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Q. Does incomean individual affect his loan taking capacity?

A. Incomethe applicant isimportant factor forbanks while ascertaining if they want to lend toindividual Higherincomebetter it is forloan applicant Loan sumstypically-functionthe take home incomethe consistencythe income

Q. Doesproperty value matters"the home loan?

A. Banks typically fundto 80 to 85the home value Even ifincomethe loan applicant supports offering more loan banks do not go beyond their threshold limit Banks first expectproperty buyer to bring"his contributionhis own funds,the remaining money is lent bybanks In casecommercial property,banks typically fund only upto 50 to 60the property valuesubject to fulfilling other eligibility criterion

Q. What is-co-branded card?

A. A bank may tie up"a partner such as airlineretail chainmovie exhibition chainissue-credit card that offers specific loyalty programmes or member reward programmes for expenses incurred at partner offerings Such cardscalled co-branded cards

Q. What is-loan against fixed deposit?

A. Banks offer short term loans againstfixed deposits The tenurethese loanstypically less thantenurefixed depositscharge 1 or 2 more rateinterest thanrateinterest at whichfixed deposit is made Banks also offer overdraft facility against fixed deposits

Q. What is-secured credit card?

A. Credit card issued against-fixed deposit"the bank is called secured credit card Unlike other credit cards,do not issued against collateralapplicant must keep-fixed deposit"the bank Bank then issues him-credit card"a credit limit less thanamountfixed deposit Such credit cardsused by those individuals who have-low credit score or have adverse remarkstheir credit report to build-credit history Ifcredit card holder defaultsthe credit card bill,bank foreclosesfixed depositrecoversdues

Q. What is-secured loan?

A. A loan extended by-bank against collateral is called secured loan For example,-home loan is-secured loan The bank finances purchasea housethe same house is mortgaged"the bank Ifloan is not repaid as perrepayment schedulethenbank hasright to sellhouserecovermoney lent along"accumulated interest if any Such secured loans typicallyoffered at lower interest rate as compared to unsecured loans

Q. What is fixed interest rate?

A. Fixed interest rate isarrangement whereinbankborrower agree at-rateinterest atbeginningthe loan The rateinterest so agreed is charged tillloan is repaid Neitherbank norborrower can unilaterally changerateinterestthe loan"the currencythe tenure

Q. What is floating rateinterest?

A. Floating interest rate isarrangement whereinbankborrower agree at-rateinterest atbeginningthe loan The rateinterest so agreed may change"the currencythe loandependingthe prevailing interest rates"the economy Ifinterest rates"the economy fallthenrateinterestthe loan may fallthe other way roundifbank finds it fit The bank keepsborrower informed about such changes"the interest ratethe loantime to time In some cases,rateinterest is linked"some benchmark interest rate such asyield10 year government bond or MIBOR Mumbai inter-bank offer rate orrateinterest offeredtreasury bills

Q. What will becredit scorean individual who has never borrowedany bank?

A. Ifindividual has never availed-loan from-bank or-non-banking finance companythen there is no credit repayment data captured bycredit bureau In such circumstances,credit score is reported to be zero

Q. Why one should repay his loantime?

A. Lender reportrepayment historyall their customers to credit bureaus Late paymenta loan or defaulta loan is reported bylender tocredit bureaus This is recordedthe credit reportthe borrowerthe same pulls downcredit scorethe individual This may bring downcredit worthinessthe individual not adhering toloan repayment schedule Such persons find it difficult to get loansbanksor have to pay high interest rates to avail credit

Q. Why secured loanscheaper thanunsecured loans?

A. Secured loan such as home loansloan against gold has collateralcan be monetized bybank ifborrower defaultsthe loan In caseunsecured loans such as credit cardpersonal loansthere is no such security bank hasbank can sell to recover money lent Hencebank needs higher margin"caseunsecured loans,is built by charging higher interest rates
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