Christmas: Value for money festive season

Praveen Pillai (27), a medical transcriptionist, has lavish plans for the festive season a Christmas vacation with friends and gifts for family. This will cost him a fortune and hes toying between pulling out money from his mutual fund savings or swiping his credit card either option will dent his future finances.
Pillai represents todays generation who want to enjoy, and feel compelled sometimes to dip into their investments to finance that binge. The festive season is that time of the year when discount tags literally push you to buy products and services. In fact, 50%-60% of the spending is unplanned and impulsive. Lured by freebies and discounts, people end up buying more, which hampers their budgets and finances, says Anand K S, wealth manager of Nile Financial Planners, who adviced Pillai to avoid the options he was looking at.
Holidays, gifts, parties and marriages the list of occasions seems endless. With the year-end craze setting in, its important you plan your budget so that you dont go overboard with credit card payments and loans.
So whats the solution?
Plan your holiday spending without affecting mandatory expenses like taxes, childrens school fees and other annual commitments. Including festival spending into your financial plan is critical.
Anil Rego, CEO of wealth consulting firm Right Horizons, says one of his clients used to be an erratic spender. Based on our advice she now makes a budget every January and looks at major expenses she has to cover. She takes into account bonus payments and uses that to meet expenses, says Rego.
For the shortfall, we suggested a regular monthly recurring deposit. A lump sum investment of Rs 50,000 would be difficult to squeeze out. She now easily manages it with Rs 5,000 per month. She also manages her tax saving investments by doing a monthly systematic investment plan with both unit linked insurance plans and equity linked savings schemes. It saves on interest payments she used to make earlier to credit card companies.

Festive Fin Plan


• Include festival spending in your annual plan/budget

• Dont jump at offers. Identify and evaluate products you need and wait for discounts.

• Plan and book your holidays to avoid rush and price hikes

• Minimize credit card purchases and EMIs

• Use your annual bonus to shop and for vacation

• Choose a short-term personal loan over credit card

• Dont miss your tax saving and other investments because of the holiday expense

• Plan for the next year before its too late

Higher study loans set to get cheaper

Getting finance for expensive professional courses is set to become cheaper for students from modest middle class homes. A Rs 4,000 crore plan is in the works that will enable the government to take over the interest burden on education loans during the ‘moratorium period’— the time when students are pursuing their studies and have not yet begun earning.
As things stand, education loans come with a clause that allows students not to pay interest during their academic life. The interest for this period is added to the principal and payments begin once the student starts working.
Now, under a mega scheme being finalised by the Planning Commission, the Prime Minister’s Office and the HRD ministry, the government will take over the interest burden for the moratorium period, estimated at about Rs 650 crore a year, assuming that five lakh students from families earning Rs 2.5 lakh a year or less avail of the loans. To qualify for the scheme, the student’s household income must not exceed Rs 2.5 lakh per annum. It will be open to students engaged in professional and technical courses at the under-graduate or post-graduate levels.
Broadly, this means those coming from families with a monthly income of Rs 20,000 will get an interest waiver.

1 cheap loan per student: Govt


New Delhi: The new education loan scheme that the government has planned will cost it Rs 4,000 crore for the 11th Plan period. The government, which intends to implement the scheme from the 2008 academic session, also wants to restrict the waiver benefit to one loan per student. So, if you borrow to complete your graduation, don’t expect a similar helping hand for a postgraduate course.
Bankers said that the move would also encourage many banks to lend more freely. In the absence of any clarity on when a borrower starts working, bankers often shy away from extending education loans. Some of them even insist on collaterals although the government has repeatedly maintained that the practice is virtually non-existent now.
The idea is not just to check brain drain from the country but also ensure that the government taps talented students who cannot otherwise afford professional studies because of the high fees.
According to government estimates, there are approximately 50 lakh students in professional courses of which about five lakh students come from families within the income range of Rs 2.5 lakh per year.
In recent years, a large number of students, especially those pursuing MBA courses in India or going abroad for higher studies, have borrowed from banks. According to latest data released by the Reserve Bank of India, there was a 51% rise in education loans—from Rs 9,962 crore at the end of March 2006 to more than Rs 15,000 crore at the end of March this year.
Tax sops have also played a role in accelerating loans and with the government allowing parents to avail of benefits, there could be a further spike in the coming year. Earlier, tax sops were available only if the student borrowed and paid the loan individually on completing his education.
The existing scheme for educational loans, devised in consultation with the RBI and the Indian Banks Association, covers all kinds of courses, including professional courses, in schools and colleges in India and abroad.
Under the scheme, banks provide a loan of up to Rs 7.5 lakh for studies in India and up to Rs 15 lakh for studies abroad.
For loans up to Rs 4 lakh, no collateral or margin is required and the interest rate is not to exceed the PLR, while for loans above Rs 4 lakh, the interest rate will not exceed PLR plus 1%.
The loans are to be repaid during a period of five to seven years with the provision of a grace period of one year after completion of study.



With cheaper loans, the Centre is trying to check brain drain and tap talented students who wouldn’t have been able to afford high fees