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Why Should You Invest In SIP – Know The Benefits

Systematic Investment Plans (SIPs) are a mode of investment in mutual funds, an alternative to lump-sum investment. Most investors are often confused if SIPs are a type of mutual fund scheme or whether it is any different type of investment other than mutual funds. Well, it is important to note that SIPs allow investors to invest periodically where you can buy units of a mutual fund scheme every month by investing some amount.

 

What is a SIP?

SIP refers to the Systematic Investment Plan where you can invest a small amount at regular intervals in a mutual fund (MF) scheme. Each time you invest, you buy more units of the scheme and you can set a date for auto payment. You can start and stop the SIP any month, without any charges or fees, unlike the Recurring Deposits, where they charge you for premature closure. You can also skip the SIP installment and then continue from the next month without paying any additional charges.

 

Benefits of SIP

With a SIP, an investor enjoys not only the benefits of a mutual fund scheme through its returns but also gains some additional advantages. SIPs have certain benefits over lump sum investments as explained below:

 

Power of Compounding

One of the most advantageous features of SIP is the power of compounding. Each time you make a payment, you buy more units, which generate returns on your investment. These returns are further reinvested in the scheme and hence, investors benefit from the effect of compounding. If investors start investing early and stay invested for a long time, they will reap optimum returns from the SIP.

 

Rupee Cost Averaging

Investors tend to invest in schemes that seem profitable and have been performing well. Usually, when they outperform the benchmark, more investors invest, thereby increasing the NAV (per unit market value) of the mutual funds. Investing in a lump-sum mode means buying lesser units at high prices. But due to market upheavals, the stocks and the returns also rise and fall. The prices of mutual funds units fluctuate. Through SIP investment, the cost of the total units purchased by the investors as long as they continue the scheme is averaged out. When prices are high, fewer units are bought and vice-versa. This is called rupee cost averaging. This is a benefit unique to SIP and not to lump-sum investments.

 

Light On Pocket

SIP is light on the pocket because you do not invest a huge amount at once but contribute small amounts at periodic intervals. You can also skip the installments when you are running short of money and increase/decrease the monthly SIP amount as per the requirement and financial conditions. Beginners can start with amounts as low as Rs. 500, which makes it convenient even for students and young earners with low-paid/part-time jobs to invest.

 

Flexibility

SIPs are flexible not only because you can start or stop them anytime or skip an installment but also because you can make changes in the SIP amount. It also offers the flexibility to withdraw money partially or fully without any charges or discontinuing the scheme. This way it can serve as an emergency fund where the money is credited into the bank account once you request the withdrawal. Moreover, several types of SIPs like ELSS and ULIPS are tax-saving and insurance-cum-investment plans respectively. Some schemes also allow investing bi-monthly or fortnightly and allow you to opt for ‘Step-up SIP’ which will uniformly increase the installment amount.

 

Saving Discipline

SIPs inculcate a habit of regular saving and investments. In fact, you can set a date for auto-debit from the bank account to invest in a scheme and this way you develop a disciplined habit of investment. Every month, you end up contributing a small part of your income to investments that can reap you good returns. It will help you build an inflation-beating corpus in the long run.

 

Wrapping it up:

Systematic Investment Plans or SIPs are a mode of investment in mutual funds where the investors do not buy units at one time paying a lump-sum amount. Rather, they invest through installments paying small amounts periodically. This helps them to stay invested in mutual funds by dedicating a small part of their income which is light on their wallet. Also, it averages out the total costs of the scheme’s units purchased and has a compounding effect on returns. The flexibility and the low minimum amount of SIPs make it convenient for small investors.

 

Source: Paytm

Commonly Used Health Insurance Terms and its Meaning

Understanding the terms and conditions of a health insurance policy seems like rocket science to many out there. However, it is always wise to have a knowledge of all the jargons your agent uses at the time of discussing health insurance plans. Here is our list of commonly used health insurance terminology:

 

Certificate of Insurance

This is the description of all important factors of the health insurance plans like coverage, cash limit and including benefits.

 

Co-payment

It is the number of hospital expenses that the policyholders agree to pay above the reimbursement cost that an insurer pays. The option of co-payment comes an advantage of a lesser premium.

