TNN | Apr 25, 2016, 06.05 AM IST | Times of India
Surat: Police arrested a disabled person, who has an MBA degree, and his wife for allegedly running a bank finance assistance service racket and duping at least 26 people to the tune of over Rs10 lakh here on Saturday. The accused charged heavy commission from loan seekers to help them apply to financial institutions and when their applications were rejected, they refused to refund the money. The accused did not enter into any written agreement with his victims.
Source : http://goo.gl/ZHFdmF
HARSH ROONGTA | Tue, 29 Mar 2016-09:22am | dna
Shrinking interest rate margins have made several lenders to insert hidden charges to increase their margins by stealth.
The home loan industry has come a long way from the time when the only charges that you had to watch out for were the processing charges taken under various heads and pre-payment charges. Regulation has ensured that there are no pre-payment charges and competition has ensured that there is a greater degree of transparency around the processing fee, legal fee, valuation fee or technical charges. Competition has also ensured that there is hardly any difference in the interest rates charged by various home loan lenders. Unfortunately, the shrinking interest rate margins have made several lenders to insert hidden charges to increase this margin by stealth.
Here is a list of these charges:
Charge interest on the loan which is disbursed late – This is a common practice. The lender prepares a cheque, but it is not to be handed over till certain documents are received from the borrower and/or the seller. These documents normally may take a few days to a few weeks, and meanwhile, the interest meter is ticking for the borrower. This is not as small as it looks. On a loan of Rs 1 crore, the interest @9.50% works out to Rs 2,600 daily.
The cost of a 10-day delay in handing over the cheque (which is pretty common) means an additional cost of Rs 26,000 or 0.26% of the loan amount. You should negotiate with the lender that you will only pay interest from the day the cheque is actually handed over to the seller and not from the date mentioned on the cheque.
Advancing the EMI payment date – The EMI amount is calculated assuming that the payment will be made at the end of 30 days from the date of disbursement. If this EMI is paid earlier than 30 days, the cost becomes much higher than the stated cost. An example will illustrate this. If the disbursement is made on February 15, 2016, and the EMI is payable on the first of every month then typically you should pay interest equivalent to 15 days’ interest (from February 15, 2016, to March 1, 2016) and the EMI should start from April 1, 2016, only. However, most lenders will start off the EMI from March 1, 201, and still charge you for a full month’s interest. Again, the difference is not as small as it sounds. 15 days’ extra interest for a Rs 1 crore loan @9.50% works out to Rs 39,000 or 0.39% of the loan amount. Again, you can negotiate with the lender to make sure that this additional hidden interest is not charged to you. Unlike the first point which is easily understood, this point is technical and the lender can run loops through the borrower while explaining how the EMI is calculated.
Forcing borrowers to buy expensive insurance products – Lenders have tied up with life and general insurance companies to provide life, disability and property insurance to borrowers and they force you to take these policies. The lenders earn fat commissions on the sale of these insurance policies and even though officially not permitted, they force the borrowers to sign up for these policies. It is a good practise to have such type of insurance policies when you take a loan, but the problem is that the policies being hawked by the lenders are hugely overpriced, reflecting the captive base of borrowers and the fat commissions for the lender inbuilt in such policies. To avoid having to pay for these overpriced policies, you can negotiate with the lender that you will buy these policies on your own. In all probability, you will get the exact same policy from the same insurance provider as what the lender is pushing at a fraction of the cost that the lender will charge.
Forcing borrowers to take a credit card or some other add-on products – In most cases this is offered for free while not stating that it is free only for the first year and would have an annual fee every year after that. You can easily negotiate your way out of this one.
Whilst these are the “extra” charges that lenders take from borrowers, there is a charge that they are unfairly accused of taking. For example, in Maharashtra, you have to pay a stamp duty of 0.20% of the loan amount on the document creating the security in favour of the lender. It is obvious that this charge will be recovered from the borrower (it is also mentioned in the loan agreement as recoverable from the borrower), but I have heard many borrowers complain that this is a hidden charge sprung upon them. This document is in favour of the borrower as it is conclusive proof that documents have been handed over to the lender. This is extremely useful when the loan period ends because there have been increasing the number of cases where the lenders have misplaced the title deeds and claim that these were never deposited with them in the first place. A stamped and registered document will prevent the lender from making any such claims.
In this new age, the lenders depend on the borrowers lack of attention to slip in the extra charges. It makes eminent sense for the borrowers to take the help of professionals to help them navigate through this process. The fee payable to such professionals will be more than made up by the savings in these “extra” charges.
Source : http://goo.gl/ImwYEb
Priya Nair | Mumbai Feb 01, 2016 10:40 PM IST | Business Standard
Banks and housing finance companies often have campaigns where they waive processing fees in a bid to increase their home loan portfolios. Currently, banks like State Bank of India, Bank of India, Union Bank of India and Dena Bank have waived processing fees on home loans till March 31. But, it need not always be cheaper than a loan where you have to pay processing fees, points out Gaurav Gupta, of Myloancare.in.
“Sometimes charges such as technical fees, legal fees, valuation fees all put together can add up to more than processing fees. And if processing fees have been waived, you may still have to pay other fees. As against this another lender that charges processing fees, but not other fees, may be cheaper,’’ he says.
Legal fees or advocate fees are charged for property search and the title investigation report. Valuation fees are charged for valuation report. In many cases, these are not refundable because the lender has incurred charges for providing these services.
Some lenders charge a separate login fee that may be non-refundable. While some others may deduct it from the processing fee. In some cases the lender may take the cheque upfront but does not encash it unless the loan is approved.
“Many customers are wary of paying processing fees upfront, in case the loan application gets rejected. It may happen if the particular project is not approved by the lender. It could also happen in case of resale property, where the bank gets a negative report about the property. In such cases, the customer may have to forego the processing fees,’’ Gupta points out.
Processing fees are usually charged as a percentage of the loan amount, usually 0.5-1 per cent, or a minimum fixed amount, whichever is higher. So, if you are availing a loan of Rs 50 lakh, the processing fees will be in the range of Rs 25,000-50,000. In some cases, lenders offer a capping on processing fees for salaried borrowers and this may vary based on the city.
“These are not usually disclosed on lenders’ websites and customers get to know of them only when they approach the lender for the loan,’’ says Gupta.
Login fees can be as high as Rs 4,000-10,000, but may be adjusted against the processing fee if loan is approved.
