Can't Repay your loan

Can't Repay your loan?? Talk to your lender at the very earliest opportunity. They willl want to consider your individual situation. If they reasonably believe your financial situation may improve, they may be prepared to suspend loan repayments for a while, or extend the term of the loan.

In the final instance, a lender can insist on the debt being repaid. They will want to determine whether you 'can't pay' at this time, or whether you simply 'wont pay'. If your loan is secured on a major asset such as your home, you could be forced to sell it to repay the debt. Even if the loan is not secured on a specific asset, the lender could nevertheless sue you to recover the debt. If you lose, the net result might be the same - you may have to sell your property.

Ashok Kargutkar, a counsellor at Abhay, a debt-counseling centre,  says, "If someone can’t repay because they are genuinely short of funds, we help them to try for a settlement with the banks. Many a time, banks have settled genuine cases."

The operative word is 'genuine' and if you prove that your case is so, then banks may settle. So, how do you prove this?

1. You need to show relevant documents to prove that you are bankrupt, and cannot pay the outstanding amount. Also, submit an affidavit that states you have no assets that you could use to pay back.

Declaring that you have gone bankrupt in the court (after consultation with your lawyer) could also prove to be helpful.

2. Your entire debt will not be foregone even if you file for bankruptcy. You will have to pay a mutually agreed (between you and the bank) amount, which can be less than the initial outstanding amount because.  

“The settlement amount will largely depend on your ability to pay as well as the bank’s policy towards such cases,” says a senior bank official.

3. In some cases the bank may extend your repayment period and break the outstanding amount in equal monthly installments to facilitate repayment.

4. If you have credit card debt where the interest rates are 45% per annum, you could go for a cheaper loan -- a personal loan.  

5. If you bank agrees to a 'settlement', you could further request for an  extension of the duration of repayment.

If the bank won't settle
Despite declaring bankruptcy if recovery agents and banks continue to harass you, you can approach debt-counselling centres, like Abhay (a trust funded by Bank of India) and Disha (supported by ICICI Bank).

These centres have a three-fold focus: financial education, credit counselling and debt management. Kargutkar says, “Most people are in debt because of reckless spending habits. We ask them to discipline their spending and manage assets to pay off debt."

" For those with genuine problems, we first guide them. If banks and financial institutions are unresponsive, we take it up with respective authorities.”

“The best option,” Ashok suggests, “is to stick to your budget, never spend beyond your means and be financially aware.” 

The contact details for these centres.

Abhay 

- In Mumbai

Address:
61 A, Sadanand, 1st floor
Above Bank of India, Gokhale Road North
Dadar
Mumbai -- 400 028

Contact person : Shri V N Kulkarni
Phone: (022) 24221843

- In Chennai

Address
C/o Bank of India
104, Sir Theaogaroya Road
Pondy Bazar, T Nagar
Chennai -- 600017

Contact person: Shri M K Raghunathan

Phone: (044) 28152669

Working hours: 6 pm to 8 pm on every Friday, Saturday and Sunday

Web site link: http://www.bankofindia.com/home/abhay.asp

Disha

- In Mumbai

Prince Apartment
Ground Floor, Karani Lane
Ghatkopar (West)
Mumbai -- 400 076

Phone: (022) 65971815/ 16/ 17

e-mail: info@dishafc.org

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Dream Home: Gift of the Finance Sector through easy funds

