Living on borrowed money?

Living on borrowed money? Here are some early indications of a debt trap

Easy availability of loans and a little push from the lenders make many of us reckless in borrowing without much thought on the repayment ability.

Most of us avail of loans of some kind or the other, be it a home loan, a car loan or consumer finance loans to some big-ticket purchase beyond our financial ability. Even your credit card spend is a loan availed for a short duration which you need to pay in time to avoid spiraling interest burden.

However, easy availability of loans, including quick disbursal of personal loans and a little push from the lenders make many of us reckless in borrowing without much thought on the repayment ability. Deferring loan payment on a regular basis or juggling with loans can add to your long-term debt burden and could land you into a ‘debt trap’ from which you might find difficulty in extricating yourself.

The Fundamental Guide To Avoid Falling Into a Debt Trap

Image Credit: dollaars.com

But what are early indications of your sliding into a debt trap? “You should not have too many loans in your name such as a combination of home loan, personal loan and a top-up loan, There are instances in which individuals opt for personal loans to pay their rents or kid’s school fees. If you are forced to borrow to survive, you are almost in debt trap,” says Sushil Jain, National Head, Financial Planning, Bajaj Capital.

Know Your Fund | Every category of funds have their own risk associated with them as per their holding period, where failing to invest as per the benchmarked time horizon, one may lose money instead of making good returns. Therefore, one should keep few things in mind to make a good amount of wealth in long run.

Jain says the first signs of a looming debt problem is inability to pay off one’s dues on time. “Most individuals do not take this situation seriously,” he said.

The other signal is if one’s emergency fund is running out. “Your emergency fund should be three times of your Monthly expenses. This is the first indication of the debt trap,” he said.

Adhil Shetty CEO and Co-founder Bankbazaar.com says the first sign of a debt problem is inability of pay off credit card dues. “Often, individuals pay the minimum balance on their credit cards. While this lets you get away by paying a small amount at one time, the debt will multiply over time. The interest rates on credit cards are very high at around 40 per cent, and the inability to pay off the bill is very expensive. If you cannot repay your bill by due date, you need to sit back and evaluate how you can clear such high-cost debt,” Shetty said.

Amar Pandit, Founder & Chief Happiness Officer at HappynessFactory.in says one should be start looking at debt carefully when if no bank is willing to give you further loans. Besides this, he says some of the signals of an impending debt trap are:

  • Inability or a stress on cash flows to pay your credit card bills, EMI’s etc.
  • Paying one loan with another.
  • Using credit card for paying basic expenses.
  • Monthly expenses are exceeding monthly income.
  • Dipping into your emergency corpus for general expenses.

This article originally published on: moneycontrol.com

Tax saving investment

Tax Saving Tips for Salaried Employees Under Section 80C, 80D, 80CD

Income Tax Returns (ITR) filing: Make the most of tax saving instruments under section 80C, 80D, 80CCD. Come December, there is a rush among salaried employees to invest as they have to submit proofs to their employers.

Tax saving salaried employeesCome December, there is a rush among salaried employees to invest as they have to submit proofs to their employers. In order to get tax benefits on investments and insurance, a tax payer can invest up to Rs 1.5 lakh in Public Provident Fund, Employees’ Provident Fund, National Savings Certificate, life insurance premium, five-year deposits in banks or post office and equity-linked savings schemes.

Under section 80D of the Income Tax Act, 1961, one can take health insurance for up to Rs 25,000 for self, spouse and dependent children. One can get tax reduction of Rs 5,000 on preventive health checkups annually. Also, additionally health insurance premium paid for parents is tax deductible up to Rs 25,000. And if the taxpayer’s parents are senior citizens (60 years and above) then the maximum allowable deduction is Rs 30,000.

Under Section 80CCD, a taxpayer can also invest up to Rs 50,000 a year in National Pension System to get tax deduction. This is above the limit of Rs 1.5 lakh under Section 80C. Also, under Section 24 of the I-T Act one can get tax benefits of up to Rs 2 lakh a year on home loan interest repayment for a self-occupied house.

In order to make tax-saving investments earn higher returns in the long-run, one must look at equity-oriented financial instruments like equity-linked savings scheme (ELSS) of mutual funds and National Pension System.

Equity-linked savings scheme
With the stock markets gaining new highs, ELSS of mutual funds are increasingly finding more takers.

Data show that ELSS category has reported an annualised return of over 18% in the past five years, which is double than most of the debt-oriented tax-saving instruments. If a tax payer invests up to Rs 1.5 lakh in ELSS in a year, then he can save as much as Rs 46,350 in taxes a year in the highest 30% tax bracket.