Adhil Shetty, chief executive officer (CEO), Bankbazaar.com says customers are willing to pay higher interest rates if they get a waiver on processing fees. “If customers are not sure whether their loan will be approved, they feel it is better not to pay the processing fees upfront,’’ he says.
Other factors to consider is the turnaround time for the loan to get sanctioned or if the lender is willing to offer a higher loan amount or a longer loan tenure. “If, for instance, there is cut-off date for making the payment to the builder, but the lender is slow with disbursal, then you will lose the chance to buy the property. In such cases a lender that offers faster service may help more than one that waives off processing fees,’’ Shetty says.
Source : http://goo.gl/3HgEaQ
SUKANYA KUMAR Founder & Director, RetailLending.com | Nov 04, 2015, 05.20 PM | Source: Moneycontrol.com
Home loans attract interest. However, there are many other fees a borrower has to pay. Here is a curtain raiser.
“Apart from the interest rate burden on home loan, what all are the other fees that I will need to pay?” The common query almost all borrowers will ask. Here’s a list to make sure you do not get a ‘surprise’ later.
Application fee: Banks take a minimal fee to cover their preliminary expenses towards home, office verification etc. This can range between Rs 1000/- to Rs 5000/- depending upon the lender.
Processing fee: This is a fee charged by the lender to service the cost of the credit appraisal. This fee can be ranging from Rs 10,000/- upto as high as 1% of the loan amount depending upon (i) Profile of the borrower, (ii) Product that you choose, (iii) Income sufficiency in available documents, (iv) Profession of the borrower, etc.
Administrative fee: This fee is not applicable for many. However, sometimes this fee could be higher than the processing fee. Some lenders split the processing fee into two parts. The one taken post sanction of the loan is called admin fee.
Legal fee: Most lenders engage external law-firms to scrutinise the legal documents of the borrowers. Generally lenders absorb this cost in the processing fee itself. But some PSU lenders take the fee separately from the borrowers.
Technical evaluation fee: For properties which are of high value (depends on lender to lender as to which value they consider as high), there are two valuations done for higher caution. The lower of the two valuations is considered for the lending. Fees if not absorbed by the lender, is collected from the borrower by some PSU lenders.
Franking fee on the sale agreement: In some states of India, there is a stamp duty payable on the property agreement with the builder or seller. This used to be a flat fee of Rs 200/- earlier but now been revised to 0.1% of the property cost subject to a maximum of Rs 20,000/-. The good news is, in those states which follow this, allow adjusting the amounts with the final property registration deed upon submission of the agreement in which the fee was paid to the Sub-registrar’s office.
Franking Fee on the loan agreement: Some states in India do not have it at all, some have 0.1%-0.2% of the loan amount being payable. For example, if you are taking a 1.50 crores loan, then the stamp charges payable is Rs 30,000/- in Maharashtra & Karnataka.
Intimation of registration: Intimation to the sub-registrar’s office is a new introduction of process in Maharashtra. Generally, this is not done by any other state as of now. Though the cost is very low, only Rs 1300/-, but to visit the SRO and doing it is tedious.
Notary: If you are an NRI, then all your KYC and the POA (power of attorney) you are executing, depending on the bank’s requirement, needs to be notarised by the Indian Embassy or a local Notary available abroad.
Adjudication: If you are the POA-holder of an NRI, then the notarised POA needs to be adjudicated here in India before submission to the lender for starting to process the Home Loan application.
Indemnity: This is the way you safe-keep the interest of the lender. the documents reads that if there is any issue because of unavailability of the said document, the sole responsibility is on the borrower and that the borrower indemnifies that the cost of such risk will be completely borne by the borrower and not the lender. There could be indemnification required for many aspects in your borrowing. For example, if the builder is yet to receive some minor approval from authority or the property tax is yet to be paid completely by the seller or the ‘Khata’ (in Karnataka) is not yet transferred in the seller’s name though the deed is registered in his name or the OC (occupancy certificate) is yet to be received by the builder, then the borrower needs to indemnify the lender. There is stamp fee of a few hundred rupees (depending upon the State) and a notarisation may also be required.
Mandatory fire insurance: Most lenders who are having a wing of bankassurance insist on this. There is a debate whether this can be forced on a borrower, but we are not here to judge that. This is just a list of expenses a borrower might incur.
Documentation fee: For getting the loan agreement signed, getting the ECS mandate activated or a few other formalities, few lenders still do charge this fee. This is generally nominal, say Rs 500/- to Rs 2000/- approximately. Note: All fees attract a service tax amount of additional 14% levied on the fee amount.
Source : http://goo.gl/T5trZq
Top up loans have costs such as processing fee and in takeover cases foreclosure charges of previous home loan. Top up loan need not necessarily offer tax sops.
Adhil Shetty, Bankbazaar.com | Source : MoneyControl.com
Ravi, an IT professional received a call from a bank offering a home loan. When Ravi told that he already had a home loan with a different bank, the caller suggested a loan transfer to their bank, with an offer of an additional Rs 10 lakh as top up loan.
The offer seemed lucrative for Ravi who was eyeing a new sedan and was looking to fund his buy. His existing bank had offered him a car loan at an interest rate of 11.5%. Hoping to save on his interest outgo, he had approached his existing bank for a top up loan to fund his car buy, only to be offered a top up loan of Rs 5 lakh at 10.5%.
The top up loan offer from the new bank sounded attractive for Ravi, as they not only offered to takeover his existing loan at 10.25% but also offered a higher top of loan of 10 lakhs, which would be sufficient for his car purchase.
All in all, Ravi’s problems appeared to be solved. But, is it really? Let’s take a closer look.
Understanding ‘Top-up’ loans
Top up loans are offered only to existing home loan borrowers with a good repayment track record. Top up loans work on the basic principle that since you have started reducing your outstanding loan amount by repaying it, a margin money by way of a top up can be added to your loan account. The amount taken as top up loan can be used for any purpose like wedding expenses, medical expenses, car purchase, or any other.
If you are transferring your existing home loan to a new bank, they will also offer you a top up loan, provided you have a good track record with the other bank.
Now let’s run the numbers in Ravi’s case.
The math in Ravi’s case
In Ravi’s case, his existing home loan was at a fixed interest rate of 10.5%. The new bank offered him a takeover, plus a top up loan of Rs 10 lakh at 10.25%. Ravi who was in need of money didn’t think twice on hearing the offer. But, let’s do the math.