If you are thinking of buying a home, then, do not worry if you lack in funds. There are many lenders who are providing home loans in India to cover housing needs of almost all types of borrowers. However, you are required to meet certain conditions laid down by the lenders, in order to get smoother approval. Home loans are being offered for variety of purposes in India. Through these loans you can purchase a home, which is a common use of the loan. The loan can be used for any alteration to the home you already own. You can construct a new home or the loan can be used for purchasing a piece of land for investment or construction purpose. These loans are also used for paying stamp duty. Interest rates on home loans vary from lenders to lenders. But, public sector banks charge interest at lower rate than the private lenders. If you take out the loan from banks, then ensure that first you have made an extensive comparison of their rates. Note that there is a vast difference of rates amongst the public sector banks. So, if is advisable to make an extensive comparison of these bank rates first in order to pick up a suitable deal. Government of India (GOI) is actively considering to provide a subsidy of 5% on home loan interest rates to the economically weaker sections of the society in the next year's budget. Being considered by major political outfits as a buildup towards the 2009 elections, this subsidized home loan scheme might go a long way in fulfilling a long cherished dream of the common man - owning a house. The home loan interest charged by banks and other housing finance institutions (HFCs) will be subsidized and government will bear the costs. This step will put an extra  burden on the the exchequer at Rs. 1600 per year. Expressing concerns over the benefits of the real estate boom being limited to the affluent and upper echelons of the society, the urban poverty alleviation minister Kumari Selja said, "The objective of the interest subsidy scheme is to ensure the economically weaker section gets the opportunity to own houses." Presently the housing sector for the economically weaker section (EWS) of the society is facing a shortfall of 31 million dwelling units and with this scheme GOI is expecting to meet the requirements of more than 50% of this segment in the next five years. The modalities of this scheme are being worked out and this subsidy scheme is likely to fix a loan ceiling of Rs 80,000 for EWS and Rs 1.50 lakh for the low income group (LIG). People who earn up to Rs. 3,300 per month are classified as EWS whereas those earning between 3,301 and 7,300 are classified as LIG. Earlier the National Housing Bank (NHB), which used to refinance housing loans especially to the weaker sections of society, withdrew the concession of 0.5 % offered on refinances and industry experts believe that this step by the NHB has affected the credit flow. In the absence of a suitable incentive from NHB, the HFCs in India have not been able to extend affordable loans to the weaker sections of the society. With the GOI extending a 5% subsidy it looks like the weaker sections will finally get their due from the HFC's.

Boom in Real Estates leads to growth in Home Loan

The key factors on which the growth of real estate sector in India is dependent are easy finance options, ample job opportunities and availability of good properties. The availability of finance options have been made possible by easy home loans provided by the banks and financial institutions. The huge job opportunities created by the IT and IT-enabled industry India has created purchasing power in the market. These service class people avail home loans to buy properties for their own use and investment. With the availability of both finance and job opportunities the demand for properties has been shooting up. The developers are also motivated to invest and develop even more properties.

There are various kinds of home loans available which can be used to purchase property, construction, home improvement, home equity loans etc. The finance can be availed for all kinds of properties like residential, commercial, and industrial. These finance options are open for all salaried individuals, self-employed individuals, partnerships and even NRIs. There is different documentation requirement for each category of borrower. The details about the loan options are also available on the web which also has online financial calculator to assist in cumbersome calculations.

The home equity loan is a comparatively a new offering from banks, here the borrower can mortgage his existing property to avail loan which can be used for the purpose as various purposes like marriage, education or medical expenses. The equity loan amount that can be disbursed is as per the bank policies. Normally it is about 60 percent of the value of the property. A lot would depend on the credit background of the borrower. The banks are able to offer the loans at such competitive rates due to refinancing facility available from the apex body of Reserve Bank of India (RBI) or the overseas market

India's finance minister has called on banks to lower interest rates to keep Asia's third-largest economy expanding strongly amid fears aggressive monetary tightening could slow growth.

P. Chidambaram urged state-run banks to reduce lending rates by half a percentage point to spur consumption and investment as signs emerge of a slowdown in consumer spending.

"I would like... that banks cut lending and deposit rates by 50 basis points so it stimulates investment and consumption," he told reporters late Friday after meeting heads of state-run banks.

He said he wanted banks to boost lending for consumer goods at the same time as reducing loans to the housing sector, which analysts warn could overheat.

Red Hot market cooling down for Home Loans

Home Loans given in last 3 years (2004-2007) form 71 % of total home loans.

During 2001-2006 the home loans have grown 35%. During 2006-2007 home
loans are growing at 18%. For 2007-2008 it is expected at 10%.

"In 2006-07, the proportion of monthly income being paid out as home
loan installments grew to more than 50 % for an average home buyer
from around 32 % in 2003-04. "

Interest rates in past 3 years have gone up by 4%.

"There could also be a risk of default if the rise in EMIs outstrips
the growth in salaries. For a 400 basis point increase in interest
rates, EMIs on 15-20 year loans taken in 2003-04 would have to go up
by 10-26 per cent to fully absorb the impact of hike in interest
rates."

Now couple this stats with a growing trend. "The rupee is appreciating
against dollar".