In ELSS, an investor will not have to look at the performance of individual stocks regularly as the investment is done in diversified stocks and sectors. The funds have a lock-in period of three years, which is the lowest lock-in period as compared to other tax-saving instruments like Public Provident Fund, National Savings Certificate and 5-year bank fixed deposits.

Rupesh Patel, fund manager, Tata India Tax Savings Fund, says ELSS is a good option for an investor to take exposure to equities as it comes with an added benefit of tax savings on investments up to a specified limit. “To benefit from the compounding effect, one has be patient and remain invested during market ups and downs. Even in ELSS category, instead of investing through lumpsum, informed investors do prefer to invest through SIP route, which gets reflected in increasing proportion of SIPs in ELSS funds,” he says.

Income Tax Return Filling India

National Pension System (NPS)
It is an ideal investment tool for retirement planning. For non-government employees, up to 50% of the contribution can be invested in equities (index funds) and the rest between corporate and government debt paper. It works like a mutual fund, as one buys units of the fund at a certain NAV. There are two ways to get higher tax benefits in NPS—employer contributions to your NPS account and self-contributions.

Under Section 80CCD, a tax payer can investment up to Rs 50,000 to get tax benefit, which is over and above the benefit available on Rs 1.5 lakh under Section 80C. However, one should try to invest more to create a sizeable corpus for retirement needs.

Also, if the employer contributes to the taxpayer’s NPS account, he gets to claim tax benefits. Contributions made by employer are allowed under Section 80CCD(2). This deduction does not have a monetary restriction, but the total deduction claimed for amount contributed by the employer should not exceed 10% of your salary. Employer can make this contribution apart from contributing to EPF. However, this will reduce one’s take-home pay, but will save on tax and create a corpus for retirement needs.

At the time of maturity after the age of 60, an investor will withdraw 60% of the corpus including the returns and invest the rest for compulsory annuity. One has to pay tax on 20% of the withdrawal. Products like PPF and EPF are tax-exempt at all the three stages — investment, accumulation and withdrawal. Subscribers of NPS Tier-1 account can now make tax-free partial withdrawal of up to 25% of contributions for certain specified circumstances after 10 years of being in the scheme.

Source: financialexpress.com

How is monthly lumpsum investment different from monthly SIP?

Is doing an SIP any different from making a lumpsum investment yourself every month? (financial benefits?)
-Rohan Suri

If we understood you clearly, you want to know the difference between investing a fixed amount every month versus investing the same amount every month via a Systematic Investment Plan (SIP). Well, as an investment strategy both methods are the same. If you can invest every month without fail, you will benefit from rupee cost averaging (that is, it helps you to average your purchase cost).

Systematic Investment Plan

However, there is a world of difference between the two when it comes to practice. The money automatically gets invested in a mutual fund scheme every month through an SIP, whereas you have to take the time and invest the money yourself in the second method. Are you disciplined enough to do it without fail month and after month? Are you sure you would make the investment, irrespective of the market conditions? In fact, many studies have found out that very few investors can actually do it. Market conditions and spending habits have a huge impact on investments. Some investors overshoot their budget and fail to invest. Some investors get scared by the market and postpone their investment. An SIP helps investors avoid such traps.

OLA and UBER Drivers strike in Mumbai on December 10r

Ola and Uber drivers are calling for an indefinite strike in Mumbai on December 10

Driver partners associated with online taxi-hailing companies Ola and Uber are calling for an indefinite strike in Mumbai on December 10. The drivers were protesting against falling incomes and driver suicides, reports VCCircle. The publication said that pamphlets were circulated for the strike and said that they would carry out the protest at their offices in Andheri.

The call for protest comes in the backdrop of the Maharashtra government saying it will fix both minimum and maximum fares for app-based taxi companies during the winter session of the state’s legislative assembly.

Ola-Uber Driver Strike Mumbai 10 Dec 2017

Image Courtesy: Inc42

VCCircle added that there was concern among the drivers as three drivers committed suicide as they were unable to pay EMIs for their cars. Meanwhile, leaders in the protest said that 500-450 have confirmed participation in the protest. MediaNama has written to Ola and Uber and will update once we hear from them.

Falling earnings

Over past year, there have been numerous protests across the country and both Ola and Uber have tweaked their incentive plans which led to reduced incomes.  MediaNama reported that drivers were are not able to make their ends meet or pay EMIs for their car loans. In February, we saw the first instance where an Ola driver tried to kill himself by consuming poison in a strike in Bangalore. Ola and Uber encourage drivers to buy cars on loan. Many drivers bought cars as they were lured by higher incomes the companies offered in 2015 and 2016 when the companies were starting their operations.

