Skip to main content

Loans On Credit Cards – Say NO

Recently, a number of credit card customers received a pre-approved loan mail, from a leading private sector bank. The customer was entitled to a loan over and above his existing credit limit, at 15 per cent on a reducing balance.

Sounds too good to be true, especially in a market where interest rates are on the rise. Also, for those already burdened with expensive debt (such as credit card debt, which charges over 40 per cent annually), this could be a good way to reduce the burden.

However, if planning to use this debt for other purposes, like buying the latest iPad or mobile, things could go very wrong. The equated monthly instalments (EMIs) are added on the card, escalating the bill. And, the loan is over and above the credit limit. One will over leverage himself/herself. That is, the loan will be treated separately but come as a part of the monthly credit card bill payment.

Bankers said they typically target rotators – ones who pay the minimum or slightly more every month – with such schemes, as it helps such customers reduce their dues at one go. But, if misused, this would worsen your credit score, limiting future chances of securing any credit.

There are similar products in the market which offer a personal loan at a lower rate within the credit card limit. Under one such scheme, if your credit limit is `30,000, you can avail a loan of `15,000 at 17 per cent for one year, 16 per cent for two years and 15 per cent for 36 and 38 months.

Though such schemes can be used to reduce the interest burden and retiring high cost debt, financial planners are not enthused. There are other ways of raising cash. A loan against fixed deposits, which cost two per cent above the deposit rate, can work out cheaper. He even advises using the gold loan route if one does get the right rate. At present, gold loans come at 12-24 per cent.

In the worst case scenario, it is better to retire investments and use the proceeds. Once the debt is paid, you can restart your investments. Ideally, your total instalment-to-income ratio should not be more than 4050 per cent. Many exceed this limit; as a result, they keep on borrowing to retire earlier loans, a classic debt trap.

Once caught in a debt trap, clearing the clutter isn't easy, as you will have little or no cash in hand. You would have spoilt your track record as well.

Loan on credit card is a pre-approved personal loan

Interest charged is 15 per cent and more

Processing fee is minimum sum or a portion of the loan amount

Many banks give prepayment facility but at a cost

The EMIs will be billed to the credit card every month
 

Popular posts from this blog

SBI Magnum Tax Gain Scheme 1993 Applcation Form

    https://sites.google.com/site/mutualfundapplications/tax-saving-mutual-funds-elss     Investment Details Basics Min Investment (Rs) 500 Subsequent Investment (Rs) 500 Min Withdrawal (Rs) -- Min Balance -- Pricing Method Forward Purchase Cut-off Time (hrs) 15 Redemption Cut-off Time (hrs) 15 Redemption Time (days) -- Lock-in 1095 days Cheque Writing -- Systematic Investment Plan SIP Yes Initial Investment (Rs) -- Additional Investment (Rs) 500 No of Cheques 12 Note Monthly investment of Rs 1000 for 6 months and quarterly investment of Rs 1500 for 4 quarters.
Read more

Birla Sun Life Tax Plan Online

Invest Birla Sun Life Tax Plan Online   An Open-ended Equity Linked Savings Scheme (ELSS) with the objective to achieve long-term growth of capital along with income tax relief for investment.   After a bad patch from 2008 to 2010, Birla Sun Life Tax Plan has made a big comeback in the last five years, with a particularly good run since 2014. The fund's rankings, which had slipped to two stars in 2011-12, recovered sharply to three-four stars in the last three years. The fund has delivered a particularly large outperformance over its benchmark and peers in the last couple of years. The fund's investment strategy focuses on a diversified and high-quality portfolio, with parameters such as capital ratios and balance-sheet strength used to judge quality. It uses a combination of top-down and bottom-up approaches to take sector/stock positions. The fund avoids highly leveraged plays. Staying more or less fully invested at all times, the fund parks roughly half of its portfoli
Read more

Should you Roll Over 1 year Fixed Maturity Plans?

The period between January and March typically sees an uptick in the launch of fixed maturity plans, or FMPs. Not this year. Instead, fund houses are busy rolling over or extending the tenure of their one- year FMPs launched last year to three years. Investors in one- year FMPs have a choice. Either redeem units or roll over to three years. If you exit now, your gains will be added to your income and taxed in line with your individual slab rate of 10, 20 or 30 per cent. If you stay invested for two more years, you pay 20 per cent tax with indexation benefit. Yields have softened in the past few months on expectations of a rate cut. If the central bank continues its soft monetary stance, yields are likely to fall further. In such a scenario, it makes sense for investors, particularly those in the 30 per cent tax bracket, to roll over their investments and lock in at a higher yield now. In a surprise move, the Reserve Bank of India cut repo rate by 25 basis
Read more

Mutual Fund Review: IDFC Premier Equity Fund

  IDFC Premier Equity Fund, which falls under the presumed high risk group of mid- and small-cap schemes, can rely on astute and timely equity picks. These make it less vulnerable to fluctuations compared with others in the category   IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes.    While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows. Thus, while an investor can always take the systematic investment plan ( SIP ) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for l
Read more

IDFC Premier Equity Fund dividend

  IDFC Mutual Fund   has announced dividend under the dividend option of   IDFC Premier Equity Fund Direct-D . The quantum of dividend shall be   R 4.3464 per unit.   The record date has been fixed as May 06, 2015. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot]
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now