Tips to Gear-up Against the Increasing Inflation Rates

The inflation rates in India have sky-rocketed in the past few years. These inflation rates are calculated on the basis of the average increase in the cost of living or the increase in the overall prices of goods and services in the country. Now you might be wondering that how does the increasing inflation rates fit into the picture of banking and finance.

The answer to this question is that when the inflation rates in a country increase above a certain number, the banks and NBFCs (non-banking financial companies) increase their rates of interest on a loan product, along with enforcing stringent loan approval measures. Thus, in such times, getting a personal loan through a financial institution can prove to be quite a hassling task. However, if you follow these few tips, then you can easily obtain a personal loan, even in these tough economic times:

  1. Work on your credit score: You might have already heard about it more than often; however, I will say it again, “Improve your credit score”. The reason being; financial institutions scrutinize your credit score before lending you with financial assistance. After all, a good credit score indicates a great repayment history and further assure the lender that you will make timely repayments on your installments. CIBIL is the credit rating agency in India that will provide you with a credit score; make sure that you credit score is above 750 to not only obtain a personal loan but also renegotiate on the interest rates. There are numerous easy ways to improve your credit score, one simple search on the internet should be able to find all you need to better your score.
  2. Arrange your documents: As a wise man once said that putting in your best foot forward will never do you any bad. In a similar way, putting in your documents and presenting them in the best way possible won’t cause you any problems; in fact, it will increase your chances of obtaining a personal loan. The reason being; if you have all the required documents and are geared up to face the questions against any potential red-flags in your credit history, you will be easily able to obtain financial assistance from the banks and NBFCs (non-banking financial companies).
  3. Choose the correct lender: There are a ton of financial institutions in the market that provide financial assistance for the people in the forms of personal loans. Thus, make sure that you look around to find the best form of financial assistance at the lowest possible interest rates and processing fees. Further, each and every lender has different set of eligibility criteria; thus, even if one of them rejects your loan application, you can always gear-up and prepare to look out for another financial institution.

Therefore, even though the times are tough and inflation rates are rising with each consecutive year; you must always save money to cruise through such times. And if you ever find yourself in a tough spot and it seems too hard to get out from it; make sure that you are ready to avail financial assistance in order to get out of it.


Mobiles & Smartphone Apps to Drive Personal Loan Sales by 2022

In the next 3 years, mobiles & smartphone apps are expected to drive a majority of personal loan purchases in India. This is according to a report from the fifth study of Facebook’s ‘Zero Friction Future’ program; the same report also predicts that the sale of financial services, including personal loans, will see business worth $985 billion solely from mobile devices.

The study that aims to reduce friction in the purchase journeys of Indian consumers, also states that 32% of the customers from the loan category drop out of the application due to friction. What’s more is that, a whopping one fourth of these drop outs are due to friction in the media they chose.

However, mobile phones are rapidly changing this. More and more lenders are taking to the smartphone platform, some are also releasing apps. All this to tap a large pool of customers who want personal loans, yet do not want to endure a painful digital journey. These apps make the purchase process extremely simple and quick. Individuals are now able to get the financing they need with a mere click or tap on their mobile phone. The process, from application to loan sanction, is also reducing quickly with mobile-enabled loan purchase journeys already being 8% shorter than offline purchases.

On the release of the ‘Zero Friction Future’ report, Mr Pulkit Trivedi, Director of Facebook India was quoted saying, “As more and more Indians access the Internet on their mobile phones, there is a big opportunity for financial companies to create a powerful digital experience that is intuitive, more seamless and free of friction points for their customers”. Further fueling the move to mobile is the penetration of smartphones & the internet in India; all of which has led to the rapid increase in the number of mobile-first customers in the financial services sector.