 

Cumulative Bonus

The increase in the amount of Capital Sum by a certain percentage for each claimless year is a cumulative bonus. It never exceeds more than 50% of the Capital Sum. They increase the coverage amount and offer better protection to the health insurance holder.

 

Deductible

It is the amount of money that the insured must pay every year before consuming the benefits of their respective health insurance policies.

 

Grace Period

It is the time policyholder get for premium payment to the insurance company even after the due date.

 

Free Look Period

It is like a window given to the policyholder to review the benefits of the policy. In case of dissatisfaction, the insured can cancel the policy to get money back. It generally lasts for 15 days from the purchase of the policy.

 

Long-Term Care Policies

They differ from traditional health insurance plans as they are designed to provide a long term cover for services and support to individuals above age 65 for activities like custody care, nursing care or home health care services. They reimburse the holders a daily amount for such services. They are more flexible with more options than other policy programs.

 

Long Term Disability Insurance

They are designed to protect the future of the holder in case he/she loses his ability to work due to physical disability. They replace the portion of the individual’s income.

 

Maternity expenses

With a certain waiting period, some health insurance plans provide coverage for maternity expenses. One can reduce the waiting period by paying more premium.

 

Portability

If the policyholders discontinue paying a premium when they switch to another insurer or a fresh plan with the same insurer after encountering an issue with the current policy, they may lose certain benefits of the policy. The portability protects the policyholders from this loss. This is the right rendered to the policyholder (including family cover) to transfer credit acquired from pre-existing terms and time-bound exclusions. It works only when the previous policy is preserved without break in the premium.

 

Reasonable Charges

These are the charges mentioned on the hospital bills. Generally, insurers prefer paying reasonable charges and not the additional expensive services the insured get from the hospital.

 

Sum Insured

It is an annual maximum amount that the insurance company pay in case of hospitalisation.

 

Source: Reliancegeneral

Useful Car Insurance Add-on covers that can boost protection for your vehicle

Car insurance is considered an effective tool to financially protect your car from risks such as road accidents, vehicle theft or third-party liabilities that may occur while driving. While having a valid third-party (TP) car insurance is mandatory for all vehicles plying on Indian roads, few owners are aware that in a standard comprehensive car insurance only an own damage (OD) cover is payable. Other losses like engine damage due to floods or depreciation on value of parts replaced are not covered in own damage cover, which can significantly increase the owner’s liability in many scenarios. Let us have a look at a few indispensable car insurance add-on covers that are recommended to enhance the overall financial protection for your car and to ensure you enjoy a stress-free ownership experience.

 

Nil Depreciation Cover

As your car ages, its value depreciates with time, and you may not be able to recover the full cost of replacement of car parts. At the time of insurance claim, this results in partial recovery of the cost of parts replaced and can lead to a substantial liability in case of medium to major damages. A Nil Depreciation add-on cover protects you from this depreciation and expands coverage of repair cost to the fullest extent possible.

 

Engine Protection Cover

While modern cars are considered to be highly reliable, there are susceptible to hydrostatic lock related damages when the car is driven through flooded areas which can lead to huge expenses. Choosing an engine protection add-on cover assists in recovering the cost of repairs to your car’s engine in such situations and also includes scenarios where engine damage arises out of leakage of lubricant oil in case of underbody vehicle damage.

 

Return to Invoice

If your is stolen or damaged beyond repair, it can cause a lot of mental stress and burn a big hole in the pocket. A Return to Invoice cover (RTI) add-on cover provides full reimbursement of the final invoice value of the car in such situations.

In addition to the above add-ons, other important covers include EMI protection, Consumable cover, No Claim Bonus Protection cover, Tyre, Key & Rim protection cover. It is advisable to compare car insurance policies on more than cost grounds and opt for these add-on covers as per car’s requirement and protect yourself from myriad expenses that can occur in different driving conditions.

 

Source: Reliancegeneral

Should You Buy Health Insurance At A Younger Age?

Yes. You should definitely buy a health insurance policy at a younger age. If you can afford it, you should buy health insurance as soon as you turn 18 years old. Take a look at some of the reasons why buying health insurance at a younger age is a great idea:

 

1. Lower Premiums– Your age is one of the most important factors that determine your health insurance premium. Insurance companies consider younger people healthier and so, are a lower liability for them. On the contrary, older people are more vulnerable to ailments and thus, are a greater liability to the insurance provider. As a result, the lower is your age, the lower will be your premium amount.

