity bill, telephone bill, Aadhaar card or lease agreement.
- Age Proof: Voter ID card, Aadhaar card, PAN card or passport.
- Financial Documents: Income Tax Returns for the last 2 years, balance sheet audited by a certified Chartered Accountant (CA), profit and loss statement (2 years), along with a statement representing the business transaction.
- Proof of Income: Bank statement of business account as well as the personal account for the last two years.
- Proof of Business Ownership: Documents including the declaration of a sole proprietorship, a copy of the memorandum along with the articles of association will be required.
Dream vacation, emergency expenses or alternate loan repayments, Paisa Nivaran takes care of your financial health via instant personal loans. With a maximum limit of ₹50 lakhs, we ensure you get the lowest personal interest rate, starting at 8% p.a.
Features and Benefits of Personal Loans
Given below are some of the features and benefits of personal loans:
- No Security Required: Individuals do not have to provide any security or collateral for availing of a personal loan. This loan is usually approved on the basis of the applicant’s creditworthiness. This depends on the credit score, employer reputation, credit history, and repayment capacity.
- End-Use Flexibility: One of the most impressive features of a personal loan product is the flexibility in end-use. These loans can be availed to meet several expenses, such as home renovation, medical expenses, travel, etc.
- Flexible Tenures: Usually, lenders offer loan products with flexible repayment tenures ranging from 12 months to 60 months.
- Hassle-Free Documentation: Individuals can make personal loan applications online as well as offline. The documentation process is comparatively quick and hassle-free. Some of the key documents that you must submit for a successful application are identity, income and address proof documents.
- Quick Loan Disbursal: The personal loan amount can be deposited in the applicant’s bank account within just a few hours of application processing. In the case of pre-approved loan offers, the turnaround time can be even lower.
- Flexible Approved Amount: The personal loan amount approved for the applicant depends on their repayment history, age, profession, income, employer’s reputation, and other such factors. Usually, lenders offer personal loans ranging from Rs. 10,000 to Rs. 40 lakhs.
In today’s ever-changing financial environment, it is not uncommon for people to avail of a personal loan to meet their financial needs. One of the major reasons that people prefer a personal loan is that it is an unsecured line of credit for which the individual does not have to provide collateral. Anyone can obtain a personal loan from any bank or NBFC of their choice by just submitting the application and supporting documents.
Once the application is approved, the loan amount is disbursed in the applicant’s bank account in less than 48 hours. Lenders usually sanction the loan application on several criteria, like repayment capacity, employment history, credit history, income and profession. These loans are also referred to as multi-purpose loans, as they can be availed to meet any of the immediate requirements.
Factors Affecting Personal Loan Interest Rates
When you make repayments for a personal loan, you are required to pay a certain amount of interest as a part of your EMI payments. This amount depends on the interest rate you are charged for the loan. Given below are some of the factors that affect your personal loan interest rates:
Income
Your income is the basic component of what determines your personal loan interest rate. It is viewed as the universal truth that financially sound people with higher disposable income have a better repayment potential than people with lower income. Usually, people with higher and more stable incomes receive the lowest interest rates on their personal loans. On the other hand, people with bad financial histories are more likely to get higher interest rates.
Credit History
Credit scores play a crucial role in your personal loan approval. In the case of personal loans, it not only determines your eligibility but also affects the loan interest rate. Usually, credit scores are a reflection of the financial history of the individual in terms of existing debt, income, repayment history, and borrowing pattern. A higher credit score increases the lender’s trust in the borrower’s financial behaviour, even granting them loans at lower interest rates.
Employer’s Status
Since personal loans are generally unsecured lines of credit, lenders verify a number of factors that establish the borrower’s creditworthiness. Your employer or the company you are employed in plays a key role in it. This is because applicants being employed by a reputed organization are viewed as being more financially stable and capable of making timely payments. Such applicants may also get better lending terms and conditions.
