Unit I – Introduction to financial Planning Financial Goals When it

Unit I – Introduction to financial Planning Financial Goals When it comes to personal finance, everyone’s situation is unique. No one has the same bills, rent, debts, or lifestyle. When you’re ready to take control of your financial lifestyle, you need a plan that will answer your specific problems, not your neighbour’s. The first step to tackling these problems is to define your financial goals.

What Is a Financial Goal? A financial goal is a target to aim for when managing your money. It can involve saving, spending, earning or even investing. Creating a list of financial goals is vital to creating a budget. When you have a clear picture of what you’re aiming for, working towards your target is easy. That means that your goals should be measurable, specific and time oriented.

Your financial goals should take as S-M-A-R-T approach, in that they are: S— specific, so you know exactly what your goals are so you can create a plan designed to achieve those objectives. M— measurable with a specific amount. For example, “Accumulate 5,000 in an investment fund within three years” is more measurable than “Put money into an investment fund.” A— action-oriented, providing the basis for the personal financial activities you will undertake. For example, “Reduce credit card debt” will usually mean actions to pay off amounts owed.

R— realistic, involving goals based on your income and life situation. For example, it is probably not realistic to expect to buy a new car each year if you are a full-time student. T— time-based, indicating a time frame for achieving the goal, such as three years. This allows you to measure your progress toward your financial goal

Types of Financial Goals There are several types of financial goals: Short-term goals Mid-term goals Long-term goals Short term financial goals These are smaller financial targets that can be reached within a year. This includes things like a new television, computer, or family vacation.

Mid-term financial goals Typically, midterm goals take about five years to achieve. A little more expensive than an everyday goal, they are still achievable with discipline and hard work. Paying off a credit card balance, a loan or saving for a down payment on a car are all mid-term goals. Long-term financial goals This type of goal usually takes much more than 5 years to achieve. Some examples of long term goals are saving for a college education or a new home.

Examples of Personal Finance Goals 1. Start an Emergency Fund Life is unpredictable, and it’s important to be prepared. Saving for emergencies is one of the only goals that is a necessity. It should be the first one you should set, regardless of your situation. It’s up to you to decide what qualifies as an emergency. There are a lot of different situations that can fall into this category, including: Medical expenses Job loss Accidents Broken appliances Car repair

When something unexpected and expensive occurs, emergency funds are there to keep you from suffering the financial blow. How much you save toward an emergency will vary. Statistically, it takes 9 months on average to find a new job after a layoff. With this in mind, it is in your best interest to save roughly 9 months’ worth of income for emergencies.

2. Pay Off Debt Paying off debts is one of the most common financial goals. No one feels comfortable knowing that they owe large sums of money. And because the amount you owe is already a specific number, paying off debt can easily be translated into a financial goal. In addition to making every monthly payment, the best way to make real progress is to stop borrowing. Adding to your debt will only push you away from your goal, so it’s important to stay strong and diligent. In some cases, this goal is probably a mid-term goal, but there are ways to get out of debt fast.

3. Save for Retirement Saving for retirement is a goal you may be working towards your entire life. It is the perfect example of a long term investment. It is important to consider exactly what your retirement needs are. Setting up a 401(k) or another retirement plan is the most lucrative way to save for your future. Remember, the earlier you start, the better off you’ll be in the end.

4. Strive for Homeownership Buying a home is a common long-term financial goal. Whether you’re saving for a down payment or working to pay off a mortgage, homeownership is one of the largest financial targets to aim for. Saving up a sizeable down payment is the best way to get a reasonable home loan. And if you save enough, you can avoid the cost of Private Mortgage Insurance, which will save you even more money.

5. Pay Off the Car loan Having a monthly car payment is not a staple in life. A great example of a midterm goal is paying off a car loan. Somewhat sizable, paying off the balance should only take a few years. Once you’ve completed paying off your auto loan, don’t run straight back to the dealership. It’s a signal that you should use those loan payments for other bills or savings. You’ve already finished one debt – there’s no reason to hop into another loan right away. It’s important to know the best time to sell or trade in your car to make the most of your investment. Instead, continue to drive your old car until you have a sizable down payment for the next one. Make it your goal to pay for your next car in full, without borrowing at all.

