LOAN ON CREDIT CARDS

I have taken a loan of Rs 50,000 each from two banks through credit cards. While one of the banks is charging only a service tax of 12.24 per cent, the other is charging the interest on the equated monthly instalment (EMI) apart from the service tax. Why this discrepancy? Which bank is following the correct procedure?
Both banks will charge interest as well as service charges. Make sure you have understood the repayment process correctly. Since the EMI includes the interest component, there will be no interest on the EMI itself, unless you have not paid the EMI.

TRANSFER OF FUNDS

I have an account in HDFC Bank in Delhi and my sister has one in State Bank of India, Mumbai. What is the most cost-effective way to transfer funds from my account to my sister’s account?
Both the banks are participants in the Electronic Clearing System (ECS) and are located in metros.
You should ask your bank to give you a form that enables you to write an ECS mandate that will enable you to transfer funds, without any cost, to your sister every month. You have to specify your sister’s bank branch and account details in your mandate.

I have a salary account with ICICI Bank. This month, when my salary was credited to the account, I received an SMS about my account balance. But the amount in the SMS was Rs 60 less than my salary figure. I was not able to check up with the bank immediately and used my debit card a day before. Now, I have lost the earlier SMS also. How do I clarify with the bank?
You can use your ATM card to print out the latest list of transactions on your account. You can also call the bank’s customer service centre to seek the balances and the details of debits and credits into the account. You can also post in a request to the bank, asking it to mail you the account information to enable you to verify the transactions in your account.
If you apply for Internet banking services, you can log in to check your account at any time.

PRE REPAY LOAN

I want to prepay a loan. I am told the EMI paid till now is mostly interest and the principal is due. Why?
The bifurcation between principal and interest works on a decreasing basis, so that the interest component decreases over time, while the principal component increases. If you prepay, you lose the interest already paid. EMIs are financial structures constructed in the same manner and the effective interest paid can be higher than the quoted number. Since borrowers mostly care about how much the EMI is, lenders get away without explaining the math and the effective rates.

HOME LOAN IN JOINT NAME

My wife and I are salaried and intend to take a home loan. We want to register the house in the name of both of us. Should we apply for the loan jointly?
Every individual is entitled to deductions of up to Rs 1.5 lakh on interest repayment under Section 24(2) and up to Rs 1 lakh on principal repayment under Section 80C. When you apply for a loan jointly, here is how you end up enhancing tax savings.
If you take a Rs 25 lakh loan for 15 years at 7.5 per cent rate of interest, you will pay Rs 1.84 lakh as interest in the first year. If you apply alone, you will be able to claim a tax deduction for Rs 1.5 lakh only. Of course, you will be able to claim Rs 93,784 as deduction for principal repayment under Section 80C (maximum limit: Rs 1 lakh).
If you apply jointly with your spouse, assuming that you are both in the highest tax bracket, you would both be able to claim Rs 92,159 under Section 24(2) and thus make the interest payment fully exempt from tax. A deduction of Rs 46,892 each can be claimed for principal repayment under Section 80C by both of you. This will help you claim deductions for other permissible investments. The tax saving in joint loan application is much higher—at Rs 83,431 compared to Rs 73,135 in a single application.;

PREAPPROVED LOAN

I have seen cases of friends who suffered due to delays in the sanctioning and disbursement of their home loans. I am yet to finalise on a property. My friends suggest that I go for a pre-approved loan. Is it a good idea?
When you get a home loan pre-approved, the home loan provider gives a commitment to provide you with the loan at a contracted rate after you have chosen a property, within a stipulated period, mostly six months.
However, the bank will give early approval if it finds the chosen property suitable for mortgaging.
This commitment comes after a lender has thoroughly examined your credit-worthiness through the home loan process. You have to negotiate the home loan rates with various lenders and decide on the right lender after having done market research. Of course, you will have to pay the requisite charges, often 0.25-0.50 per cent of the applied amount, for loan processing.
These days, the period of the loan pre-approval is often extended, without the payment of any extra charge.
Apart from the certainty it lends, pre-approval helps in other ways. In many property transactions, you have to sign the buyer-seller agreement, where there might be a condition about the forfeiture of your payment amount, if the full payment isn’t made available within a certain period, mostly a month.
This delay can arise from loan processing delays. With pre-approval, half the loan processing is complete. The disbursal can materialise quickly after technical and legal scrutiny of your property. In this way, pre-approval can spare you a lot of anxiety.

FIRE INSURANCE POLICY

I have bought a house. The earlier owner had a fire insurance policy for it. This is still in his name. Can it be transferred in my name? If yes, what is the procedure?
The fire insurance policy issued in the name of previous owner cannot be transferred in your name. You will, therefore, have to buy a fresh policy in your name. The previous owners, however, can cancel the policy and claim the refund. The insurance company will retain the premium on the short period scale and refund the balance.