Debt-to-Income Ratio
Let’s assume that the applicant is employed in a renowned organization and earns a high salary, but the majority of the applicant’s income is diverted towards debt repayment. In such cases, the volume of the existing debt is sure to have an adverse effect on the personal loan interest rates.
A debt-to-income ratio can basically be defined as the ratio of all existing debts divided by the total income. Having a high debt-to-income ratio generally means that the applicant is already under high repayment debt, and the lender may charge a higher interest rate.
Rapport With the Lender
If the applicant has been a trusted and loyal customer of the lender, they might get a preferential interest rate. This is because a long and constant relationship might inculcate a sense of inter-dependability. This trust is simply not built overnight, it requires a long period of trustworthy and responsible behaviour on the part of the customer. The better the relationship, the more the chances of getting a loan on favourable terms.
Default History
Similar to how a credit score works, if a lender finds a history of default in the applicant’s credit report, it might lead to higher interest rates or even application rejection. Usually, lenders sanction loans to the applicant’s with no defaults over the last 12 month period.
Documents Required for a Personal Loan Application
We at Urban Money are dedicated to making your loan disbursal process as easy and smooth as possible. You will need to submit a few documents to complete your loan application process. The process is not very paperwork intensive, however, the documents differ for salaried and self-employed individuals. Let’s take a look at the documents required for both these cases:
Common Documents
Given below are some of the common documents required for completing a personal loan application:
- Identity Proofs: Voter ID, Passport, Aadhaar Card, Driving License.
- PAN Card.
- Signature Proofs: PAN Card, Passport, etc.
- Address Proofs: Ration Card, Rent Agreement, Passport Copy, Aadhaar Card, Utility Bill, Voter ID Card.
- Bank account statement from last six months.
Salaried Individuals
Given below are the documents required for salaried people to complete their personal loan application:
- Salary slips from the last 3 months.
- Form 16 or ITR returns.
Self-Employed Individuals
Given below are the documents required for self-employed people to complete their personal loan application:
- P&L account and balance sheet from the previous 2 years.
- ITR from the last 2 years.
- Business Proofs, like GST Number, Registration Certificate, License.
- TDS Certificate, Income Tax Challans or Form 26 AS for declared income in ITR.
Loan Against Property (LAP) doesn’t have to be complicated. Discover your residential or commercial property’s hidden potential to fulfil your financial needs with Urban Money. Get quick approvals, attractive LAP interest rates with minimal paperwork.
Loan Against Property: Features and Benefits
Following are the key features and benefits of a loan against property:
- A loan of up to 70% of the property’s market value is offered.
- Flexible repayment terms make the loan against property rates competitive.
- Facilitates easy repayments through small monthly instalments.
- Quick processing, usually 3 to 4 days with minimal documentation.
- The applicant’s age must be between 21 years to 65 years old.
- Flexible repayment tenure up to 20 years.
- Is available on plots, residential property and commercial property.
- Lower interest rates, starting from 11 percent.
- A loan amount of INR 5 lacs to INR 7.5 crores can be offered based on the property’s market value.
- No additional collateral is required.
- Availability of balance transfer on the existing loan.
- Minimal prepayment penalties may vary from one bank to another.
Loan Against Property Overview
A Loan Against Property (LAP) empowers you to use the funds tied with the property to satisfy any expenses you may have. While the LAP amount offered on the property is determined by its valuation, you have complete discretion over how you spend the funds. Your property serves as collateral for the loan, but you can use it as usual.
In short, LAP is a secured loan provided by banks and financial institutions in exchange for a property pledged as security. The pledged asset can be the applicant’s land, house or commercial property. The property stays as collateral with the credit provider unless the borrower repays the debt amount.
However, the sanctioned funds are relatively higher, as the borrower can acquire a loan against property for up to 70 percent of the property costs. The loan against property interest rates are also lower than other loans, and its repayment terms are flexible.