Drivers MediaNama spoke to said that in 2016 and 2015, they had monthly earnings of Rs 85,000 and Rs 70,000. Now their earnings have fallen to around Rs 51,000. The driver recordings and interviews show that drivers are now earning around Rs 1,700 per day and they say that this barely covers the cost of fuel and servicing of their cars. If a driver earns Rs 1700 a day for 30 days, his income is Rs 51,000. Their monthly loan EMI ranges between Rs 11,000 to Rs 16,000. Their car maintenance and fuel set them back by at least Rs 500 to Rs 700 each day. Even taking Rs 500 as an average, their monthly expenditure for this comes to Rs 15,000. Drivers say that the cab aggregators take a cut of almost 30% (20% commission plus taxes including VAT) on Rs 1700 which comes to Rs 340 each day.

Source: medianama
By   ( @KJshashi shashidhar@medianama.com )

keep your credit card safe from hackers

Learn how to protect your credit card online

Keep your credit card details away from prying eyes and avoid fraudulent transactions with these tips for shopping online.

How to keep your credit card details

It pays to protect yourself when shopping online to avoid getting more than you bargained for.

With high-profile data breaches potentially affecting millions of people, here are some card-specific tips to keep in mind when virtually swiping your plastic.

The basics

  • Use a credit card. Debit cards often don’t have the same level of fraud prevention and protection
  • Only enter details on secure sites. Look for an https connection and valid security certificates
  • Don’t send credit card details over email or social media
  • Keep your antivirus software and browsers up to date
  • Avoid clicking through on deal links from emails as it may be a phishing attempt
  • Read more tips for shopping online safely

Turn on your credit card’s added layer of security

Many credit cards will have an additional layer of security that might not be enabled by default. MasterCard’s SecureCode is a one-time code you enter every time you make a transaction on a supported site.

Verified by Visa also requires a passcode to authorize a purchase. On top of these safeguards, some banks also have their own verification system in place that works in place of SecureCode and Verified by Visa. This may include the bank sending a one-time PIN or security code to your phone as a second layer of authorization. Check with your bank or financial institution to see if one of these options is available.

Both Mastercard and Visa offer Zero Liability protection against fraudulent transactions for both online and offline use.

Consider a separate card for online transactions

For those who want to keep online purchases completely separate from everyday credit card transactions, prepaid cards are one option.

They allow you to load a set amount of money at the time of purchase. The advantages are plentiful when it comes to using a prepaid card for online shopping, but the big one is that even if the card’s details are compromised somewhere along the chain, there is a limit to the amount of money that can be taken.

Virtual credit cards

Some banks and financial institutions let you generate a virtual credit card number. This is a single-use number linked to your real card that often has a fixed spending limit and an expiry date. Even if a merchant is compromised and your details are exposed, thieves only get this temporary number. Bank of America calls this ShopSafe and Citi’s version is Virtual Account Numbers.

A third-party option is Privacy, a browser extension for Chrome that links to your bank account. Click the icon in the Chrome toolbar to generate a virtual card on demand and load it with an amount of your choosing. You can create burner cards so numbers self-destruct after use. Privacy is currently only available in the US.

A payment system such as PayPal, Mastercard Masterpass, Visa Checkout, Amazon Pay or Apple Pay can add an extra layer of protection between you and the merchant. Your payment details aren’t revealed to the store when you use one of these services.

Watch statements for any unusual transactions

While many banks have sophisticated 24/7 monitoring systems designed to detect fraud and unauthorised credit card use, it’s important to keep an eye on your financial statements. If you spot anything suspicious, call your bank immediately.

Hamid Karimi from Beyond Security also suggests letting your bank know where you do your online shopping and to block certain geographies. “For example, if you live in the US, a purchase conducted in Eastern Europe is illegitimate,” he says.

Check your browser settings

Turn off your browser’s autocomplete settings to avoid it storing your credit card number or personal information.

In Chrome, go to Settings and select Advanced. Under the Passwords and Forms section, click Autofill settings. Delete any credit card information that is automatically stored, then toggle off the option to use autofill.

Autofill Setting Online Credit Card Transaction

Image Courtesy: http://www.cnet.com

In Firefox, go to Preferences. Find the Privacy panel and look for the History drop-down box. Choose Use custom settings for history then uncheck Remember search and form history.

In Safari, go to Preferences, AutoFill. Uncheck the options to remember form data, including the credit card option.

Autofill web forms online credit card payment

Image Courtesy: http://www.cnet.com

In Edge, select the More Actions button, then Settings and View advanced settings. Uncheck the save form entries toggle.