6. Invest in a College Education Unfortunately, due to the increasing cost of college, paying off student loans has become a modern long-term goal. Whether you’re a student paying off your own balance or a parent saving for your child’s education, college tuition is easily a substantial goal to base your budget on. 7. Plan for Fun While most financial goals are oriented around being responsible, you should always try to aim for one “fun” goal. This could be a vacation, a big-screen TV, a boat or any other unnecessary thing that you simply want. If you work hard and save diligently, you deserve to reward yourself with fun savings goals. Plus, working towards something you truly want is a great way to practice self-discipline and goal setting.

Achieving Your Financial Goals What strategies can you use to reach your financial goals? Throughout your life you will have many different financial needs and goals. By learning to use your money wisely now, you will be able to achieve many of those goals. Financial planning involves choosing a career, and then learning how to protect and manage the money you earn. By using eight strategies, you can avoid many common money mistakes: 1. Obtain—Obtain financial resources by working, making investments, or owning property. Obtaining money is the foundation of financial planning because you will use that money for all other financial activities. 2. Plan—The key to achieving your financial goals and financial security is to plan how you will spend your money

3. Spend Wisely—Many people spend more than they can afford. Other people buy things they can afford but do not need. Spending less than you earn is the only way to achieve financial security. 4. Save—Long-term financial security starts with a savings plan. If you save on a regular basis, you will have money to pay your bills, make major purchases, and cope with emergencies. 5. Borrow Wisely—When you use a credit card or take out another type of a loan, you are borrowing money. Borrowing wisely—and only when necessary—will help you achieve your financial goals and avoid money problem.

6. Invest—People invest for two main reasons: to increase their current income and to achieve long-term growth. To increase current income, you can choose investments that pay regular dividends or interest. To achieve long-term growth, you might choose stocks, mutual funds, real estate, and other investments that have the potential to increase in value in the future. 7. Manage Risk—To protect your resources in case you are ever seriously injured, get sick, or die, you will need insurance coverage. Insurance will protect you and those who depend on you. 8. Plan for Retirement—When you start to plan for retirement, consider the age at which you would like to stop working full time. You should also think about where you will want to live and how you will want to spend your time: at a part-time job, doing volunteer work, or enjoying hobbies or sports.

Time Value of Money (TVM) What Is the Time Value of Money (TVM)? The time value of money (TVM) is the concept that a sum of money is worth more now than the same sum will be at a future date due to its earnings potential in the interim. This is a core principle of finance. A sum of money in the hand has greater value than the same sum to be paid in the future. The time value of money is also referred to as present discounted value.

Understanding the Time Value of Money (TVM) Investors prefer to receive money today rather than the same amount of money in the future because a sum of money, once invested, grows over time. For example, money deposited into a savings account earns interest. Over time, the interest is added to the principal, earning more interest. That's the power of compounding interest. If it is not invested, the value of the money erodes over time. If you hide 1,000 in a mattress for three years, you will lose the additional money it could have earned over that time if invested. It will have even less buying power when you retrieve it because inflation has reduced its value.

As another example, say you have the option of receiving 10,000 now or 10,000 two years from now. Despite the equal face value, 10,000 today has more value and utility than it will two years from now due to the opportunity costs associated with the delay. In other words, a payment delayed is an opportunity missed.