Factors Affecting Loan Against Property Eligibility Criteria
Below are depicted the factors that affect the loan against property eligibility:
1) Credit History
Credit history is one of the most vital factors to evaluate a Loan Against Property application. The credit score of the borrower represents the repayment capabilities and credibility. A credit score reflects whether or not a borrower will be able to repay their loan on time. As a result, maintaining a strong credit history is essential.
2) Incomplete Property Documents
You must pay close attention to the documentation pertaining to the mortgaged property. Before applying for a Loan Against Property, ensure all of your documentation is in order. Documents such as title deeds, building blueprints, appropriate authority permissions, and property registration should be readily available. Keeping the documents required for a loan against property ready escalates the loan procedure and increases the approval chances.
3) Loan Tenure
A longer loan term allows you to get a loan faster and pay lesser EMIs. If you have a low income, you can always choose lengthier terms because these loans have a shorter term than a traditional home loan. You can count on a loan against property calculator to determine the repayment tenure that best suits you.
4) Borrower’s Age
The age of the borrower is crucial in establishing the debtor’s ability to repay the debt. The loan must be repaid before the borrower reaches the age of 65. If the debtor has already reached the mid-60s, there are chances of loan application denial. In this case, you may choose to look for loans with a shorter term, which will result in higher EMIs.
5) Regular Income Flow
One of the most important considerations is that the application must have a continuous and constant source of income, ensuring that the borrower has the financial means to repay the loan EMIs.
6) Property Insurance
Mortgage insurance takes care of the loan repayment, alleviating the financial strain on your family. It also reduces the borrower’s risk in the event of unforeseen occurrences. As a result, it’s always a good idea to get mortgage insurance to protect your financial interests.
Interest Rates and Other Charges
The loan amount and the repayment tenure determine the loan against property interest rate. Because a loan against property is a secured finance product, it is feasible to negotiate a lower interest rate based on a variety of circumstances.
If you take out a loan for a longer period of time, the interest rate will drop even more. The majority of banks have interest rates that range from 9 percent to 12 percent. To compute approximate values in advance, one can count on loan against property EMI calculator.
In addition to interest rates, you have to pay some nominal charges. The below-depicted table provides a better understanding of the applicable charges:
| Processing Charges | Around 1 percent of the loan amount |
| Prepayment Charges | Prepayment charges may vary from one bank to another. Usually, banks charge 2.5 percent of the outstanding amount as prepayment charges. |
| Late Payment Charges | 1 to 2 percent of the due monthly instalment |
| Bounce cheque Charges | May vary from INR 250 to INR 550 |
Documents Required for Loan Against Property
Following are the documents required for a loan against property:
- Bank account statement (last three months)
- PAN card and Aadhaar card
- Residence and identity proof
- Salary Proof (for salaried applicants)
- Scanned copy of property documents
- Income tax returns (last two years)
- Form 16
Working capital is the money that is used by a business on a day to day basis. It is the money that is required for the day to day operations of a business. Without working capital, a business might not be able to operate efficiently, hence businesses might consider taking loans to meet this financial need. These loans that are used for the day to day operations of the business is known as working capital loan.
A working capital loan is not taken for the expansion of a business; it is taken for the exclusive purpose of conducting business operations on a daily basis. This means it covers the expenses of human resources and the expenses of existing capital.
What is a Working Capital Loan?
The concept of a working capital loan comes into picture when the business’s current liabilities outweigh the current assets. In such a case, the business has no other option other than to get a loan to cover the current liabilities and ensure that there is money to continue business operations. A working capital loan is a type of business loan that is used for the short-term financial goals of the business to meet its operational requirements. Such a loan may not ensure long-term stability to the business but can ensure that the business is operational in the short-term.
A working capital loan helps a business in taking care of short-term liabilities so that its long-term goals can be focused on and achieved accordingly. Working capital loans are usually only applicable to small and medium enterprises and the usual period of the loan is 6-12 months. The interest rates for a working capital loan can range from 11-16% depending upon the lender.