Ravi’s current principal outstanding was Rs 38 lakhs. As it was a fixed rate loan, he had to pay 2% of the outstanding as pre-closure fee, which comes to around Rs.76,000. Now, the new bank charged Ravi a processing fee of 1%, i.e., around Rs.48,000. So altogether, he paid around Rs.1.24 lakhs for the transfer.
What Ravi did not realize was that the difference in the interest rate was only marginal, i.e., 0.25%. So, the additional expense he incurred during the switching process in fact exceeded the amount he saved on interest outgo, which was around Rs. 1 lakh.
Here are few things you should know before taking up a top up loan.
A lucrative top up loan offer may lead to a bad loan take over: A top up loan offer along with a takeover may sound lucrative, but weigh the deal after calculating the possible charges associated with it.
No tax advantage: You will get a tax advantage for a top up loan only if you use the loan amount exclusively for repair, renovation and construction activity of the home. Otherwise top up loans are loans with no tax sops, unlike a home loan.
Charges for the loan: Banks charge a processing fee to facilitate top up loans. For customers who are shifting their home loans from a different bank, the processing fee is applicable for the takeover as well as the top up amount. Also, most top up loans are offered at 0.5-1.0% higher interest rates than a usual home loan.
No say in property price appreciation: Most banks offer top up loans in accordance with the amount of money which is reduced by the outstanding amount of the home loan through repayment. Even if the property price witnesses an increase in price index, the quantum of top up loan may not be increased by the bank. Many customers who wait for top up loans realize this at a later stage.
Banks have the final call: While top up loans may have their benefits and are even considered superior to personal loans, banks are the final authority in approving or rejecting any top up loan plan. Even if you receive a deal from the tele-sales person, the final call on approving your loan lies with the credit department.
The Bottom Line: Even if you may not need a loan, the prospect of an easily approved loan where the funds can be used in any way is far too alluring for many borrowers. So, if you think the persuasive telesales representative who is asking you to consider a loan takeover by offering you a top up loan is doing you a favor, ask the right questions, analyze the deal end to end, and then take a final decision.
Harsh Roongta | Tuesday, 2 June 2015 – 6:55am IST | Agency: dna | From the print edition
In recent times the major issue faced by home loan consumers is the tendency of the lenders to keep their interest rates high even as they welcome new home loan consumers with much lower interest rates.
In the last decade when experts addressed home loan consumers they asked them to avoid lenders who took EMIs on a monthly basis but calculated interest on annual basis. Competition soon put a stop to this consumer unfriendly practice. In recent times the major issue faced by home loan consumers is the tendency of the lenders to keep their interest rates high even as they welcome new home loan consumers with much lower interest rates. Ironically, they may not have to envy the new home loan consumer too much as he could be paying much higher than he bargained for.
In a shocking incident a home loan consumer bought to my notice a pernicious practice of charging steep processing fees hidden away in the first EMI. This consumers’ real life example is given in the box below. The consumer was being charged interest for the full month in the first EMI even though only 16 days had passed between the disbursement date and the first EMI payment date. He was paying an additional amount (0.41 % of the loan amount in his case) over and above the contracted interest amount. This was also contrary to the loan agreement entered into between the lender and the consumer. This particular consumer did not ignore it. He spoke to a few of his other friends who had borrowed from the same bank and realised that the bank was overcharging interest on a systematic basis rather than just in his isolated case. In fact, the overcharging was much more in other cases because home loan disbursement are bunched around the month end and the EMIs tend to be payable in the first 10 days of the month and hence the overcharging is much higher than the 14 days of interest as in his case. He has not received any response from the bank officials to his written complaints.
Many senior officials of the bank visited him and verbally offered to make good the overcharged amount to him but he wanted the facts to be put in writing to him so that he could take up the matter on a systemic basis rather than for his isolated case. The bank officials were unwilling to offer anything in writing. He also wrote to RBI but did not receive any response. This practice is not in accordance with the lenders own loan agreement with the borrowers and is a clear case of overcharging. Since this bank lends more than Rs 20,000 crore of home loans every year the additional amount charged can be as high as Rs 100 crore per annum if 0.50% overcharge is assumed on an average. The impact of this kind of overcharging on car loans and unsecured personal loans and all other EMI loan products disbursed by the bank could also be similarly high.
Only a detailed investigation can conclude if this consumers’ case (and those of his couple of friends whom he has spoken to) is a one-off case or is a system-wide problem within that bank. It clearly does not seem to be an industry wide practice from my preliminary chats with the major players in the industry. To their credit, major public sector banks have always touted their daily rests basis of interest calculation. And thus by definition do not follow this kind of practice.
RBI’s grievance redressal mechanisms do not help since by design they only help solve a specific consumer’s grievance and these systems do not look at systemic issues such as the one highlighted above. Meanwhile, this consumer is not taking this lying down and has now filed a public interest litigation in the Bombay High Court against the RBI for permitting this practice to continue.
I am not sure if the courts will entertain this petition but I earnestly hope that the issue will gain enough traction so that the top management of the concerned bank or the regulator is forced to take notice and take remedial steps. As consumers you should take care to double check the interest and principal breakup of your first EMI to ensure that you are not paying more than what you bargained for.
The writer is director, ApnaPaisa.com
His home loan of Rs 1.55 crore was disbursed on April 24, 2014. As per the agreement the EMI date was fixed as the 10th of every month and @ 10.50% p.a. the EMI for 180 months was Rs 1,71,337. Logically he should have paid only the interest amount for the first 16 days (from April 24, 2014 to May 10, 2014) amounting to Rs 71,342 (being Rs 1,55,00,000 * 10.50%/365 * 16 days) and then the regular EMI payments of Rs 1,71,337 should have begun on June 10, 2014. Instead to his shock and surprise the entire EMI of Rs 1,71,337 was debited on May 10, 2014 and furthermore when he checked his statement of account he realised that the interest has been charged for an entire month i.e. Rs 1,35,625/- (being Rs. 1,55,00,000 *10.50%/12) and only the balance amount of Rs 35,712 (being EMI of Rs. 1,71,337/- minus interest of Rs 1,35,625/-) was adjusted against the principal loan outstanding. This effectively meant he had paid extra interest of Rs 64,283/- or 0.41% of the loan amount).
By Sangita Mehta, ET Bureau | 13 May, 2015, 10.48AM IST | Economic Times
A bank’s facilities typically come loaded. For the unsuspecting customer, it could just be a question of filling out a fixed deposit form or being granted a home loan. But there are some entrapments the bank will slip in that you need to be aware of, says Sangita Mehta.