What u get a deadly mix for loan takers.

1) Since the rupee is appreciating, there is little scope of higher
salary increments for IT guys. (Or people in export oriented biz.)

2) Anticipating the demand, builders are releasing new flats. These
new building , which will have fewer takers will bring down the cost
of flats. The home-loan takers do-not stand to make big profits by
just selling their flats.

3) Foreign capital is pouring in india. The effect of this would be
that local companies (services, infrastructure,banks) will have good
growth. And people working in these firms will now be the new-buyers.
So there is little chance that will be a major drop in interest rates.
So for an average IT guy (a risky sector), sitting on fat-loan is a
real issue.

Home loan rate going south? Forget it

Currently there does not seem to be an early signs of Home loan rate going
southwards.
Home loans are unlikely to turn expensive too despite the increase in cash
reserve ratio (CRR) of the banks, which will make money scarce for banks.
The Reserve Bank of India (RBI) has raised CRR by 50 basis points to 7% for
the banks, but a large section of bankers told ET that they do not expect
lending rates, including home loan rates, to go up.
At the same time, bankers are unlikely to lower the home loans rates for
now. This comes as a bad news for a large number of borrowers who had
expected interest rates to come down post credit policy. Earlier, Deepak
Parekh, chairman of HDFC bank, the largest home loan provider, had said HDFC
would consider a lower lending rate if RBI does not hike CRR.

Are floating rates better for Auto Loans?

What do you think, should I go for Fixed loan or the floating loan?

This is the question that many ask from me. So I thought about this and here is the answer.

 

The government's liquidity tightening measures this year have pushed up interest rates and slowed down offtake of auto loans. While interest rates have not fallen significantly yet, most experts say they will in future. Typically, the price of an auto loan is set for the entire loan tenure. But now some banks, such as State Bank of India and ICICI Bank, have started offering floating rate loans too. When interest rates are going down, floaters allow you to reduce your liability. Should you then

go for them?

The floater rationale

ICICI Bank's auto loans head, N.R. Narayanan, says: "Many customers told us that they were not going in for car loans now since they were expecting the interest rates to get better (fall). We thought we should offer them the floating rate scheme so that they also get the benefit if at all the rates fall." He says ICICI Bank's rates are linked to floating reference rate (FRR), the benchmark used for its home loan floating rates.

 

Investment schemes for NRIs

For NRIs/ PIOs/ OCBs there are broadly two categories of investments - repatriable (investments than can be taken back) and non-repatriable (investments that cannot be redeemed). Repatriable investments allow for investment up to 100% equity by NRIs in specified industries and also cover portfolio investments. Equity investment up to 100% is also permissible for non-repatriable investments.

Portfolio investment scheme

NRIs can acquire shares/ debentures of Indian companies or units of domestic mutual funds through the stock exchanges in India. There is an overall ceiling of 5% of paid-up equity share capital of the company/ paid-up value of each series of convertible debentures for purchase by NRIs/ OCBs. An application for this has to be submitted to the Reserve Bank though a designated branch. These designated branches are the main branches of major commercial banks located close to the stock exchange(s). An NRI can operate through only one selected branch for this purpose. The Reserve Bank approval is valid for a period of five years after which it may be renewed by a letter.

This scheme also allows for

Sale of shares/ bonds/ debentures by NRIs to residents Transfer of rupee securities by non-residents as gifts Transfer of rupee securities to non-residents as gifts Loans abroad against securities provided in India Loans in India to NRIs against shares/ securities/ properties held by them in India Loans in India to NRIs against security of NRI Bonds issued by State Bank of India Loans in India against guarantees by non-residents Loans to residents against shares/ securities/ properties in India from non-resident relatives.

Procedure for sale/ transfer

In case of shares/ debentures/ bonds acquired by NRIs through the portfolio investment scheme, a general exemption is provided by RBI if the sale is arranged through the same designated branch through which they were purchased. In other cases, necessary permission has to be obtained from RBI. For sale/ transfer of shares/ debentures to residents by private arrangements, permission has to be obtained from RBI. General permission from the RBI is also available for transfer of shares, bonds and debentures by way of gifts to resident close relative(s). For sale/ transfer of shares/ debentures of Indian companies to other NRIs, no permission is required from RBI. The transferee NRI would need permission for purchase of the shares. Government securities/ units can be transferred through an authorized dealer while the units can also be repurchased directly by UTI. Repatriation possible if the remittances were made from abroad of from NRE/ FCNR accounts; sale proceeds from securities purchased out of NRO accounts can only be credited to the NRO account. Interest earned after the financial year 1994-95 onwards can be remitted as permitted by Reserve Bank.