 

2. No Pre-policy Medical Check-up– If you apply for a health insurance policy at a younger age, you will not be required to undergo a medical check-up before buying the policy. This prevents the insurance company from discovering any disease/ medical condition that may increase your premium. But this option is mostly not available for people above 45 years of age and their premium amount is determined based on their medical check-up report.

 

3. Easier to Get Over Waiting Period– Every health insurance policy comes with an initial waiting period of 30 days. Younger people are less likely to raise a claim during this period as their probability of having any serious medical condition is very low. Therefore, they can wait out the initial waiting period with ease. The same cannot be said for elderly people as they may face a medical emergency within days of buying the policy but will be unable to raise a claim during the waiting period.

 

4. Earning Cumulative Bonus– Most health insurance plans provide a cumulative bonus for every claim-free year. This bonus can be used to enhance your sum insured amount for no additional cost. A younger person is more likely to be fit and may not need to raise a claim during the policy year. This way they can easily earn cumulative bonus over the years. But older people may need to raise a claim owing to their age-related medical conditions making it difficult for them to earn a cumulative bonus.

 

5. Financial Freedom– The basic purpose of health insurance is to pay your medical expenses. With a health policy, you end up saving a lot of money on medical expenditures, especially those arising due to a sedentary lifestyle. Otherwise, you would have to pay for these expenses from your own pocket. Thus, the sooner you buy the policy, the more financial freedom you can enjoy.

 

When Is The Right Time to Buy A Health Insurance Policy?

The right age to buy a health insurance policy is in your mid-twenties and early thirties. At this age, you will most likely be in your best health and will be free of any financial responsibilities of your family. Let’s take a look at the outcome of buying a health insurance policy at different ages below:

 

Buying Health Insurance in Your Twenties:

If you buy a health insurance policy in your mid-twenties, you will be able to pay its premium easily as you won’t have any financial pressure. Your premiums will be affordable, which will allow you to opt for the best coverage as per your insurance needs. You will be able to afford additional coverage such as maternity insurance and get over its waiting period in case you plan to start a family in the coming years. Moreover, you can get a lifetime renewal facility and earn a cumulative bonus with ease.

 

Buying Health Insurance in Your Thirties:

If you decide to buy a health insurance policy in your thirties, you are most likely to opt for a family health plan. You may be planning to settle down and start a family at this age if you haven’t already and would want coverage for your spouse & children as well. Further, you may want to buy additional covers for diseases, such as heart ailments, whose symptoms are known to start showing at this age. Thus, the likelihood of your health insurance premium increasing and raising a claim is greater in your thirties.

 

Buying Health Insurance in Your Forties And Fifties:

If you are thinking of buying a health insurance policy in your forties and fifties, you would need to opt for higher coverage. Your financial responsibilities will be the highest at this age and you may have developed certain ailments like diabetes, high blood pressure, cancer, etc. As a result, you may have to opt for wider coverage with critical illness and sum insured enhancement benefits. Your premium will no doubt be very high at this time. You may opt for a family floater coverage to reduce your premium to some extent but it will still be pretty high.

 

Buying Health Insurance after Turning 60 Years Of Age:

If you are buying a health insurance policy after turning 60 years old, you will have to pay a hefty premium amount. You are most likely to face severe health ailments during this age, which may need long-term treatment and hospitalization. A basic health policy will not be sufficient at this stage of life and you may require a senior citizen health insurance policy. They will come with a higher sum insured and provide coverage for AYUSH treatment, domiciliary hospitalization, organ donor expenses, etc.

 

In A Nutshell

 

The right time to buy a health insurance policy is as soon as possible. The sooner you buy, the better it is for your pockets. Make sure to compare different health insurance plans online on Policybazaar.com to choose the best policy within your budget.

 

Source: Policybazaar

Everything About Corporate Mediclaim Policy

​​​Emergency, unplanned expenditure can cross anyone’s door. Medical emergency is one such event which leads to unforeseen expenses. Medical emergencies can leave one in a financial contingency like situation. Hence, there’s a need of health care insurance​ plan.