All these factors put together make sense of the report’s core prediction that mobiles will be a driving force for personal loans and other financial products in the future. However, what this means for customers is that, getting financing is only going to become easier. Lenders are spending more & more time trying to engineer smooth & enjoyable mobile-based journeys for customers. So if you ever need a personal loan or any other finance product in the coming years, the solution will most likely already be in your pocket.

Some personal loan aggregators have also jumped from web-based process to the mobile bandwagon. They have introduced apps where people can compare and apply for personal loans in minutes. These apps put affordable financing at the customer’s finger tips and allow them to borrow with ease.

So, if you are ever in need of a personal loan, we at ApnaPaisa already have a mobile phone app that you can use to quickly and easily get your needs sorted. Download it now to compare and apply for personal loans from India’s top 30+ lenders & banks!


Explained: The Interim Budget’s Effect on Second-Home Loan Tax Benefits.

Purchasing a home or property is a huge investment; after all, the rising real estate prices in India are no joke. Thus, to counter the increasing prices and help the people to invest in real estate, the interim budget for the financial year 2019 has made some drastic changes in the housing loan segment. On 21st February 2019, the President of India has assented to the finance bill turning it into an act. Thus, before we start talking about the various tax benefits that it brings along with it, let’s discuss the act itself in detail.

Income tax amendment on tax benefits:

Earlier, if you had two properties then you would have to choose one of them as self-occupied and had to select the other one as let-out property. Thus, you would be eligible for taxation only on your self-occupied property and would have to pay notional rent in the form of tax on your let-out property. However, now thanks to the interim budget 2019, you would be eligible for deductions on home loan interest rates for both the properties up to 2 lakh rupees.

Now let us take the example of Suneel and understand this interim budget for home loans in depth:

In the financial year 2018, before the interim budget-

Suneel is a proud owner of two properties since the financial year 2015 and has one of his properties lying vacant. Earlier, in the financial year 2018, he could only opt for tax deductions on the interest rates of his self-occupied property up to 2 lakh rupees; however, at the same time, he had to pay notational rent in the form of tax for this let-out property, even though it was lying vacant. After which, he was eligible to avail deductions on a municipal tax that he had paid, deductions on interest rates, and other standard deductions on his rented-out property. Although, he was provided with the liberty to select his self-occupied property amongst the two he possessed (the one that would fetch him the maximum profits); however, he still had to pay tax for the property which was lying vacant.

In the financial year 2019, after the interim budget-

After the interim budget, in the present year, he has the liberty to choose both of his properties as self-occupied; meaning, he can now avail tax benefits on both of his properties up to 2 lakh rupees. Further, he doesn’t even have to pay off tax for his vacant property. Now the money that he can save from the tax exemption can be utilized to pay a couple of EMIs (equated monthly installments) on his housing loan.

Thus, the above instances show that the new interim budget will be of great help to the people with two housing loans- to avail a certain amount of tax benefits. Meaning, you can make use of this amount to fulfill your other financial commitments. Therefore, the interim budget for the financial year 2019 has had an extremely good impact on the home loan segment in India.

Will Home Loan Rates Come Down with the RBI’s 25 BPS Reduction in Repo Rate?

The RBI, earlier this month, reduced its repo rate by 25 BPS. The aim of the cut is to encourage and increase investment. The move was anticipated by many as inflation in the retail market grew by only 2.2% in December of 2018; this is the slowest rate of increase in the last 18 months. Also, it is keeping with the Monetary Policy released in December, 2018 that pitched a ‘neutral’ stance instead of its previously existing ‘calibrated tightening ‘stance. The reduction means that the RBI’s repo rate now stands at 6.25%.

However, will the move result in lower home loan interest rates?

Banks and lender borrow money from RBI. They need to repay the amount borrowed with interest to the Central Bank. This interest rate is known as repo rate. Therefore, usually when the repo rates decrease, lenders decrease the interest of their home loans. However, the reduction in the repo rate has not made much of a difference on the rates offered by housing finance companies and banks.

Only one bank has reduced its rates.