Be sensible about where and how you use your card

Reduce the chance of falling victim to a large-scale breach by not allowing the retailer to store your credit card details. Enter your credit card details each and every time you make a purchase.

Make sure to use a separate password for every account you make with an online retailer. A password manager is the easiest way to generate and store unique passwords across sites.

It might sound obvious, but don’t type your details out in public view where people can see your screen. Also, avoid connecting to public Wi-Fi networks if you’re shopping on a mobile device and use your cellular data instead.

Be on the lookout for fake apps

Not every app is legitimate, especially when it comes to retail apps. Double-check before downloading to make sure it’s from the real merchant. A lack of reviews on the app store, typos in the description or app itself could be red flags. Apps that ask for you to grant excessive permissions, paid apps, or those that ask for your credit card details immediately are also warning signs. Here are some more ways to identify fake apps.

Story Courtesy: cnet

NBFC Targates in INDIA

Small Businesses to Build Loan Book – NBFCs Targeted

Lending to MSMEs to see compounded annual growth of 11% over the next two fiscal years: Crisil

While banks took a cautious stand in lending to the MSME segment due to the steep increase in NPAs, a Crisil study shows that NBFCs have been aggressive in lending to this segment, registering a four-fold increase in their MSME credit book over the past five years.

The integrated research house expects non-banking finance companies to outperform banks in the next two years.

“Opportunities to lend to SMEs is huge but continuous tracking of sectors is crucial for managing risks,” the study says.

Crisil has forecast a compounded annual growth of 11 per cent in lending to micro, small and medium enterprises over the next two fiscals, way higher than the 7 per cent growth anticipated in bank credit to India Inc.

NBFC-India

Image Courtesy: indiatoday.intoday.in

MSME LENDING MARKET SIZE

The current MSME lending market size is estimated at around ₹14 lakh crore.

“While competition has intensified and asset quality weakened, the overall opportunity remains compelling, given the huge under-penetration of formal finance in the segment.

“Sharper focus on small-ticket loans, adoption of technology and data analytics and giving greater thrust to smaller towns and cities would give the NBFCs an edge over banks to lend to this segment,” the report notes.

Recommendation: Check Online Your Eligibility For Business Loan

Citing an example, Prasad Koparkar, Senior Director, Crisil Research, said: “In loan against property, the net margins have compressed 75 basis points in the past two years. Financiers have been trying to protect their return on assets by focussing on unsecured loans and loans of smaller ticket size where yields are relatively high.

“And such unsecured loans have accounted for 20 per cent of the MSME portfolio as at end-March 2017 (for non-banks).”

Following demonetisation, asset quality has worsened due to demand-side pressures and liquidity issues. In 2017, gross non-performing assets across lenders increased 70-100 bps.

According to the study, with GST compounding the challenges for MSMEs, especially the unorganised lot, the asset quality could deteriorate before getting better. Given the rapidly changing business milieu and variation in business prospects across sectors and geographies, financiers will need to have a structured decision-making approach and continuous monitoring to manage risks.

“The business potential for MSME units from the same industry but different clusters could vary significantly,” said Ajay Srinivasan, Director, Crisil.

Source: thehindubusinessline.com

all time financial management

Personal Loan Applying First Time Easy Credit

At 31, Mumbai-based Hardik R Thakker is a veteran of mastering loans. Don’t scorn at the thought of the 31-year-old being attributed as a veteran; his first loan was for his education and then he borrowed when he was about to get married to tide over the mounting wedding expenses and now, he has taken a loan for his dream house. “These days, banking service has become so efficient that I had to just call my personal banker and tell him about my requirement and the rest was taken care by him,” beams Thakker.

How scores of Indians are smartly using easy access to loans to realise their financial dreams

Thane-based Dhanse family of five spreads over three generations – Rukhsar, her husband Yasin, their two sons who are 22 and 20 and Yasin’s mother. “We bought the car as a gift for my son on his birthday. We live in Thane, where it is not easy to hail an auto at will. We felt the need for our own car due to the poor state of public transport,” rattles Rukhsar. They bought a Toyota Etios in 2014 and are happy with their choice of car and the loan. “The EMI is convenient and the car helps us commute easily,” she adds. In Pune, 35-year-old Amber Sironzkar is a man possessed with his dream of buying MacBook Pro. “Last year, I just felt the urge to buy what I was aspiring for long—the MacBook Pro for Rs 64,000, because the deal sounded just right and it was easy to avail an enticing offer from Bajaj Finance,” he says. For him this option was the best way to buy a product of his dreams, with an easy payment option. “The loan process was swift. The processing was complete in a short time, with an ECS Mandate form, one cancelled cheque, and a KYC document, along with one recent salary slip. With an easy four-figure monthly EMI, I was able to take my favorite machine home,” adds Sironzkar.