 

In India, healthcare insurance plans are offered by both public and private sector companies. Thanks to the long list of healthcare insurance providers, that today individuals have a variety of health insurance plans to choose from.

 

Primarily, health insurance can be categorized in three types:

1. Health Insurance
2. Critical Illness Insurance
3. Personal Accident Insurance

 

Apart from these basic types of health insurance in India , another type of health insurance plan we see is corporate plan. This type of health insurance policy is provided by employers (public or private) to all its employees. The premium amount of such insurance plans is comparatively very low. However, such policies come with too many limitations.

 

For instance, it is valid only till the employee is employed with the company. In many cases, health insurances offered under corporate plan do not cover facilities like Daycare treatment, or tests and diagnosis. It only covers the hospitalization cost, also there could be chances that your corporate plan may offer only reimbursement facility and not cashless hospitalisation.

 

Moreover, the sum insured offered under corporate health insurance​ plan may not always be sufficient to cover your medical expenses.

 

Therefore, in order to beat the rate of inflation and rising cost of medical expenses, it becomes very essential to cover yourself under a healthcare insurance plan out of your corporate plan.

 

Source: Reliancegeneral

Tips for a Fire Insurance Claim

As the fire becomes an increasingly prevalent threat, insurance companies are trying to cut the corners on fire insurance claims for saving money. The increasing threat of fires makes it very essential to familiarize yourself with the claims procedure and how to file fire insurance claims. An insurance claim, if filed correctly, permits you to get reimbursed when you lose your property in a fire.

 

Losing your belongings and home to a fire is a devastating experience. The last thing you want is your homeowner’s insurance company delivering you a hard time regarding your claim. Listed below are some tips that you can follow when dealing with your homeowners’ insurance company regarding fire insurance claims.

 

Make use of Available Financial or Resources Advance

 

In case of a fire occurrence, you may have been forced to vacate the space and search for temporary shelter. If you do not have sufficient money in hand to buy the essentials, you can approach the insurer to extend some financial help in advance. However, the amount released as an advance payment will be fixed with the total claim later, only if the insurer has such a facility.

 

Estimate The Loss

 

It is important to calculate the loss to get reimbursed fully. Try keeping a track of the losses incurred after the loss. While doing so just make sure that

 

• Not to repair the damage infrastructures

• Not to dispose of the burnt items

• Keep the proof of lost or damaged items

 

Approach To The Insurance Provider and File A Claim

 

It is suggested to inform the insurance provider as soon as a fire incident occurs. You can either write them or call on their toll-free number informing them about the loss and ask them to access the loss. You may require to submit evidence of loss claim indicating the damaged or lost items. The claim request should contain the listed below items

 

• Type of damage or loss

• Date of loss

• Description of damaged contents

• Any related injuries

• Location of damage

• Conditions of the office or home

• Police FIR copy in case police is involved

• Other involved

 

Estimation of Loss of The Surveyor

 

A surveyor will be appointed by the insurance company to calculate the damage or loss in the spot of the damage. The claim calculation will be done according to the report made by the surveyor. Help in the investigation to get reimbursed completely. Also, keep the original reports of the related documents or investigation for the future.

 

It’s Not Over Until You Say No

 

The insurance company might be in a rush to close your case, especially if there is a mass disaster. The reason is longer your claim is open, the greater the chance for you to find something that was ignored earlier. In such a stressful time, the probability is there that may forget something essential to list down in your initial claim. That’s why it is suggested to take your time before closing your claim.

You get many benefits when you buy fire insurance. Fire insurance protects you from many unexpected risks or situations. Just choose the right insurance company and grab the policy on time.

 

Source: Reliancegeneral

What is Zero Depreciation Car Insurance Cover?

Depreciation in motor insurance often refers to the loss in value of an asset over time due to factors such as age, wear and tear, and obsolescence. Vehicles, in general, are depreciating assets. For example, a new car will cost more than an older one. Similarly, there is a certain depreciation associated with all the materials the car is made up of such as glass, plastic, metal etc. Each of the materials or parts have a different rate of depreciation.


In the event of an accident, if your car is damaged, you may not be able to recover the entire expense incurred on the parts replacement. The general insurance company only pays for the replaced parts after deducting the depreciation amount. The insured person has to pay for the difference between the market value of the new part and the depreciated part of the car.