HOME LOAN: Double Trouble
Watch out: When you apply for a home loan, the bank will sell you property insurance — which covers damage to property — and mortgage protection term insurance, which covers the loan in the event of the borrower’s death
What you should know: The housing society may already have property insurance. You don’t have to opt for an insurer the bank has a tie-up with. Ensure the premium is not clubbed with the loan, in which case, you will have to pay interest
CREDIT CARD: Take it or Leave it
Watch out: Banks often sell credit cards with the promise that for the first year, they will not charge any fee and the customer can discontinue it from the second year. However, at the end of the second year, the card company sends an innocuous mail stating they will renew the card for a fee unless the customer explicitly rejects it.
What you should know: The Reserve Bank of India has banned banks from giving such negative options. Customers should ideally use the credit card of a bank they do not have a savings bank with. In case of a dispute, banks often debit money from the borrower’s account
DEPOSITS: Auto Route
Watch out: When you’re opening a fixed deposit, watch out for ‘auto renewal’ in the fine print
What you should know: If you do not opt for auto renewal, the money is transferred to the savings account after maturity, where the bank offers about 4% interest as against 7-9% on FDs. You may forget to renew the deposit and the bank won’t remind you. When you tick that ‘auto renewal’ box, the bank cannot charge you a penalty on premature withdrawal of the deposit
ATM, CYBER FRAUD: Cry ‘Thief’
Watch out: If you find a fraudulent transaction in your account, immediately notify the bank
What you should know: If you are the unfortunate victim of an ATM or e-transaction fraud, watch out: the bank is liable to prove its innocence. If the bank is not notified, the maximum loss to you is `10,000 Postnotifi cation, the customer is not liable to bear any cost
LOCKER FACILITY: Keep your Freedom
Watch out: Banks put a price tag on a ‘scarce’ commodity like the bank locker
What you should know: Your bank may ask you to invest in fi xed deposits or mutual funds or even third party insurance, with the bank locker, even though they are not allowed to to do so by the RBI. You anyway need to pay an annual rental
PERSONAL LOANS: Don’t Rush to Pre-pay
Watch out: Banks have stiff conditions on prepayment of personal loans
What you should know: The RBI has mandated banks to not charge a penalty for pre-payment of a home loan if the interest is on a floating rate. But the rule does not apply for other personal loans. Some banks charge as much as 5-10% on pre-payment of loans. Some banks don’t even permit you to repay the loan for the fi rst six months or one year
PROCESSING FEES: No Free Lunches
Watch out for: For every home loan, auto loan and personal loan, banks charge a processing fee, which can be steep
What you should know: This fee is mostly at the discretion of the bank and can be as high as 1 percentage point, which itself will infl ate your outgo. If any bank says they have a lower rate, ensure the processing fee is also low.
Source : http://goo.gl/r0S6eK
RAJIV RAJ | MAY 11, 2015, 02.28 PM | Business Insider
Credit card rewards can be very tempting and can lure card holders to spend money which they otherwise wouldn’t have. What happens then? You end up spending more money than what the reward is worth! Such spending decisions taken under the influence of a reward temptation can be a bad idea for your wallet. Moreover, there are chances that you were not required to make that purchase at all. You may have done it only for the reward. Expensive carrots indeed! Here are 7 situations when credit card rewards can actually backfire.
1) Here redeem your rewards, but first open your wallet!
Rewards points accumulated can be redeemed as per the card company’s policies. This typically includes spending at specified outlets, brands, miles or cash back. Once you know that you have accumulated the reward points there is an urge to redeem and benefit from it. This urge pushes us to think of ways to redeem which includes going in for purchases which are not required! Whether it’s shopping for clothes, accessories, travel plans or dining out, decide to spend on these activities only if they were a part of your plan anyway. Planning to spend for redeeming rewards is not a good idea.
2) Chasing rewards?! They are watching you.
Often friends and family talk about the “amazing” credit card they have signed up for. Their stories of saving money, claiming air miles and access to exclusive lounges lure us into going and checking out what the deal was about. Not denying that it may be a good deal, but stop before you decide to sign up. Having a bunch of “amazing” credit cards, signed up primarily because they have good rewards scheme can prove detrimental for your CIBIL score. Banks can view you as a credit risk if you aren’t organized while picking credit. Credit utilization and repaying on time is a task which requires a good tracking system. If your tracking system is not in place it is possible that you miss out on repaying or end up spending more than you intended to. Your wallet and CIBIL report, both will be affected as a result of the reward chase.
3) Mind your score!
Reward credit cards have a higher rate of interest. If that is the choice you have made then redeeming the reward points will definitely be on the list. However, while availing rewards you may end up spending more money. The repayment of which, if missed can lead to paying a heavy interest rate. Moreover, these delayed payments can negatively impact the CIBIL score. Now the last thing you need after ending up spending more money is a drop in the CIBIL score!
4) I don’t need it but let me buy my reward!
Credit card offers can be generous deals. The best offers are generally up to 5% of the value spent as reward in some form or the other. Now if you are making a purchase with an eye on this offer, then you are in trouble. Spending 95% of the money on an unnecessary purchase is far from being wise about spending. Availing the reward should be a bonus on the purchase and not a reason for the purchase.
5) Did you see the fee?
Reward cards charge a considerable annual fee. While we sign up for the cards, enticed by the rewards, the annual fee is often ignored. It is important to evaluate the total worth of the rewards as against the annual fee applicable. Are the rewards another reason for you to spend more? Does redeeming the rewards means planning for unwanted purchases? Answer these questions for yourself to know if the credit card rewards are actually helping you save. If not, look out for options with lower or no annual fees and do away with unwanted temptation to spend more for redeeming reward points.
6) Watch out if you are shopping for more debt!
If you already have a credit card with a credit limit which is utilized regularly and timely repayments are being done then you are in the right zone. This approach will help you max out the benefits of using a credit card while positively keeping up your CIBIL score. Don’t let greed take over and make you hunt for reward cards. While the immediate benefits like signing up bonuses and short term benefits like using a certain amount within a limited period of time in return for reward points may appear lucrative, it is a bad idea in the long run. You are actually taking on more debt even though you don’t need it! We definitely don’t need to find newer avenues to part ways with our hard earned money.
7) Focus on your goals more than the rewards!
To stay out of trouble and sail smoothly it’s important to stick to your personal financial goals. A part of this plan is sticking to budgets every month. Major expenses are planned and money is set aside for such expenses beforehand. Credit card rewards can prove distracting while you are trying to stay focused on planned spending. To avail rewards, we convince ourselves to get off the budget plan. Bad idea! The thrill of availing the reward not only takes us off the road leading to our financial goals but also drills a hole in our pocket. So remember, goals over rewards any day.