In response to the RBI’s reduced repo rate, only the SBI has reduced its home loan interest rates. And being the bank with the largest market share for home loans, this was expected. However, the bank’s reduced rates are being seen as symbolic as the new rates are a mere 5 basis points lower than previous rates. Since 1 basis point is equal to 0.01%, the SBI’s new rates will be just 0.05% less than they were. This means that home loans up to Rs. 30 lakh will come at 8.70% instead of the previous 8.75%.

Why have the rates not decreased further?

This is mostly due to deposit rates staying stagnant. Deposit rates play a pivotal role in the dynamics of interest rates under the MCLR (marginal-cost-based lending rate). Difficult liquidity & year-end pressures have made it challenging for banks & lenders to lower their deposit rates. The top management of one public sector bank was quoted saying “Mathematically, there seems to be no room available for rate cut since the March MCLR remained almost flat as compared to last months”.

Will home loan interest rates drop in the future?

A reduced repo rate will lower borrowing cost and this should bring down deposit rates. However, even a deposit rate cut also comes with minimum buffer of three or four months. In short, there are a number of things at play and that’s why, following the decision from the RBI to lower its repo rate, most banks are expected to have meetings to discuss interest rates & deposit rates. So, even if RBI’s move is to have any positive effect on home loans, end consumers will have to wait for a while to see the benefits.

We hope this has been helpful and if you want an in depth comparison of home loan interest rates, simply visit our page. We have the best interest rates from India’s top 30+ lenders!

RBI cuts home loan risk weightage

In a move to boost the real estate sector, the Reserve Bank of India on Friday reduced the risk weight on home loans and residential housing projects.

RBI, on its website, stated the risk weight on housing loans up to R75 lakh has been brought down to 50% from the earlier requirement of 75%. On home loans above R75 lakh, the risk weight has been brought down to 75% from 100% earlier. “The government had provided additional tax benefits for home loan borrowers in the Budget and RBI has followed it up with these announcements,” said Keki Mistry, vice-chairman & CEO of HDFC Ltd.

The move is intended to help banks price loans better. However, bankers say it will be tough for them to cut home loan rates since they are already being offered at base rates, below which banks are not permitted to lend. In the premium housing segments, rates may see a marginal downtick. “A lot of banks offer home loans up to R75 lakh at the base rate. So for banks to lower interest rate on these loans, they would have to first reduce the base rate itself, which seems difficult right now,” said Ram Sangapure, general manager, Central Bank of India.

Recently, Bank of Baroda announced all its home loans will now be offered at 10.25% which is its base rate. Similarly, Indian Overseas Bank confirmed it offers home loans up to R75 lakh at the base rate.

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Lending Rates

Home Loan Rates to Stay High for Longer

If you were hoping for a cut in your home mortgage or loan on your car, as a result of easing inflation and slowing growth, you’ll have to wait much longer than expected thanks to recent measures taken by India’s central bank.

The Reserve Bank of India late Monday basically made it more expensive for banks to borrow funds, which in turn means that they will have limited cash to lend to consumers.

This will be a setback for individual borrowers, who haven’t seen a reduction in their mortgage rate for more than a year, despite the fact that RBI has cut the benchmark interest rate by 1.25 percent points to 7.25%, since April 2012. The major Indian banks have only marginally passed on this lower rate to consumers and currently charge between 9.95% and 12% for the typical home mortgage, depending on the amount and tenure of the loan.

Lately, however, banks were under pressure from the Indian finance minister to cut rates, in order to boost economic growth.

Earlier this month, a handful of state-run banks such as the Union Bank of India, Bank of India and Canara Bank, lowered their base rate – the minimum interest rate it can charge a borrower – by a quarter percentage point.

But in light of RBI’s recent measures, analysts say there won’t be any more cuts.


If anything, they say, there’s a slight chance that the RBI could increase interest rates, in an effort to make Indian assets more attractive to foreign investors – which would help stem the decline of the rupee.