It is a good idea to avail zero depreciation for car insurance. With the help of it, you get maximum reimbursement during the time of claim and get the most out of your car insurance policy.


What is Zero Depreciation Car Insurance Cover?


A car insurance with zero depreciation cover helps protect your car against all physical damages caused to the car without factoring in the element of depreciation. Although a standard motor insurance policy covers you against losses arising in case your car is damaged or stolen when you file for a claim settlement, the compensation is received after a standard deduction of depreciation.


On the other hand, a car insurance with zero depreciation cover can fetch you the entire compensation amount.  A zero depreciation add-on cover can be availed for brand new vehicles and also can be opted for at the time of policy renewal.


In a zero depreciation car insurance policy, the entire claim amount is paid by the Car Insurance Company without considering the depreciation on the value of the car. Obviously, you have to pay slightly more in terms of your premium. However, this add-on feature is highly recommended to everyone considering the fact that it eliminates the possibility of any out-of-pocket expense from the owner.


Benefits Of A Zero Depreciation Car Insurance Cover


• Helps curb out-of-pocket expenses since depreciation cost is not taken into account while filing for a claim settlement

• Most of your claims regarding the insured parts are settled without taking the depreciation amount into consideration.

• It adds more value to the basic automobile insurance coverage and makes your investment almost nil


With this cover, you can be assured of a complete peace of mind. Also, with all major insurers offering this cover, you can save yourself a lot of hassle by purchasing a nil-depreciation cover by paying a little extra premium.


Zero Depreciation Cover Vs Normal Car Cover


Let’s quickly look at how a zero depreciation cover varies from a normal car insurance cover:


• Value consideration at the time of Claim Settlement: Depreciation does not affect the claim settlement and the full compensation is given to the insured in case of zero depreciation cover. On the other hand, in case of a normal car insurance cover, the claim amount is received after a standard deduction of depreciation.


• Premium: The premiums to be paid for a zero depreciation cover are higher than those for a normal car insurance cover.


• Repairing Costs: The repairing costs of fiber, glass, rubber, and plastic parts are borne by the insurer in case of zero depreciation cover whereas, in case of a normal car insurance cover, these repairing costs have to be borne by the insured.


• Age of the car: A zero depreciation cover is meant for new cars whereas a normal car insurance cover can be taken for cars older than 3 years.


Factors to Consider before Opting for Zero Depreciation Cover


The following are a few important points to consider while opting for car insurance with zero depreciation policy:


• Consider the age of your car. The car insurance zero depreciation policy is applicable to cars under the age limit of 3 years. So in other words, only new cars are eligible for 0 depreciation car insurance.


• As compared to a regular car insurance policy, zero depreciation car insurance will be slightly more expensive in terms of premium. It is not advisable to pay high premiums for cars older than 3 years. 


Although, if you own a luxury car or live in a high-risk area, you should consider opting for zero depreciation cover add-on.


A zero depreciation policy premium depends on 3 main factors:


a) Age of the car

b) Model of the car

c) Your location


• You can make only a certain number of claims under the 0 depreciation car insurance. This is to limit the customers from making claims about every small dent in their car.


Remember that in case you make a claim, with a basic car insurance policy, the insurer only reimburses the depreciated value of the car parts replaced. As per the Insurance Regulatory and Development Authority of India (IRDA), the following rate of depreciation for the car parts has been defined:


• On rubber, nylon and plastic parts, and batteries – 50% depreciation be deducted,

• On fiberglass components – 30% depreciation be deducted

• On wooden parts – depreciation be deducted as per the age of car (such as 5% in the first year, 10% in the second year, and so on)


Who Should Buy Zero Depreciation Cover?


In order to protect your brand new car from any unforeseen events, it is advisable to opt for a zero depreciation cover.  Buying a zero depreciation car insurance in India can also prove to be beneficial to:


• People with new cars

• People with luxury cars

• New / Inexperienced drivers

• People living in accident-prone areas

• If you worry about small bumps and dents

• If you have a car with expensive spare parts


It is a general belief that zero depreciation car insurance policy is apt for new or inexperienced car drivers as they are more prone to get the car damaged. However, this cannot be considered as a rule of thumb because there have been numerous cases where the most experienced drivers were caught in unfortunate events due to the fault of other drivers.