Formula for Time Value of Money Depending on the exact situation, the formula for the time value of money may change slightly. For example, in the case of annuity or perpetuity payments, the generalized formula has additional or fewer factors. But in general, the most fundamental TVM formula takes into account the following variables: FV Future value of money PV Present value of money i interest rate n number of compounding periods per year t number of years Based on these variables, the formula for TVM is: FV PV x [ 1 (i / n) ] (n x t)

Time Value of Money Examples Assume a sum of 10,000 is invested for one year at 10% interest compounded annually. The future value of that money is: FV 10,000 x [1 (10% / 1)] (1 x 1) 11,000 The formula can also be rearranged to find the value of the future sum in present day dollars. For example, the present day dollar amount compounded annually at 7% interest that would be worth 5,000 one year from today is: PV 5,000 / [1 (7% / 1)] (1 x 1) 4,673

Effect of Compounding Periods on Future Value The number of compounding periods has a dramatic effect on the TVM calculations. Taking the 10,000 example above, if the number of compounding periods is increased to quarterly, monthly, or daily, the ending future value calculations are: Quarterly Compounding: FV 10,000 x [1 (10% / 4)] (4 x 1) 11,038 Monthly Compounding: FV 10,000 x [1 (10% / 12)] (12 x 1) 11,047 Daily Compounding: FV 10,000 x [1 (10% / 365)] (365 x 1) 11,052

This shows TVM depends not only on the interest rate and time horizon but also on how many times the compounding calculations are computed each year. How Does the Time Value of Money Relate to Opportunity Cost? Opportunity cost is key to the concept of the time value of money. Money can grow only if it is invested over time and earns a positive return. Money that is not invested loses value over time. Therefore, a sum of money that is expected to be paid in the future, no matter how confidently it is expected, is losing value in the meantime.

Time value of money and opportunity costs When making financial decisions based on the time value of money, you should also consider opportunity costs. If you have multiple options to choose from when making a decision, the opportunity cost refers to the potential gains you will not receive because you chose one option over the others. Here is an example of the time value of money and opportunity cost: You are a business owner and need to decide how to spend 10,000. You can either spend it on a new piece of equipment that will give you a 5% annual return or put it in an investment account that offers an annual return of 8.5% interest. Using the time value of money formula, you can calculate your options: 10,000 x [1 (5% / 1) (1 x 1) 10,500 10,000 x [1 (8.5% / 1) (1 x 1) 10,850 In this scenario, your opportunity cost is the 350 you miss out on by buying the equipment instead of investing the money.

Why Is the Time Value of Money Important? The concept of the time value of money can help guide investment decisions. For instance, suppose an investor can choose between two projects: Project A and Project B. They are identical except that Project A promises a 1 million cash payout in year one, whereas Project B offers a 1 million cash payout in year five.The payouts are not equal. The 1 million payout received after one year has a higher present value than the 1 million payout after five years.

How Is the Time Value of Money Used in Finance? it would be hard to find a single area of finance where the time value of money does not influence the decision-making process. The time value of money is the central concept in discounted cash flow (DCF) analysis, which is one of the most popular and influential methods for valuing investment opportunities. It is also an integral part of financial planning and risk management activities. Pension fund managers, for instance, consider the time value of money to ensure that their account holders will receive adequate funds in retirement.

STEPS IN FINANCIAL PLANNING Personal financial planning is the process of managing your money to achieve personal economic satisfaction. This planning process allows you to control your financial situation. Every person, family, or household has a unique financial position, and any financial activity therefore must also be carefully planned to meet specific needs and goals.

Specific advantages of personal financial planning include Increased effectiveness in obtaining, using, and protecting your financial resources throughout your lifetime. Increased control of your financial affairs by avoiding excessive debt, bankruptcy, and dependence on others for economic security. A sense of freedom from financial worries obtained by looking to the future, anticipating expenses, and achieving your personal economic goal

STEP 1: DETERMINE YOUR CURRENT FINANCIAL SITUATION In this first step, you will determine your current financial situation regarding income, savings, living expenses, and debts. Preparing a list of current asset and debt balances and amounts spent for various items gives you a foundation for financial planning activities.

STEP 2: DEVELOP YOUR FINANCIAL GOALS Several times a year, you should analyze your financial values and goals. This activity involves identifying how you feel about money and why you feel that way. Are your feelings about money based on factual knowledge or on the influence of others? Are your financial priorities based on social pressures, household needs, or desires for luxury items? How will economic conditions affect your goals and priorities? The purpose of this analysis is to differentiate your needs from your wants. Specific financial goals are vital to financial planning. Others can suggest financial goals for you; however, you must decide which goals to pursue. Your financial goals can range from spending all of your current income to developing an extensive savings and investment program for your future financial security.