Credit cards when planned and used can indeed help us save and give us access to money when required. However, using cards to accumulate reward points and then planning ways to redeem them is not a great idea. Focus on your financial goals, plan your expenses and aim to save. Keep off those credit card reward carrots!
About the author: Rajiv Raj is the director and co-founder of http://www.creditvidya.com.
Source : http://goo.gl/dtH5bW
Creditvidya.com | Updated On: March 15, 2015 12:27 (IST) | NDTV Profit
If you are new to using credit cards or have been using one without knowing what a bunch of things mean on the credit card statement, let’s make things a little simpler for you. Let’s de-jargonise some credit card terms for you so that you can handle your credit responsibly and in turn help you keep up a good Cibil score.Many financial terms on your statement stand for basic things that are easy to understand. Here’s a closer look.
The credit limit is the maximum amount of money that you can swipe or borrow on your credit card. This is a prestipulated amount that is fixed by the card issuer. How much of the credit limit you utilise, also has a large bearing on your Cibil score. Ideally the utilisation rate on your card should not exceed 30 per cent of the total limit that has been allotted to you. If you display good credit behaviour your credit limit may be enhanced by the lender, but do not use it as an excuse to become reckless on your spend. Reckless spending may lead you to penalties and as has been noted in some cases, even account suspension by the bank.
The cash limit on your credit card should not be confused with the credit limit. The cash limit is the maximum amount of cash that you can withdraw from the ATM using your credit card. Issuers of credit cards often allow cardholders to obtain a maximum amount of cash with their cards where the cash limit is usually a per cent of the overall credit limit. This feature makes credit cards similar to bank debit cards. However, the striking difference between debit and credit cards cash withdrawal is that in the case of debit cards the cash belongs to you and is at your disposal whereas in case of credit cards, a very high rate of interest is applicable from the day the cash is withdrawn to the day it is repaid.Therefore, cash withdrawal through credit cards should be made only in emergency situations.
Annual percentage rate (APR):
The annual percentage rate (APR) is the interest rate charged on outstanding credit card balances outside the due date. APR is expressed in per cent per annum. A common misunderstanding about credit cards is that interest is charged on everything you swipe or borrow through your card. However, the truth is you will be charged for keeping an outstanding balance on your account over the interest-free grace period, which is usually 30-45 days from the payment due date (differs from bank to bank). So effectively if you pay the entire outstanding amount within the billing cycle, you will never have to pay interest on the money you use on credit.
The billing cycle is the time between the credit card bill statements. The billing cycle and credit card statement dates are confirmed to you at the time of the issue of your card by the card issuer. The due date remains the same each month. Since you already know the due date, it gives you the headroom to plan your credit in a smarter way and avoid making late payments.
Minimum amount due:
This is usually a small per cent (usually 2-5 per cent) of your total amount outstanding. This is the minimum amount a cardholder should pay within the pay-by date to keep the account from going into default.
The due date is the date by which you must make at least pay the ‘minimum amount due’ in the case where you are not able to pay your bill in full. Paying outside the due date will cost you late fee charges as well as get reported on your Cibil report as a negative mark. Some card issuers allow you to set your convenient date for card payment and others set a standard due date. For payments whose due dates fall on weekends or holidays, the due date would be the next business day.
Sometimes during online transactions, purchases may not go through for various reasons – including the transaction being non-compliant with the merchant account rules or a dispute by cardholders. In such cases, the amount charged previously on the credit card is credited back to the card holder through a reverse (credit) entry. This is called a charge-back.
Late payment fee:
A late payment fee is charged when you miss paying the minimum amount due by the payment due date. Late payments may affect your Cibil score negatively even if your entire outstanding balance is paid in full at a later date.
It is the process of moving outstanding credit card balance from one card issuer to another, usually from a high APR issuer to a low APR issuer in order to reduce the interest charges for the cardholder. However, balance transfer also involves payment of fees to the low APR issuer.
It refers to rewards program on your card that return to you (by crediting your card account) a percentage of the total amount spent on your credit card over a specific period of time. This feature can be beneficial only if you use your credit card regularly and pay the entire outstanding amount on your bills every month.
CVV (card verification value):
It is a 3 digit number printed on the back of the card. It stands for “card verification value” code and helps verify the legitimacy of a credit card. The CVV number is essential while making payments online. Since this is sensitive information you must never reveal this number to anyone including your Financial Planner to the customer care executive at the bank.
These cards use computer chips to store and process information instead of, or in addition to a magnetic stripe. A personal identification number (PIN) is required at the point of sale for the card payment to go through.Similar to CVV, this is also classified information that you should not be share with anyone.
Once you have these jargons demystified, it will be easier for you to understand how your credit card works and thus plan to make repayments accordingly.
Disclaimer: All information in this article has been provided by Creditvidya.com and NDTV Profit is not responsible for the accuracy and completeness of the same.
Source : http://goo.gl/3FrGf8
In the recent past, bank borrowers were lured by advertisements offering low fixed rate of interest on loans for periods as high as 20 years.
While customers can opt for fixed or floating rates for home loans, several new generation banks now offer only fixed rates for car loans, personal loans, gold and other loans meant for individuals.
Apart from the rate per se, an individual should know the difference between a fixed rate and floating rate loan system in banks to take informed decisions while availing loans.
By definition, a fixed rate loan implies the interest rate is fixed during the tenure of the loan (sometimes, fixed rates on long term loans are reset at regular intervals, say once in 5 years). Like interest on fixed deposits, the subsequent changes in the interest rate structure may not affect the pricing of these loans.
On the other hand, floating rates “floats” with the market and get adjusted with the changes in the base rates of individual banks. Generally, in the present economic scenario where interest rates are expected to fall, it is desirable to opt for floating rate loans.
Regulations: One has to understand why the banks, especially new gen banks, pushes the customers to avail fixed rate loans or even offer many loan products to individuals only on fixed rates.
In June, 2012, RBI directed banks not to levy foreclosure charges/prepayment penalties on home loans on floating interest rate basis. Similarly, from May 2014, in the interest of the consumers, banks are not permitted to charge foreclosure/ pre-payment penalties on all floating rate term loans sanctioned to individual borrowers.
Thus, these directions do not withdraw the freedom of banks in levying foreclosure/prepayments’ penalties on fixed rate loans.