Positive Versus Negative Working Capital
The way one calculates the working capital of a business is by deducting current liabilities from current assets. It is important to know what one’s working capital is to ascertain what needs to be done for business operations in the long-term as well as the short-term.
- Positive working capital: In an ideal business, one should always strive to have more current assets compared to current liabilities. Positive working capital is when your current liabilities are lower than your current assets, this can ensure that one can pay off all business debts and still have the capital to invest in other resources for the business.
- Negative working capital: Negative working capital is when one’s current liabilities are more than one’s current assets. This means that the business’s current debts cannot be completely paid off using only the current assets at hand.
Working Capital Ratio
A working capital ratio is a figure that is used to see the financial health of a business. Ideally, the working capital ratio should be between 1.2-2.0 to show that the business is doing well. A working capital ratio of 1.2 means that the business has enough current assets to cover its liabilities and to ensure day to day operations. Anything beyond a ratio of 2.0 means that the business is not investing its capital to further itself effectively.
The working capital ratio is computed by dividing current assets by current liabilities i.e. Current assets/Current liabilities = Working capital ratio For example, if the current assets of a company is worth Rs 2,00,000 and the current liabilities are Rs 1,40,000, the working capital ratio of the business would be: 2,00,000 / 1,40,000 = 1.42
Types of Working Capital Loan
There are many reasons why a person would be looking for a working capital loan. Depending upon what the need is, one should look at the different types of loans that are available.
- Short-term loan: This is a loan that comes with a fixed interest rate for 12 months. As long as the business has a good credit history, such loans can be obtained without the need of giving collateral.
- Accounts receivable loan: An account receivable loan is a loan taken out by a business to fulfil orders that have already been placed. Such a loan is easy to obtain as you already show the lender the pending orders to show that there will surely be cash flow from completing them.
- Bank overdraft: A bank overdraft is a type of working capital loan as the bank allows the business to overdraft their account when needed. The interest rate for such overdrafts is fixed and is usually higher than the prime rates of the bank.
- Trade creditor: This type of working capital loan is extended to the business by the creditors of the business; usually, the suppliers.
- Equity funding: This type of working loan is taken on by giving equity of the business to the lender. Of businesses that have a bad credit history or businesses that are just starting, hence having no credit history, this is the best option.
- Factoring loan: This type of loan works similar to accounts receivable loans. The difference lies with the credit in question. Where accounts receivable loans work on orders pending factoring loans work of the credit towards the business. For example, where a business accepts credit for products sold, the payments are still due on the sold items.
Advantages of a Working Capital Loan
There quite a few advantages in getting a working capital loan as compared to a regular business loan:
– No collateral needed
– Speed of acquisition
– No spending restriction
When Should One Get a Working Capital Loan?
There are many reasons why a business requires a working capital loan. The main purpose is to take care of short-term financial constraints of the business. There are lots of businesses that do not have a continuous and stable income throughout the year; hence they are sometimes unable to meet their liabilities. Here are some of the reasons a business should consider taking a working capital loan. :
- Capitalization on investment opportunities: There may come a time for a business where they land upon an opportunity to further itself by investing in something. But in such a case, the business is unable to do so due to their financial situation; they should consider taking a working capital loan.
- Seasonal business: If a business is seasonal where they only have sales during a particular season, it means that the business does not have a stable cash flow throughout the year. This could lead to the business facing a financial crunch during their offseason, in such a situation, the best option is to get a working capital loan.
- Emergency cash reserve: If the business does not have enough financial stability to offer spontaneous financial for any purpose, it is a good idea to et a working capital loan to have something to fall back on in case of an emergency.
Disclaimer: The materials provided herein are solely for information purposes. No attorney-client relationship is created when you access or use the site or the materials. The information presented on this site does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for legal advice from an attorney licensed in your state.
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