Tag Archives: repayment
Facts About Payday Loans And Credit Score
Everybody knows that payday loans and cash advance loans are probably two of the few financial products that do not require credit verifications to qualify for them. Though credit has little to do with the qualification process of payday loans and cash advance loans, there are still interactions between these loan products and your credit score and history. It is very important to know them if you are interested in keeping a healthy financial life.
These interactions may have nothing to do with approval but have implications on the qualification process of other financial products like credit cards, personal loans and even secured loans like home mortgage loans or home equity loans. So, as you can see, it is important for you to know them because your future financial life can depend on the use you give to these loans and their relation with your credit score.
Positive Interaction For Raising Credit Score
It may sound strange but even though payday loans are meant only for an emergency situation, they can be a great tool for recovering your credit if used properly. Since most of the lenders that provide this kind of loans report to all major credit bureaus, it is possible to obtain one of these loans that do not require credit checks and take advantage of the fact that the lenders report to credit bureaus to get positive inputs on your credit history.
Even though the approval of the loan will not have implications on your credit report because no credit checks are made, the timely repayment of the loan will be recorded into your credit history and thus, a positive entry will be added to your credit report. However, bear in mind that payday loans do not have long repayment programs and thus, a single or two entries will be reported during the repayment of a payday loan. Personal loans with longer repayment programs are far better for this purpose, however, you may need to request a few payday loans before you can get approved for a personal loan if your credit score is not that good.
Negative Effects On Credit Score
There are some reasons why payday loans can affect credit score negatively. The mere fact of getting a payday loan will not affect your credit score but if debt keeps accumulating it will affect your debt to income ratio which will, in turn, affect your credit negatively. Thus, you should avoid using payday loans as a common source of financing because that is the main reason why debt accumulates: people fail to raise the money to repay a loan and so, they take another loan to repay the previous one.
Also, payday loan lenders report to credit bureaus, as explained above, and if the timely repayment of the loan gets recorded into your credit report as a positive entry, the lack of payment, or late payment will also be recorded into your credit report but it will affect your credit score negatively. As you can see, just applying for a payday loan will not affect your credit but what you do with it and how you repay it can have either positive or negative effects. Thus, be careful.
Loans-Bane or Boon
Owning a house is a dream of everyone. Majority of buyers look for a house to have a roof of their own while others look to buy a house as an investment option. In India, nearly 70-80% buyers belong to middle class or salaried class and cant afford a house at cash down payment. So, they look out for options like loans. But before taking a loan one should do a little bit research on interest rates, down payment, home loan eligibility etc so that a more cautious approach is taken which can save the buyer from taking any wrong decision.
Here are the things that you need to keep in mind before taking a loan:-
1) Property under construction: Some banks fund under construction property while some do not and that too depends on whether builder is reputed or not. So, consider buying a property from a reputed builder.
2) Ready / resale property: While selecting a ready or resale property, one should always keep in mind to take proper registered documents from the seller declaring his ownership. Besides that, one must check the condition of property and if it is urgent to buy a property on cash down payment, one can get some discount on that property.
3) Pre-approved property: Some major builders get their property approved from certain banks. These banks maintain the record of legal title documents and if somebody wants to buy the same property, the banks do not recheck documents. The banks and builder agree on a time period and takes into consideration a time when the project gets completed and then banks approve a loan and release payment after reviewing the construction site and banks take no liability if property is not completed on time.
Some Important terms you should know:-
Loan Amount eligibility: This is the amount which one receives from the bank but this depends on factors like cost of property in India, income of buyer and repayment track record i.e. will he / she be able to pay the amount back
Joint Loan: You can also take joint loan by clubbing with your wife or any relative. This increases your loan amount eligibility and in this way both become joint borrower of the loan. It increases the chance of increasing loan repayment by seeing their income.
Fixed and Floating rate: These are the various modes of interest. As the name suggests, fixed rate remains fixed during the entire period of loan whereas variable or floating rate depends upon the market condition and keeps on increasing and decreasing and monthly installments remains the same but repayment period varies.
Flat rate: The flat rate of interest is charged for the entire period of loan irrespective of payments. For instance, if somebody has availed a loan of five lakhs for five years, the rate of interest will be charged on five lakhs for five years and it will not depend on repayments of that person.
When taking a loan, one has to pay 15% of amount as down payment for a property and for rest 85% balance, one can avail loan for. Also, you can get certain tax benefits from it. Ones loan repayment period varies and depends upon the type of loan taken. The monthly EMI, which you have to repay, is divided into principal and interest. One can avail tax benefits by showing interest as a loss and it works like deduction. Also, once a person starts repaying loan amount, he / she should not miss their monthly installments. If one starts doing that, he / she will come in defaulter category and penalties will be imposed and it will effect your credit history so remember to make your payments on time.