easy access to loans to realise their financial dreams

Image Credit: outlookindia

Making loans work for you

With the growth of consumption based spending, the need for loans for various goals has grown ranging from vehicles and weddings to tablet and smartphones. Today, personal loans have certainly made life easier and simpler as it is a great way to handle unexpected bills, improve your home, make a large purchase, or perhaps assist with education expenses. The loans are getting easy to get because the lender-customer relationship, especially for unsecured loans like personal loans, is being validated with several parameters other than the credit score. Then, the access point for loans is spreading; you don’t need to visit the bank or the NBFC.

You don’t need to apply for a loan and wait endlessly. In the case of borrowing for consumer goods and cars, most manufacturers and distributors have tie-ups with lenders who are stationed at the point of sale to facilitate the loan.

As for personal loans, your existing banking or financial dealings with an NBFC or the usage trail of a credit card makes it easy to borrow. While financial institutions follow a stringent process to ensure that borrowers can repay the loan, the borrower too must accurately judge and be confident of their ability to repay. Says Veetika Deoras, chief operating officer – Digital Head, Tata Capital: “A consistent employment record, residence stability, and adequate documentation are elements that help an individual secure a loan at a good rate. Technology is helping make the loan process a breeze for customers by providing an easy, fast, convenient and 24×7 way to apply for a loan.”

And, credit card users also get the option to break down their purchases into EMIs. Almost every online purchase above Rs 5,000 whether it is a mobile phone, home appliances, furniture or even travel tickets can be broken down into EMIs at the time of purchase. One can just click on the EMI option and see the amount of EMI and interest to be paid for a particular credit card which depends on the loan tenure whether it is 3 months, 6 months, or even up to 2 years in some cases.

Prudent borrowing

Just because loans are easily available, one should not err into borrowing too much and face difficulty in repaying a loan. There are several indicators to arrive at what could be an ideal borrowing. For instance, a good indicator on how much you could borrow should be the amount of money that goes towards servicing the loan from your salary. A debt servicing ratio of less than 35 per cent is preferable. This means, 35 per cent of your income goes to pay the debt off by way of EMI. This ratio would vary across individuals, but ballpark this is a good indicator to know how much money goes towards servicing all forms of debt that you have.

“One has an income and then there are expenses and also, one needs to keep 20 per cent for contingencies. From the surplus cash one has the option of going for loans—housing, personal, car etc. But, one should remember that one should never take into account income that is not regular. Also one needs to keep in mind other commitments like SIPs and annual insurance premiums,” says Rakesh Makkar, head of business, marketing and CSR, Fullerton India. It is for this reason that most borrowers seek your bank statements to assess the money that is going towards servicing debts to ascertain your ability to repay the loan.

These days, access to Aadhaar and the Internet has meant that one cannot create fake identities for the sake of borrowing. There was a time when one could fudge bank statements and even income tax returns with the intent to cheat lenders. The credit bureaus have ensured there is practically no room for such fraud. The flipside to such robust data-driven assessment also means that if some records are erroneously marked, the onus is on you to get your records straightened with the institution where the records have not been updated or cleared.

Says Anil Ramachandran, head – marketing and communication, and head – retail unsecured assets, IndusInd Bank: “Yes, getting a personal loan without established credit history is difficult, however for our own clients who have strong banking relationship with us, we do offer appropriately customised personal loans based on their relationship with the bank, employment etc. Other than this, such clients have an option to avail secured credit card among others as well.”

However, that may not be the case in semi-urban and rural areas. Says Ramesh Iyer, vice chairman and managing director, Mahindra & Mahindra Financial Services: “We cater to people mostly in semiurban and rural market. And here, there is no CIBIL score, therefore the applicant factors should be very healthy factors in the sense that he has to pay his instalment on time, so that the reputation risk is well-maintained.”

At the time of festive season, several re-sellers and lenders have got into tie-ups by promoting 0 per cent interest, which is attention grabbing. However, do not be blinded by such deals, because such deals do not have the option for a cash only sale, which would otherwise allow you to arrive at the real cost of the deal. So, no matter how tempting these loans appear and are easily available, even at low interest rates—you should know that all loans include processing fees, hidden costs, and a repayment cost by way of interest. After all, who will offer you a product at a loss? Keep this mantra handy before you embark on your borrowing journey.

Source: outlookindia