Improve your Credit Score to avail Personal and Mortgage Loans

Due to lack of awareness, we often don’t pay any attention on our credit accounts while making transactions. The most prominent reasons to have a low credit scores are:

• ·         High Credit Card Balance

• ·         Too many credit accounts linked to your name

• ·         Payments not made on time.

• ·         Current Loans you have, if any.

• ·         Your previous payment history.

In India, there is a separate organization that deals with collecting and maintaining every individual Credit account records known as CIBIL Scores. The Credit Score is taken into account when you want to apply for Credit Cards or Personal Loans. If your score is higher than the prescribed one, you won’t have any problem getting Loans or credit Cards, but if it’s less, you may have a problem.

Here are some ways you could improve your CIBIL score:

1.        Know your weak areas and Improve: Now that you have known about the points that can get you a low credit score, you can improve in those targeted areas.
2.         Paying your Loan Interest on time: Never fail to pay your mortgage loan or personal loan EMI, so that it won’t affect your Credit Score so severely.
    3. Have one credit card: Don’t try to use multiple credit cards, for if your account balance differentiates hugely, you will be in a trouble.

Therefore, it’s important to opt for low interest rates Mortgage Loan, whenever you are in a need. If you have a good credit history, loan providers may offer you best deals on Loan against Property with low processing fees, since your ability to repay will be shown in your credit score report.

What factors determine your loan approval or rejection?

We often don't feel that in spite of not taking any loan before, our loan application will be rejected and unfortunately, we don't even understand the reason for it.

                 Your Loan approvals or rejections at first depends on what type of loan do you want to take? If you are planning to take an unsecured loan such as Personal Loan, you can get a loan easily as it does not require any guarantor and the interest rates are also greater, so you should avail it without any problems. If you are planning to take a secured loan with low interest rates, such as Mortgage Loan/ Loan against Property, a thorough background check is required regarding your Profit and Loss account and your personal account stability, which determines you are eligible to take the loan.

             Also, there are many other factors that determine the loan approvals, and the time taken to disbursal of your loans. You are judged by the ability to repay these loans on various factors and some of these factors includes, your present age at the time of loan application, your present income, the job stability i.e. Are you planning to change the organization you are working, your CIBIL score(which is determined by your financial account stability), how much monthly installment you can pay that is agreeable to the finance funders, the time duration for which you take the loan, the most suitable type of loan for your purpose that means there’s no point to taking a car loan if you are not planning to take a car!

        Ensuring you have a high credit score can obviously get you a higher probability of getting a loan easily, but a high credit score completely depends on your history of personal accounts, such as late payments on credit cards. Also, if you have an existing loan, you should pay all your mortgage Emi’s in time, which will ensure you are eligible for a good credit score and thus, for another personal loan or mortgage loan.

      

Mortgage loans v/s Personal Loans

While taking up a loan, we always have a dilemma whether to take up a Personal Loan or Mortgage Loan/ Loan against property. There is nothing like this loan is best, or this is not. According to the needs and requirements of the customers, the best can be decided.

Generally, Personal Loans are often known as unsecured loans as there is no involvement of guarantor while taking up a Personal Loan. As such, a high risk is involved because the loan disbursal on purely on the basis of conviction, the interest rates involved are higher than the other types of Loans.  Generally, people prefer Personal loans when they want to buy any household commodity, or they want to go to any Personal trip. The best benefit of a personal loan is you can get it immediately in case of an emergency and you are short of cash. On the basis of your eligibility, you can get a good personal loan amount. The duration for repayment of personal loans is lesser than other loan. You can say it, that it is a short term loan.

A loan against any collateral, such as property is known as a mortgage loan. This is the most secured form of loan available in India. The interest rates in this Loan against property is also low as compared to other loans. As, most of the Indian population comes from a rural area, the loan against property is a good thing for them.  A full fledged agreement is made between the borrowers, the lender and the third party involved, if any. You should take these types of loan keeping in mind the fact that it has been taken for the purpose of some very important things such as Education of children, medical treatments etc. The benefit of Loan against Property is that it is a low interest rate loan and gives you tax benefits also.

Does personal loan give Income tax benefits?

For any Personal loan, the interest paid is for the most part not deductible. However if the loan is used in obtaining any income which you are unveiling in your Return of Income and in a position to legitimately identify the loan with gaining that income, then the interest and different expenses might be guaranteed as a deduction.  There is no other method of benefiting from personal loan under the Indian Income tax law of 1961 as changed till date.

                   Assuming that you have taken a personal loan from a bank, housing finance company, Life Insurance Corporation of India or from an employer and used the cash for purchase or construction of a house, you can assert IT profits for both principal and interest paid.  But in the event that you have taken a loan from a friend or relative, and then you can assert tax reductions on the interest paid justly. In any case, provided that you have taken a loan for renovation of your house building, then you can claim reasoning up to Rs.30, 000 a year of the interest paid.

Normally such Personal loans have to be arranged in such a manner, that some origin of income gets tagged. Loans for particular utilization or family matters are not entitled to Income tax concessions. Also loan for marriage, education, traveling and do not get such concessions. Usually, a few organizations like ICICI, HDFC and LIC make loans for Housing and vehicle necessities. They also do not usually provide loans for different purposes to salaried individuals since they can lay their substantial hands effectively and rapidly in the event of default on these possessions and recuperate their giving.