Source: Reliancegeneral

5 Life Insurance Scams You Should Be Aware Of

The large sums of money involved in these life insurance policy frauds are one of the main reasons why they occur so frequently. Money is the primary motivator for any type of fraud, and life insurance fraud is one of the most widespread.

Another factor is that most consumers are unaware of how life insurance products function. They are vulnerable to fraudsters because of their ignorance.

You can be taken advantage of in a variety of ways. Here are some of the most typical life insurance scams so you can recognize when something isn’t quite right.

 

1. Theft of Identity

This is the most popular fraud. Identity theft occurs when a person obtains your personal information from you wrongfully and uses it for economic gain. Over the years, this type of life insurance scam has significantly increased due to the internet. As technology has advanced, more and more work is being done by just talking over the phone or the internet. This enables the fraud to commit more crimes.

 

Many scammers lure you via e-mails, phone calls, SMS will pose as agents and ask you for your personal information. They can contact you saying to buy a new policy or your existing policy needs some changes. The information asked from you can include the following.

 

a) Credit card information

b) Aadhar card number

c) Bank account number

 

All these are taken by the scammers as a form of information needed to apply for a life insurance policy but then are misused against you for money.

 

2. Fraudulent Company/Insurer

You may have heard in the news about the companies that didn’t have any existence taking advantage of people. Yes, this thing does happen. Some high-profile frauds research well and set up their own fake insurance companies.

 

These companies make they’re at a cost that is considerably lower than what the other legitimate companies are offering so that customers are attracted to them. Also, they can offer services such as easy sign-up, quicker response.

 

All they require is for you to enter your card details. As soon as they start getting customers and when the customers enter their details to get insurance the fraudsters run away with the money. Always make sure of the company before buying.

 

Not only the company but sometimes insurers are also frauds. They may present you papers that are real and take premiums from you as well, but they will not transfer it to the policy and instead keep it with themselves. This will lead to the company cancelling your policy even though you are paying premiums.

 

3. Churning

Churning is the act of replacing the policy which is already in force with a new policy by the agent, to earn more commission. This is also referred to as ‘Twisting’.

 

How does Churning Work?

In churning, an insurance agent will try to replace your existing policy with a new policy price of which is either same or a bit higher. He will try to do this without involving you as the policy structure is somewhat the same. This is done so that the agent can get an extra commission for the new policy he replaced with your existing one.

 

Churning to add to your commission is illegal and is a big fraud in India as well as many other countries. Agents must take the customer’s consent before making any alteration, modification to the policy.

 

4. Claims Fraud

You must have seen in many movies that how people orchestrate their or even their loved one’s death to get hold of the insurance money. While this happens in real life as well.

 

Faking or staging death to claim the insurance money is what claims fraud is all about. Many people fake their death or their family members to claim the life insurance policy death benefit. Fraudster fakes their death and disappear and return after some years.

 

Some famous life insurance fraud examples include one of the British ministers, John Stonehouse. The minister went missing from Miami and was later found in Australia with a different identity. He was later found guilty and was imprisoned for 7 years for fraud.

 

Some people even go to the extent of killing their loved ones to get the policy’s benefit. Though sounds gross, but it does happen in some cases.

 

These were the most common scams under life insurance. Staying aware of the working of life insurance policy and knowing what you are getting into is very important. Some steps you can take to stay safe from these scams are as follows.

 

a) Check that the company you buy insurance from is trusted. Do not buy from the source you have not heard about and cannot be easily found.

 

b) Do not reply to unsolicited e-mails. If you receive an e-mail, call asking about your information then do not provide them unless you are sure of it. Check with the company’s helpline if they require such information or not.

 

c) Always read the terms and conditions associated with a life insurance policy thoroughly. Keep checking on the policy regularly.

 

d) Check with the company immediately if the agent asks you to pay more premium without any reason.

 

e) Always disclose full information to the insurer. Do not indulge in any unscrupulous activity yourself too. Getting caught can lead to a heavy fine and even jail.

 

5. False information

This case happens not at the insurer’s end but at the insured end. This happens when wrong information is entered into the application. This is also called misrepresentation or concealment of facts. This is one of the most common frauds.

 

Before buying a life insurance policy, you are required to enter details, regarding your basic information. This may also involve your medical details. Hiding any important information or misrepresenting information counts as fraud in this case.