Remittance of income on non-repatriable investments

Income/ interest accruing during the financial year 1994-95 and onwards on bank deposits and investments held on non-repatriation basis can be remitted in the following manner. i. Upto US $ 1,000 or its equivalent in full and one-third of the balance income earned during the financial year 1994-95 ii. Upto US $ 1,000 or its equivalent in full and two-third of the balance income earned during the financial year 1995-96 iii. Entire income earned during the financial year 1996-97 and onwards iv. Entire income earned during the financial year 1996-97 and onwards The NRI will designate a branch of an authorized dealer; the designated branch will allow the remittance of the funds to the NRE/ FCNR account. General permission is available on transfer of shares/ debentures/ bonds held on non-repatriation basis to residents; sale proceeds are credited to an NRO account.

Investment in immovable property

Non resident Indians can acquire/ hold/ transfer/ dispose of immovable property. No permission is required for this purpose. They cannot purchase agricultural land, farm houses and plantation property. However, on acquiring foreign citizenship, permission from RBI is required. RBI has also granted general permission to Persons of Indian Origin to acquire immovable property in India. The general permission is also applicable for transfer/ disposal of the properties (other than agricultural land, farm houses, plantation property). Under this, Persons of Indian origin can acquire immovable properties in India: i. on non-repatriation basis for residential purposes - The purchase consideration has to be made by way of remittance from abroad or NRE/ FCNR account. The sale proceeds cannot be repatriated. ii. on repatriation basis for residential purposes as well as commercial properties - The purchase consideration has to be made by way of remittance from abroad or NRE/ FCNR account. Repatriation facility is limited to sale proceeds of two residential properties; there is no such restriction in respect of commercial properties. iii. by way of gift/ inheritance - The gift should have been received from a relative who may be an Indian citizen or person of Indian origin; general permission is available only in respect of two houses. iv. out of rupee funds - Prior permission of the Reserve Bank of India is required. Residential or commercial properties can be let out for rent if not for immediate use, The rental proceeds or proceeds of any investment of such income has to be credited to the NRO account.

Repatriation of sale proceeds

The general permission is also available in case of disposal of the immovable properties. Sale proceeds equivalent to the original amount of purchase consideration remitted can be repatriated after a lock-in period of three years. The balance amount has to be credited to the NRO account of the seller. The period of lock-in is applicable from the date of final purchase deed or from the date of payment of final installment of consideration amount, whichever is later.

Procedure

Persons of Indian Origin are required to file a declaration in form IPI 7 with the Central Office of the Reserve Bank. This must be filed within 90 days from the date of purchase of immovable property or final payment of purchase consideration. A certified copy of the documents evidencing the transaction and bank certificate regarding the consideration paid is to be filed along with the form. Application for permission for remittance is to be filed in form IPI 8 within 90 days of the sale of the property.

Can NRIs obtain housing finance?

Can NRIs obtain housing finance? Certain financial institutions grant housing loans to NRIs for acquisition of houses/ flats for self-occupation. Authorized dealers can grant loans to NRIs for acquisition of house/ flat for self-occupation on their return to India. Repayment of the loan should be made within a period not exceeding 15 years out of inward remittance through banking channels or from funds in NRE/ FCNR accounts. Indian companies can grant housing loans to their employees deputed abroad and holding Indian passport. All these loans are subject to specific loan covenants; details can be obtained from banks/ institutions.

 

Loan is always not the right answer

we have already discussed preparations for obtaining a business loan, whether from a traditional bank or an alternative lender like The Loan Fund. While paying cash is often the best option for covering the expansion needs of your business, sometimes - like when you are looking to buy new, very expensive equipment or to double the size of your plant - paying cash may not be an option.

Both of these examples include the purchase of hard assets and banks will often lend a large portion - 70 to 80 percent - of the purchase price. But non-collateral needs such as working capital to hire more salespeople, often can't be met by traditional lenders.

