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- Check your ability to repay before borrowing
- Health Booster for Your Financial Portfolio
- What does overheating of economies mean?
| Check your ability to repay before borrowing Posted: 07 Jan 2013 04:27 AM PST Call 0 94 8300 8300 (India) AN IMPORTANT point that has to be considered while taking a loan is the ability of the borrower to actually repay the loan.
Long-term loans that run for several years during uncertain times call for planning, but often the most important condition related to the repayment of the loan is not even looked at and hence this requires some attention from existing as well as potential borrowers. For example, if there is a loan on which the monthly EMI is Rs 23,450 then this is usually the fixed amount of the EMI or the level amount of the EMI that will operate through the life of the loan. This amount might seem affordable from the point of the view of the existing cash flow that the loan taker is generating, but there is a lot of information that is being hidden in this area that affects the borrower.
This will mean a higher interest rate will be appli cable for the borrower when the rates are rising and vice versa. In such a situation the change will not be directly visible. This happens because the loan works in such a manner that the EMI amount will not change but the time period of the loan is changed.
When the rates rise there is a longer time period for which the loan will have to be repaid and this will mean that there is a larger total amount that has to be paid to the institution from which the loan has been taken. This puts a higher burden in terms of the amount to be paid and it also translates to a higher amount of interest paid on the loan. This could be an unsettling experience for people who were expecting their loans to get over quickly and hence they might get frustrated and there could be a long time before they are able to overcome this debt amount.
This involves maintaining a margin of safety that would ensure that even if interest rate on the floating rate loan rises, this would not disrupt the overall planning process. The best way to do this would be to take a loan with the expectation that the rates would rise at least 1.5-2 per cent from the levels at which the loan has been taken. When this is done then the chances of a positive surprise increases because in case things work out well and the interest rate remains low then there would be a quicker ending to the loan but if things do not work out well then this is also well planned for.
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We can help. Call 0 94 8300 8300 (India)
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| Health Booster for Your Financial Portfolio Posted: 07 Jan 2013 04:04 AM PST Call 0 94 8300 8300 (India) It is that time of the year when personal finance is at the top of our minds. We plan our savings, major expenditure, and, of course, tax calculations for the entire year. Financial planning is our way of protecting ourselves from the proverbial rainy day. We plan because we want to manage our money in such a way that even as we fulfill our daily needs, we have a corpus built up for buying a house or a car, children's education and then marriage, a comfortable post-retirement life, taking care of ageing parents, and so on. So the planning should be comprehensive. In this process, health insurance has become a critical component.
REASONS FOR INSURANCE: While many of us may get health insurance as part of the package extended by our employers, an increasing number of people seek an additional insurance policy or top-up cover, to take care of unforeseen health emergencies during, say, the time of switching from one job to another, or when laid off. People also take these policies if they are not covered for critical illnesses by their group insurance plan. This is also done to overcome the stipulations of different waiting periods prescribed for various diseases and pre-existing disease requirements. Those nearing retirement too need to have a personal health cover that helps them tide over the transition. Of course, for the self-employed and people with seasonal income, the standard health insurance, or mediclaim, is an absolute must. START SMALL: So what are the parameters on which you base your health insurance requirements? The three important factors are your age, family dependents and spatial location. You can avail tax benefits for your spouse and kids for up to Rs 15,000. And you get additional benefits for policies taken for parents. You can start small and scale up your sum insured as well as the premium as you go along. AN EYE ON THE FUTURE: Just like in the other components of financial planning, in health insurance too, you need to keep a sharp eye on the future even as you remember that diseases and accidents are unpredictable. Faced with an eventuality, we should be dealing with the treatment and not getting hassled with trying to piece together the payment. In any case, with hospitalisation and surgery charges getting prohibitively high, it helps if there is a financial support for you and your dependents. It also makes sure that that you don't need to dip into your carefully-conserved savings that you have earmarked for other expenditure. Ultimately, financial planning is about securing our future and health insurance is an inalienable part of this future security. Happy Investing!! We can help. Call 0 94 8300 8300 (India) Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com
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| What does overheating of economies mean? Posted: 07 Jan 2013 03:04 AM PST Call 0 94 8300 8300 (India) • What does overheating mean? Overheating refers to a situation where an economy is growing close to its potential growth with the resources at its disposal, but this rate of growth is not enough to meet the demand. In other words, the productive capacity of the economy is unable to keep pace with the aggregate demand. The demand is usually stoked by expansionary monetary and fiscal policies. • What are the signs ? The first sign of overheating is usually a fast rise in prices. An economy growing above its potential rate may not find enough inputs to meet the demand, leading to an increase in prices. But more than a generalised rise in prices, it is the rise in wages that is a better indicator of overheating. Stretched physical infrastructure such as heavy demand for electricity, transport and ports also indicate overheating. High credit growth and rapid rise in asset prices are other signs. • How can it be checked? Since overheating refers to a situation of an economy growing above a sustainable rate, bringing the growth down a bit should cool things. This is usually done through monetary and fiscal tightening. The government tries to reduce expenditure while the monetary authorities raise interest rates to curb credit growth. In specific situations of asset bubbles, curbs on lending to some sectors could also be imposed. These measures usually help curb demand and slow down the economy. • What are the consequences ? If overheating goes unchecked, growth could rise in the short term, leading to a hard landing later. This could depress growth till the time excesses are removed. High inflation would tend to discourage investments and create uncertainty. System could be saddled with excess capacity to meet the spike in demand. The banking system could be saddled with non-performing loans when asset bubbles burst. Excess borrowing by consumers could depress spending for a long period.
Happy Investing!!
We can help. Call 0 94 8300 8300 (India)
Leave your comment with mail ID and we will answer them
OR
You can write back to us at PrajnaCapital [at] Gmail [dot] Com
---------------------------------------------
Invest Mutual Funds Online
Download Mutual Fund Application Forms from all AMCs
Download Mutual Fund Application Forms
Best Performing Mutual Funds
|
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