 

For example, not disclosing some medical condition you may have. Another example is not disclosing you are a smoker, despite being one. To cater to this fraud companies, have medical tests. If the information doesn’t match the medicals, then the policy is rescinded immediately.

 

If you have a problem or you sense that you have been cheated, contact the insurer. If there is no response then immediately contact IRDAI’s grievance cell.


Source: CanaraHsbclife

Things to know before taking loan against Mutual Funds

You have mostly come across borrowing loans against the land, gold, or a house. But, if you’ve put your money in a mutual fund investment, can you take a loan against it?

 

Let’s find out.

 

An overdraft against mutual funds, could it be? There are always emergencies right be it Small or big? It can happen. There can be a time in those situations that you can fall short of money in a short-term aspect. Investing in funds is known to be liquid, but not all of the funds have high liquidity. Sometimes you would not be ready to redeem your fund as it would interrupt your financial goal, and liquidating it can be out of the picture. So a loan against this find could be an opportunity to keep the find and still be supplied the finance, right?

 

Let me also make it clear that not all banks would accept mutual fund investment from fund houses.

 

Pointers to Loans Against Mutual Funds

 

– You Can Avail Loans to Only a Certain Limit of your Mutual Fund Holding

 

The amount of loan you may acquire against your mutual fund  holdings is primarily determined by the sort of mutual fund scheme in which you have invested and the financial institution from which you will borrow.

 

– The Loan you Can Get Has an Upper Limit

 

Loans against mutual funds, like any other form of loan, have specific restrictions. Many banks have a maximum and minimum loan amount that you can get.

 

– You won’t Get these Loans From All the Banks

 

Many banks only lend money against a certain set of mutual fund plans that they have chosen.

 

– It will Cost you Less for a Loan Against Mutual Funds than Personal Loans or Credit Cards

 

A significant advantage of a loan against mutual funds is that the interest rate is lower than that of credit cards or personal loans. This is due to the fact that loans against mutual funds are secured, that is, they are guaranteed by collateral.

 

– You Will Still Continue to Earn Returns on your Pledged Mutual Funds

 

When you pledge your mutual fund units to secure a loan, those units remain invested in the market. This is due to the fact that when you pledge your mutual fund units with a bank, you grant the bank the right to sell the mutual fund units only if you default. However, as long as you do not default, your assets remain market-linked, and you continue to receive profits on them.

 

What are the Advantages of Taking a Loan Against Mutual Funds?


1. You Get a Lower Interest Rate: Loans against mutual funds often have lower interest rates than personal loans. Because it is a secured loan, the interest rate is lower than that of unsecured loans.

2. You Do Not Need to Redeem your Mutual Fund : Investors are not required to redeem the MF plan in order to get loans against it. The units are pledged as security for loans but are not sold, allowing investors to get loans while maintaining ownership. In fact, if money is tight, it is best not to sell the apartments and instead take out a loan against them.

3. Quick Money: It is useful when there is a need for rapid cash. In times of financial crisis, one can pledge fund units even online and get money into an account. Because you are already an investor, the loan application process is simplified, with minimal documentation and eligibility requirements.

4. A Source of Short Term Capital Needs: Loans against MF might be beneficial when money is needed for short-term purposes. You can raise cash from investment fund units for a short period of time and repay it gradually without jeopardizing scheme ownership.

5. Pay Interest for the Used Loan Amount: Interest is not to be paid on the full loan amount promised from the investment plan, but only on the amount actually utilized, that is, the amount credited or overdraft from the current account.

When you want to continue your mutual funds without a hitch but the problem is you need liquid money, a loan against mutual funds interest rate, a loan against sip, or an overdraft can come in handy. This is one of the most prominent benefits of the option of availing a loan against your mutual fund.

Conclusion
 
When there is a failing market, it is better to take a loan instead of redeeming the units at a loss or so. You can take a loan, which can prove to be more beneficial. When you do this, you have not liquidated your fund, and when the market does better the price of your share will rise up again. In a bull market where all funds are profitable, it is preferable to sell the units rather than borrow. If you are in a bull period, redeem. Borrow during a down market. If you require money quickly, be sure you borrow sensibly.