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Need Loan

Looking For A Loan? An Arranger Can Help

The slogan on the hoarding caught your eye: “No paperwork, get loan in 7 days.” You quickly jotted down the phone number but wondered how an entity, other than a bank or a lending institution, can assist you in getting a loan.

Indeed, they are not loan providers, but are “loan arrangers”. These service providers help you secure a loan from the comfort of your home. From filling forms to submitting documents, every minute detail is taken care of by them. Here’s a look at the benefits of availing their services.

So in a way, they help you save time and ensure the process remains smooth for you.

“We basically work as an intermediary between a loan provider and a loan seeker. Our main functions include completing documentation, submitting documents to banks and ensuring that the process does not take much time. And we provide these services at the doorstep of customers,” says Surjit Singh Grover, head (e-commerce), Andromeda Marketing Pvt. Ltd, a Mumbai-based loan arranger. However, there are different types of loan arrangers in the market and you need to find one who will give you the best service.

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Home and car loans to cost more as PSU banks hike lending rates

State-run banks may not have formally raised their base lending rates despite a spike in market interest rates, but are charging even their marquee customers such as Housing Development Finance Corporation (HDFC) more, indicating that cost of home and car loans may rise.

With borrowers such as HDFC paying higher interest rates, bankers expect lending rates to firm up across the board as the Reserve Bank of India’s recent monetary tightening measures begin to bite.

The nation’s biggest mortgage lender, which was lent money by banks at base rate, is now contracting lines of credit at 50-75 basis points higher than base rates, said two persons familiar with the matter. HDFC may now be borrowing at 10.5% or 11%.

HDFC provides home loans in the range of 10.15% to 10.40% and if liquidity conditions continue to be tight, it may be forced to raise rates for its borrowers. Its subsidiary, HDFC Bank, the most profitable lender, has raised the base lending rate by 20 basis points to 9.80%.

“Several banks signed contracts with HDFC to lend at rates ranging from 10.50% to 11% and on a condition that they cannot repay the loan within 90 days of availing it,” said a banker who did not want to be identified. “Since the finance minister does not want banks to raise lending rates, banks have raised the spread on base rate to prevent margins from shrinking.”

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HDFC Bank Increases Lending Rates

 Lending Rates

HDFC Bank has become the first major lender in the country to increase its lending rate in the wake of Reserve Bank of India’s measures to tighten liquidity. The bank has increased its base rate to 9.8% from 9.6% with effect from August 3, a move that would affect all corporate borrowers who have availed of floating rate loans.

The hike, however,will not impact home loan customers as mortgages sold by HDFC Bank are on behalf of its parent which has not revised its benchmark prime lending rate yet.

Last week YES Bank was the first to revise its base rate. Some other private banks, including Axis Bank, have raised their short-term deposit rates. “If the measures last, I would expect that cost of deposits to rise and this will have an impact on asset pricing,” said Sunil Kaushal, chief executive for India and South Asia, Standard Chartered Bank. Interest rates have been inching up gradually with RBI planning to hold its liquidity tightening measures for the medium term.

Although both the Prime Minister and the finance minister have gone out of their way to announce that the central bank’s measures are “temporary” , RBI has told banks that there is no such commitment. In its meeting with banks, the central bank has refused to provide a timeline for the measures. However , RBI has told banks that they have the headroom to absorb some of the cost arising out of the increase in short-term rates since they have reduced their base rate by only 60 basis points as against a 100 basis point reduction in the repo rate by RBI since last year. “We wanted a non-disruptive adjustment to higher interest rates at the short end. And that has been happening and that is going to happen. Whether it will transmit to the long end is uncertain. As I said, it might well transmit, but our intention is to invert the yield curve such that short rates are higher, and the long rates stay where they are. That is good for the economy,” said RBI governor D Subbarao while announcing his quarterly policy review on Monday.

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