Practices: Since the freedom to levy foreclosure/prepayment charges is available to banks on fixed rate loans, some banks offer loans to individuals only on fixed rates.
At the time of availing a loan, an individual cannot predict his future income during the loan period. These banks expect the loan to be repaid only on the terms stipulated at the time of sanction and deviations, if any, are charged heavily.
It is true that bank incurs a lot of expenses, especially manpower, in pitching the loan products and the processing fees levied may not be sufficient to recover these expenses. Banks expect to earn interest on these loans and for that purpose loans have to continue in the books.
One should know how this freedom is put in practice to the advantage of the banks and, certainly at the cost of innocent borrowers. Practices differ from bank to bank. Banks are expected to charge interest on the daily outstanding balances.
Stipulating a specific date for paying the EMIs and not apportioning the repayments received prior to these dates’ results in interest loss to the borrowers.
A borrower may have surplus funds with him and bank will not permit him to repay the installments in advance; nor will the bank accept lump sum repayment.
Sometimes, additional interest is charged on the prepayments. Some banks also restrict the number of prepayments during the tenure of the loan.
In the case of gold loans where bullet payments are stipulated, part payments/foreclosure is permitted only after expiry of specific period from the date of loan availment.
Therefore, the borrowers are compelled to park their surplus funds in their savings account earning much lesser interest than they pay on the amount they borrow. At the same time, any delay in repayment is charged heavily by the banks.
Look at the practices for foreclosure! Not permitting the foreclosure during initial stipulated period (say 6 months), charging heavy amount computed as a percentage on the principal amount outstanding (higher the loan period remaining, higher is the rate), levying the interest for the remaining period, stipulating a minimum amount etc cost the borrowers very heavily.
For home loans, switch from floating to fixed or fixed to floating is permitted at a charge computed as a percentage on the amount outstanding, subject to a minimum absolute amount.
An individual borrower should understand that availing a loan at fixed rates restricts his freedom of servicing the loans and any deviations from the repayment schedule will add to his cost.
A prudent borrower should not be guided by the rate alone. He has to keep the freedom of prepayment/ foreclosure (without loss) with him. And, certainly, he has to prefer floating rates to fixed rates.
In a country like India, RBI has to consider the interest of innocent consumers. RBI has to balance the consumer protection with the freedom to individual banks and consider issuing regulatory guidelines on levy of prepayment/ foreclosure penalties on fixed rate loans also, directs banks to provide both fixed and floating rates on loan products to individuals.
Too much freedom to individual banks in levying charges results in exploitation of ill-informed consumers.
One can hope for some action from RBI in this direction in the days to come.
(The writer is a retired public sector bank executive)
Source : http://goo.gl/UJl22P
Bindisha Sarang, ET Bureau Dec 29, 2014, 08.00AM IST | Economic Times
The banking space was a mixed bag for retail customers in 2014. Interest rates remained decidedly high during the year, delighting depositors but dismaying borrowers. HDFC reduced its home loan rates by a marginal 15 basis points.
There was some relief for home loan customers in the Budget. The deduction limit for home loan interest was raised from Rs 1.5 lakh to Rs 2 lakh a year. But this won’t offer any benefit if your loan is less than Rs 15 lakh because the interest will not be more than Rs 1.5 lakh a year.
The RBI introduced several customer-friendly measures during 2014 and even took up cudgels on behalf of the aam admi by laying down a charter of rights. But all these got balanced by a new rule that allows banks to charge for ATM usage beyond five times a month.
Other banks’ ATM can be used for free only three times in a month. After that, transactions will be charged Rs 20. SBI, Axis Bank and HDFC Bank have already started charging customers for usage beyond the free transactions. However, in response to a PIL, the Delhi High Court has asked the RBI to explain why customers should be made to pay for taking out money from their own bank’s ATM.
Financial inclusion at 10
Another major change was the RBI’s nod to allow children above 10 to operate their bank accounts independently. Kids are permitted to use facilities like ATM and cheque books.
The objective is to familiarize children with banking procedures but many parents are skeptical about letting children handle money so early.
Rate cut seems imminent, but…
Though most analysts expect the RBI to cut rates in 2015, it is not clear if this will happen in the next couple of months. Till that happens, make best use of the high deposit rates offered by banks. If you do not have a large sum to invest in a fixed deposit, use recurring deposits to lock in to the high rates.
Bank deposits are not as tax efficient as debt funds, but the 2014 budget levelled some portions of the playing field. If the investment horizon is less than three years, there will be no difference in the tax.
Also, if you plan to take a home loan in 2015, opt for a floating rate loan. Given the imminent cut in rates, a fixed rate home loan will not be a good idea. Customer friendly steps by the RBI in 2014:
KYC norms eased
Customers may submit only one proof of address when opening a bank account or during periodic updation.
Banks not to charge foreclosure charges on floating rate loans.
Minimum balance in savings accounts
Instead of penal charges for not maintaining minimum balance, banks should limit services available on such accounts.
Minimum balance in dormant accounts
Banks not to levy penal charges for non-maintenance of minimum balance in any inoperative account.
Banking for minors
Minors above the age of 10 allowed to open and operate savings bank accounts independently.
SMS alert charges
Banks told to charge customers only on the basis of actual usage.
Source : http://goo.gl/8oiRHw
TNN | Nov 21, 2014, 01.44AM IST | Times of India
MUMBAI: The Reserve Bank of India (RBI) has placed curbs on the charges imposed by banks for not maintaining minimum balance requirements. The new norms require banks to notify the customer by SMS, email or letter about the intention to apply penal charges if minimum balance is not restored within a month. Banks have also been barred from the practice of having negative balances in accounts due to imposition of penal charges.
Under the new norms, the board of directors of a bank has to approve the penal charges proposed to be levied for non-maintenance of minimum balance. “The penal charges should be directly proportionate to the extent of shortfall observed. In other words, the charges should be a fixed percentage levied on the amount of difference between the actual balance maintained and the minimum balance as agreed upon at the time of opening of account. A suitable slab structure for recovery of charges may be finalized,” RBI said in a circular to all banks.
Although the board of directors has been given the freedom to fix charges, RBI has said that penal charges must be reasonable and not out of line with the average cost of providing the services. The new charges come into effect from April 2015. Until then, banks have been asked to update their customer’s mobile number and email details.