STEP 3: IDENTIFY ALTERNATIVE COURSES OF ACTION Financial choices require periodic evaluation. Developing alternatives is crucial when making decisions. Although many factors will influence the available alternatives, possible courses of action usually fall into these categories: Continue the same course of action. For example, you may determine that the amount you have saved each month is still appropriate. Expand the current situation. You may choose to save a larger amount each month. Change the current situation. You may decide to use a money market account instead of a regular savings account. Take a new course of action. You may decide to use your monthly savings budget to pay off credit card debt

Creativity in decision making is vital to effective choices. Considering all of the possible alternatives will help you make more effective and satisfying decisions. For instance, most people believe they must own a car to get to work or school. However, they should consider other alternatives such as public transportation, carpooling, renting a car, shared ownership of a car, or a company car. Remember, when you decide not to take action, you elect to “do nothing,” which can be a dangerous alternative

EVALUATE YOUR ALTERNATIVES You need to evaluate possible courses of action, taking into consideration your life situation, personal values, and current economic conditions. How will the ages of dependents affect your saving goals? How do you like to spend leisure time? How will changes in interest rates affect your financial situation? CONSEQUENCES OF CHOICES Every decision closes off alternatives. For example, a decision to invest in stock may mean you cannot take a vacation. A decision to go to school full time may mean you cannot work full time. Opportunity cost is what you give up by making a choice. This cost, commonly referred to as the trade-off of a decision, cannot always be measured in dollars. It may refer to the money you forgo by attending school rather than working, but it may also refer to the time you spend shopping around to compare brands for a major purchase.In either case, the resources you give up (money or time) have a value that is lost

STEP 5: CREATE AND IMPLEMENT YOUR FINANCIAL ACTION PLAN This step of the financial planning process involves developing an action plan that identifies ways to achieve your goals. For example, you can increase your savings by reducing your spending or by increasing your income through extra time on the job or shelter current income in a tax-deferred retirement program, or buy municipal securities. As you achieve your short-term or immediate goals, the goals next in priority will come into focus. To implement your financial action plan, you may need assistance from others. For example, you may use the services of an insurance agent to purchase property insurance or the services of an investment broker to purchase stocks, bonds, or mutual funds

STEP 6: REVIEW AND REVISE YOUR PLAN Financial planning is a dynamic process that does not end when you take a particular action. You need to regularly assess your financial decisions. You should do a complete review of your finances at least once a year. Changing personal, social, and economic factors may require more frequent assessments. When life events affect your financial needs, this financial planning process will provide a vehicle for adapting to those changes. Regularly reviewing this decision-making process will help you make priority adjustments that will bring your financial goals and activities in line with your current life situation

LOANS A loan is when you receive money from a friend, bank or financial institution in exchange for future repayment of the principal, plus interest. The principal is the amount you borrowed, and the interest is the amount charged for receiving the loan. Since lenders are taking a risk that you may not repay the loan, they have to offset that risk by charging a fee - known as interest. Loans typically are secured or unsecured. A secured loan involves pledging an asset (such as a car, boat or house) as collateral for the loan. If the borrower defaults, or doesn't pay back the loan, the lender takes possession of the asset. An unsecured loan option is preferred, but not as common. If the borrower doesn't pay back the unsecured loan, the lender doesn't have the right to take anything in return.

FEATURES AND BENEFITS OF LOANS There are several types of loans categorized based on various factors. You can choose the type of loan you wish to take based on your requirement and eligibility. The lender will be the ultimate power to decide the loan amount they wish to offer to you based on several factors, such as repayment capacity, income, and others. A repayment tenure and interest rate will be associated with every loan. The bank may apply several fees and charges to every loan. Many lenders provide instant loans that take a few minutes to few hours to get disbursed.