Source: Groww

7 Insightful Loan Tips for Young Entrepreneurs in India

Running a business is no easy task. And, if you are starting a new venture with a completely new idea, the road to success becomes much more challenging. The only way to overcome the challenges and run the business successfully is to have adequate funding.

 

For new businesses and entrepreneurs, there are plenty of financing options available including business loans. Therefore, you need to research the financing option that will work best for you.

 

Here are the 7 useful business tips for young entrepreneurs looking for a business loan that will help you make an informed choice.

 

1. Determine the Purpose of Seeking a Business Loan

 

Before applying for an online business loan, you should have clarity on the purpose of seeking a business loan. Whether it should be utilized for funding growth, making a new acquisition, working capital requirements etc.

 

For example, if you are seeking funding to meet working capital needs, you can consider taking a business line of credit, which is approved immediately. You need to weigh the pros and cons of each business loan type, and whether it meets your objective and business needs.

 

2. Decide Loan Tenure and Repayment Amount

 

For any new business, it takes time to settle in the market and generate enough cash flows from business operations to sustain on its own.

 

Therefore, as an entrepreneur, you need to decide on the loan tenure and repayment amount accordingly. It is better to go for a flexible timeline, with repayment tenure stretching up to 5 years. It will give you enough space to focus on your business, rather than prioritizing repayments.

 

3. Compare and Pick the Right Lender

 

Always compare the different funding options available with different lenders and the type of business loan that suits your business requirements.

 

Also, check the lender’s background, review given by borrowers, time taken to approve the loan, and other necessary factors before finalizing the lender and business loan type.

 

4. Understand the Costs

 

In any loan type, the interest cost is greater than any other type of cost associated with the loan. Also, you cannot ignore it, as a small difference in business loan interest rate percentage can have a huge impact on the total cost of the loan over the repayment tenure.

 

While comparing the interest cost, instead of checking the annual rate of interest charged by the lender, you should focus on APR or Annual Percentage Rate.

 

APR reflects the actual yearly cost of the loan and is a more effective metric when it comes to comparing the cost of the loan. It includes the base interest rate plus all the costs (processing fee, service charges) to avail of the loan.

 

5. Gather all the Information and Keep Documents Handy

 

Before approving a business loan, the lender verifies the financials of the business, whether the business is profitable or not and can generate enough cash flows to meet all the expenses efficiently. Please note that most lenders do not provide business loans to applicants who do not have an existing business or one that does not match their business loan eligibility criteria. Thus, if you are planning to start your business from scratch for the first time, you can consider taking a personal loan (if you plan to keep working at your job on the side) or looking for alternative funding options. You can also ask a close family member with a good credit score and stable income to take a personal loan on your behalf.

 

If you do have an existing business and match the required criteria, please also note that before applying for a business loan, do detailed market research, a report on the viability of the business with financial projections for the next three to five years. This will help the lender to establish confidence in your business and approve the business loan. You should note, lenders refrain from financing risky businesses, which are untested in the market and have a low rate of success.

 

Keep all business loan documents handy including bank statements, cash flow statements, income statements, balance sheets, ITR for the past two years and legal documents like trade license, certificate of incorporation, GST certificate, etc.

 

6. Take Advantage of Tax Benefits

 

There are various government-backed loan schemes targeted towards promoting start-ups, MSMEs, SMEs, in India. For example, MUDRA loan, Stand-up India scheme, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), etc.

 

Such loan schemes offer many benefits to business owners and entrepreneurs, for example, tax benefits under various sections of the IT Act, interest rate concessions, and flexibility in repayments.

 

7. Check Your Business Loan Eligibility

 

Apart from the business financials, lenders also pay close attention to the creditworthiness and credit behaviour of the business owner. For example, having a credit score lower than 700 can affect your business loan eligibility. Also, having multiple loan accounts is not considered a good sign by lenders, as it indicates, you have a high dependency on credit.

 

Always check your business loan eligibility before applying, as any hard inquiry on your credit report can negatively impact your credit score.

 

Conclusion

 

Managing finances efficiently is crucial for the success of any business, whether it is a start-up or an established business house. You should weigh the pros and cons of every financial decision before implementing it.

 

The tips for entrepreneurs to be successful in availing a business loan in favorable terms will help you in making the right financing choices and let your business grow in scale.


Source: fullertonindia