Earlier, RBI had proposed that banks should not take undue advantage of customer difficulty or inattention and instead of levying penal charges for non-maintenance of minimum balance in ordinary savings bank accounts, banks should limit services available on such accounts to those available to Basic Savings Bank Deposit Accounts and restore the services when the balances improve to the minimum required level. However, following a representation by banks, the RBI has revised its approach.
Source : http://goo.gl/XhgZIG
Mayur Shetty, TNN | Oct 28, 2014, 04.56AM IST | Time of India
A study by IIT-Bombay has highlighted how such cash handling charges are hurting the underprivileged who work away from their permanent place of residence.
MUMBAI : Charges for bank transactions outside the home branch are a relic of the pre-core banking system (CBS) days. Yet, banks are continuing with this legacy using a loophole in a Reserve Bank of India (RBI) circular and imposing charges under the head of ‘handling charges’ for cash deposits although it makes no difference to the bank where the transaction is being conducted.
A study by IIT-Bombay has highlighted how such cash handling charges are hurting the underprivileged who work away from their permanent place of residence. “Instead of harnessing the potential of the core banking system, banks are misusing the system with unjustified charges,” said Ashish Das, professor of statistics at IIT-Bombay, who has conducted the study.
The study shows that while several banks discriminate in the way they treat home branch and non-home branch transactions, there is no uniformity in the practice.
HDFC Bank, for example, allows one free transaction up to Rs 49,999 per day at a non-home bank branch as long as the money is deposited by the accountholder himself. But if it is a third party, including a family member, there is a charge of Rs 100.
ICICI Bank allows one cash deposit transaction in a month by either the customer or his representative in a non-home branch. Beyond that, deposits at non-home branch accounts are charged Rs 5 per thousand rupees.
State Bank of India has recently capped the number of free transactions to five in a month, beyond that there will be a charge of Rs 50 per transaction. The bank however does not place any restrictions on use of cash deposit machines (CDMs). Punjab National Bank, on the other hand, places restrictions on the number of transactions that can be done in a non-home branch. It also differentiates between deposits made in a cash deposit machine within the home branch and those outside the branch. Outstation deposits are charged at the rate of Rs 2 per Rs 1,000 or part of it.
The report, titled A Myth Called ‘Any-Branch Banking’, recommends that RBI end the disparity in charges for cash transactions at home branches and non-home branches. It also calls upon RBI to popularize cash deposit machines. To popularize the use of these machines, the report recommends that the National Payments Corporation of India take up the feature of reverse debit (cash deposit) under its interoperable debit card platform. This will allow account holders to make deposits in any machine. “With the envisaged increase in CDMs in the country, it is the right time to work towards making the CDMs interoperable,” the report said.
In its circular issued in July last year the RBI had said, “To ensure that bank customers are treated fairly and reasonably without any discrimination and in a transparent manner at all branches of banks/service delivery locations under CBS environment, banks are advised to follow a uniform, fair and transparent pricing policy and not discriminate between their customers at home branch and non-home branches.” However, the circular also clarified that cash handling charges may not be included under intersol (interbank) charges.
Following the introduction of core banking systems, details of account holders are maintained in central servers and can be accessed through any branch across the country.
Source : http://goo.gl/d6Qxuz
K. C. GOPAKUMAR | July 14, 2014 11:55 IST | THE HINDU
A consumer forum here has held that collection of foreclosure charges from housing loan borrowers amounts not only to deficiency in service but also unfair trade practice.
The Ernakulam Consumer Disputes Redressal Forum headed by its president, A. Rajesh, made the ruling while directing Federal Bank to refund the foreclosure charges collected from Biju Joseph of Kakkanad, a borrower.
The forum said the Committee on Customer Service in Banks had opined that foreclosure charge levied by banks on prepayment of home loans was seen as a restrictive practice, deterring borrowers from switching over to cheaper available source. The committee was of the view that levying of foreclosure charges amounted to restrictive practice on the part of banks. The Reserve Bank, through a circular in 2012, had asked banks not to charge foreclosure charges/prepayment penalties on home loans on floating interest rate basis with immediate effect.
Need for uniformity
Though many banks had in the recent past voluntarily abolished prepayment penalties on floating rate home loans, there was a need to ensure uniformity across the banking system, the circular said.
According to the complainant, while executing the loan agreement, the bank had specifically stated that it would not charge any amount at the time of foreclosure of loan account. However, the bank had vehemently argued that it was entitled to levy prepayment charges.
The forum pointed out that the person taking loan had no other go but to sign on the dotted line.
The levying of pre-closure charges contending that it was a condition in the agreement was not at all justifiable, it said. The above condition in the loan agreement “cannot be said to be with the consent of the complainant.”
Source : http://goo.gl/s7Qbjq
Rajiv Raj of creditvidya.com explains the need to keep one’s utilisation under check despite bank’s decision to raise credit card limits. It will help in maintaining a healthy credit utilisation ratio.
Rajiv Raj | Moneycontrol.com | Sep 25, 2013, 04.13 PM IST
The dynamic nature of financial markets sometimes can be befuddling for many. Any new development in markets would have misinterpretations and there would be a large part of retail consumers who buy into anything remotely connected to negativity or loss.
Such tendency gains currency and many believe negative news easily than a positive development. The upshot of this is misinformation and resultant resistance among retail investors even to understand and ascertain the reality of things.
Take for instance, the recent increase in the credit limit by banks to credit card holders who have spotless repaying record. Recently, I received e-mail from S Rajashekar, a businessman from Chennai.
His credit limit was increased and he accepted it. However, as he started preparing his file for home loan, someone told him that such an enquiry would lead to lower credit score popularly known as CIBIL score. And a worried Rajashekar wrote to me.
Some banks are going for increase in credit limit on credit cards issued to their customers on the basis of good repayment track record. Such a hike in credit limit does not depress your credit score. So keep your cool.
Here, the bank is not evaluating your credit card account afresh. It may however check your repayment history. That does not mean an enquiry to CIBIL and it is not counted as a loan application. So your CIBIL score remains intact. There is nothing to get worried about if you get a higher credit limit without providing any new income document.
But, you should be prudent enough while using increased credit limit on your credit card. Avoid borrowing too much on credit card. Banks typically offer you higher credit limit because you have been a prudent user of credit card. So, an increase in the limit of credit card must not serve as a convincing reason for you to change the way you would spend.
Stick to your spending patterns and maintain your credit profile. If you spend too much on your credit card, it works against you in multiple ways.
There are certain rules which you have to abide by to reap its benefits.
First, you have to repay all the money outstanding. If you fail to pay all your credit card outstanding, you end up paying interest. Second, failure to repay on time pulls down your credit score. Third is the credit utilization ratio. It simply means how much credit is availed by you as against how much is offered to you.