The key word is successful. It is extremely hard to get anyone, even your Uncle Louie, to lend you money, let alone invest equity in a business if it is not profitable. If your business has lost money for the last two years, if you are struggling to meet payroll, if you have little or no backlog of orders, or if your product or service is just ordinary, the chances of attracting any kind of capital becomes more difficult. Lenders and equity investors want to do business with someone who has been or will be successful.

The advantages of a loan are that you know how much it will cost each month and how many months of payments there are. At the end, you tear up the note and own the asset. Based on the quality of the asset, the amount of money you want to borrow, and your credit history, the rate should be fairly low. A rate of eight to ten percent may seem expensive, but it is reasonably priced debt based on historical rates.

Even if your business is successful, there are several very good reasons that a lender may say no to a loan.

You may have too much debt or your debt-to-equity ratio is too high. You may not have enough retained earnings in the business.

Your interest and principal may be too high relative to your income, resulting in a low debt-to-service ratio that could affect your ability to make timely payments.

Your proposed collateral may be insufficient to support the loan, or your business may simply be growing too fast.

While all are legitimate reasons for a lender to say no, having more equity might allow the lender to say yes.

This was probably the case with growing companies that have been in the news lately - companies like Eclipse Aviation, Advent Solar and Miox, Inc. All three are growing rapidly and have needed new or expanded facilities and manufacturing equipment. Money has been needed for marketing and employee hiring. All three have raised equity capital, and in the case of Eclipse Aviation, it has been a lot of equity capital.

While these companies probably have sizeable loans outstanding, none of them would have arrived at the point they are without attracting equity capital. The founders of all three probably now own less than 50 percent of their businesses, but the value of their remaining ownership has increased significantly.

Attracting an equity investor is not easy. Getting $250,000 to $750,000 from a professional investor is even more difficult. Managing and growing your business through debt is often the right way to go. However, the New Mexico Small Business Investment Corporation (NMSBIC), through its equity partners, has invested in 29 New Mexico businesses over the last three years. While many of these are technology businesses, our partners have invested in chili producers, specialty bird-food manufacturers, an oil field service company, a home security company and several other more traditional businesses. To date, all but one has been successful. Most, if not all, have increased revenues, developed new products, expanded their marketing, hired new employees, attracted board members, and experienced varying degrees of success. None could have grown as quickly without equity from outside investors.

 

No Tension With Loans

Do you know about Unsecured personal loans?
Unsecured personal loans are the loan plans for all (legally) correct needs
without any residential property security. These loans have easy repayment
pattern and other borrower-friendly natures.
Loans are always the double edged weapons. In one hand they fulfill the
monetary requirements of the borrower. On the other hand in case of delay in
repayment they create several financial tough situations.
UK loan market offers you scores of loan plans. However you should go
through the nature of these loans before applying for them. You should query
about the risk factor associated with the loans and opt for that loan plan
which has least risk factors.
Unsecured personal loans are risk-free in nature. You do not need to place
any collateral in order to avail these loans. With these loans you can avail
an amount ranging from 5,000 and 500,000. Loan amount varies according to
your credit status, repayment ability, monthly income etc. they are short
term loans and should be repaid within 10 years from the date of approval.
People suffering from bad credit due to arrears, defaults, IVA, CCJ,
bankruptcy etc can also apply for these loans. They carry slightly high
interest rate but that is not very high because of the competition
prevailing in the market. To avail personal loans at lower rate of interest,
you have to fulfill certain requirements like, you must have a full time
job, regular source of income, repayment ability etc.

As unsecured personal loans are short termed in nature, they can be easily
repaid. These loan plans very helpful for tenants who don't have any
property to apply for secured loans. Also the homeowners who don't want to
risk their properties can apply for these loans. You can use the loan amount
to meet any of your personal expenses like buying a car, going for holiday,
wedding, paying previous debts and so on.

Always apply for a loan keeping in mind your repayment ability and apply for
an amount that you can repay without any hassle. In case of non-payment of
loan installments lenders may take legal action against you. There are many
financial institutions, banks and lending firms that offer you unsecured
personal loans. Compare the features of loans at different lenders before
applying for any loan. You can use Internet to search for lenders offer
personal loans without any residential property at competitive interest
rate. You can also apply for these loans online. For this you just need to
fill up an online application form and after it the lenders will get back to
you with their offers.