For example, if your card limit is Rs 100,000 and you spend Rs 80,000 on this card, then in that case your credit utilization ratio stands at 80 percent. High credit utilisation ratio, say more than 30 percent is not a good indicator for most credit bureaus. Consistently high credit utilization ratio pulls down the CIBIL score. So, to put it simply you should not be worried about such increase in credit limit on your credit card. Instead, be a judicious user of the increased credit limit. It is an additional leeway offered by the bank; use it to your advantage to pay for your bills or shopping without getting into a debt trap.
Also keep a track of your credit utilisation ratio. Do not fall prey to the baseless rumors about the CIBIL score. A good score is built over a period of time and can be protected at an attractive level of 750 and above, by being judicious with your use of credit.
Source : http://goo.gl/aBJuPB
Before signing up for such a deal, understand that there is nothing as a 0% interest deal
Vivina Vishwanathan |First Published: Tue, May 28 2013. 07 02 PM IST | Live Mint|
On a Sunday afternoon Krishna Daswani, assistant vice-president (programming), Zee Entertainment Enterprises Ltd, walked into Croma, Tata group’s consumer durable and electronics chain, at High Street Phoenix Mills in Mumbai to buy an iPhone—a product that he had eyed since 2007. This time there were two differences since 2007. One, it was the latest version from the Apple stable, the iPhone 5, and two, he could buy it on an installment plan. Says Daswani, “I have the money to make the complete payment right now. However, payment in installment looks easy on pocket as I have to pay it over a period of time.”
We’ve all faced this dilemma because since January this year, we’ve been flooded with the equated monthly instalment (EMI) schemes for smartphone deals. Considering the advertising push of mobile manufacturers and financial institutions, we go behind the buzz and decode the offers.
What’s on offer?
Apple kicked off the deal mania when it began the EMI scheme on iPhone 5 in December. Samsung immediately followed suit and aggressively started marketing the staggered payment scheme on selected products. On 24 May, BlackBerry stated that it would sell BlackBerry Z10 and BlackBerry Curve 9220 on “easy” monthly instalments. The schemes vary for each model and brand, but the essential feature is a staggered payment plan wherein you pay for the phone over a period of months rather than at one go. There are various options for different products on offer. For example, you need to make a downpayment of Rs.16,990 upfront for a 16 gigabyte iPhone 5 that costs Rs.45,500. The remaining Rs.28,510 can be paid through EMIs of Rs.4,752 for six months or a 12-month deal wherein you pay Rs.2,376 each month.
Another offer allows you to make the entire payment through EMIs making no downpayment, but these have a processing charge sitting on the cost. Samsung is seeing the deal do brisk business for phones including Samsung Galaxy Note II, Samsung Galaxy Grand and Samsung Galaxy Note 800.
Says Himanshu Chakrawarti, chief executive officer, The MobileStore Ltd, “At present, almost 30% of our smartphone sales come through EMI.” Anything that breaks a larger number into smaller bits makes a deal look cheaper. But is it really so? Read on to find out.
Though the mobile manufacturers and the banks advertise that there is no processing charge, if you read the fine print you will find that banks have started charging a processing fee on select smartphone products and for select tenor. Processing fee adds to the cost and makes the 0% interest claim false. It varies from bank to bank and even store to store. In the Mumbai outlets of The MobileStore, an Essar-group owned mobile handset and accessories chain, you will find the list of processing charges for each bank.
The average processing charge is in the range of 1.00-8.75% on the principal amount for three months to nine months period. So for a phone costing Rs.45,500, the processing charge can go as high as Rs.3,982, or 8.75%. Also it varies across tenor. So check with the store and the bank about the details of the processing charge. Chances are that the companies that recently started offering this service will give you a better deal. Ask the question: Is there a processing fee for this deal and how much it is?
Payment option matters
Payment option can also make a difference to the final cost of the phone. Initially you could go for these schemes only through credit cards. But now companies are providing these schemes on debit cards as well. Says Devang Mody, president-consumer business, Bajaj Finserv Lending, “Many financial institutions do this as they can use up the customer’s credit limit for the EMI.”
So if you are using your credit card for a purchase of Rs.45,000 and you credit limit was Rs.1 lakh, it will get reduced to Rs.55,000 till the amount is cleared. Since March, Bajaj Finserv has been providing the scheme on debit card with no processing charges as of now.
The scheme varies from credit card to credit card too. An HDFC Bank Ltd credit card, for instance, gives you an “at no extra cost” offer. At present there is no processing charge on this scheme on certain models. An ICICI Bank Ltd credit card offers a cashback offer on the same Samsung smartphone that gives you a cashback of Rs.5,665 on your credit card if you purchase a phone for Rs.37,900. But remember that only certain ICICI Bank credit card customers will be eligible for this (cashback) offer.
The card you swipe matters for lower processing fee too. For instance, on the same product Axis Bank Ltd charges a processing fee of Rs.3,791 for a 12-month EMI while ICICI Bank charges Rs.4,163 for the same period. However, if you swipe HDFC Bank card you will get the lowest processing charge of Rs.3,640.
If you are using your card to buy, ask the question: What is the benefit or cost of this deal if I use my credit card? Name your card to make sure you get the right deal.
Compare for best pricing
If you buy a phone on EMI the salesman will sell it to you at the maximum retail price (MRP). However, if you buy it with cash down, most retailers sell it below MRP. You get a discount of 3-5%. Also you can get a cheaper deal at online shopping sites such as Ebay.in and Snapdeal.com compared with the retail outlets. Says Tony Navin, vice-president—business development, Snapdeal.com, “Online retailers will give you a cheaper deal as there is no cost overheads such as rental and inventories and hence the benefit can be passed on to the consumer.” Says Mody, “Processing charges and pricing depends on the manufacturers need to sell the product. If he (manufacturer) wants to get rid of a certain product, you may get a cheaper deal. Also it depends on the business proposition between the manufacturer and the financial services provider.”
Always remember that haggling, even at fancy looking stores, always gets you a lower price.
What should you do
Convergence Catalyst, a research firm, estimates that smartphone sales will be in the range of 44 million to 48 million in 2013 in India compared with 20 million to 22 million in 2012. And some of these sales will be nudged through the EMI route.
Before you sign up for such a deal, understand that there is nothing called a 0% interest deal. You will pay, one way or another. If the deal still works for you, go right ahead and get the phone home.