The interest rate is determined by the lender based on the Reserve Bank of India’s guidance. The lender determines the requirement for security. A third-party guarantee can be used instead of security in some cases. The loan repayments must be made in equated monthly instalments over the pre-determined loan tenure There may or may not be the option for full/part prepayment. Some loan types and lenders may levy a penalty for prepayment of loans.

CREDIT SCORE o CIBIL ( Credit Information Bureau (India) Limited) Score is a three-digit numeric summary of your credit history. o The score is derived using the credit history found in the CIBIL Report (also known as CIR i.e Credit Information Report). o A CIR is an individual’s credit payment history across loan types and credit institutions over a period of time. A CIR does not contain details of your savings, investments or fixed deposits. o To check account number or member details you can purchase your CIBIL Score and Report. o This report will contain complete details of your credit history across various lenders and products, enabling you to check all the aforesaid information

EQUATED MONTHLY INSTALLMENT (EMI) An equated monthly installment (EMI)is a fixed payment amount made by a borrower to a lender at a specified date each calendar month. Equated monthly installments are applied to both interest and principal each month so that over a specified number of years, the loan is paid off in full. The benefit of an EMI for borrowers is that they know precisely how much money they will need to pay toward their loan each month, making the personal budgeting process easier.

Factors That Affect EMI o Principal loan amount: It is the original loan amount that an individual borrows from the bank or lender. It is the foremost factor, based on which the EMI amount is decided. If the principal amount is higher, the EMI will increase. o Rate of interest: It refers to the interest rate that banks or financial institutions charge for loan repayment. The rate is arrived at, based on various calculations and assessment of the borrower’s credit profile.

What are the types of loan interest rates? Fixed interest rate: Here, the interest rate remains unchanged throughout the loan tenure. Hence, the loan EMI remains the same. Usually, fixed interest rates are higher than current floating interest rates by 1% to 2%. However, since the interest rate does not vary, you will have a clear idea about your future EMI payments. Floating or variable interest rate: In the case of floating interest rates, the interest rate will be subject to change, depending on the market trends. It is based on the base rate offered by the lending institution. Thus, the interest rates automatically change if the base rate varies.

PERSONAL LOANS Personal loans are an unsecured form of credit that is popular to meet immediate requirements. It is multi-purpose in nature and therefore can be used for various purposes including wedding, home renovation, travel purposes and more. Moreover, there is no restriction for the amount borrowed and can be used for any purpose they want. These loans are normally unsecured one. All in all, a personal loan can offset any temporary financial crisis.

Benefits and Features of Personal Loan No collateral required: one of the benefits associated with an online personal loan is that it is unsecured in nature. This means you don't need to pledge any collateral for your loan. Although this can be a reason for your higher interest rate. Minimal Documentation: In this age of digitisation, the process of verification and documentation has now become short. This is applicable for an instant personal loan as they are fast in disbursal and require minimum documents for approval.

Easy Approval You can get personal loans that are quick and easy in approval. This is why it is the best in times of financial emergency. The process has become digital; thus reducing time in the verification process. A personal loan can be used for anything except for investment and illegal activities. It is multipurpose in nature and can be used for anything. Other forms of credit when taken are for a specific purpose and can be used only for the same. For example, a home loan is used for purchasing a house whereas a car loan is taken to buy a car. However, a personal loan can be taken to offset any immediate requirements.

Personal Loan Eligibility Personal loans are provided by most of the banks/NBFCs but with different eligibility requirements. However, there are certain criteria that are common for all financial institutions. The eligibility criteria to get an online personal loan approval for salaried and self-employed individuals are Age --- 18/21 years -60/65 years Employment Type -- 1. Salaried 2. Self-Employed professionals Credit score -- 750 or above with a good credit history Minimum Net Income (Monthly)-- 15,000 (non-metro cities) 20,000( metro cities) Loan Amount Up to 50 lacs depending on the credit profile

Work Experience Salaried Employed at current company for at least 6/12 months Self-Employed Business tenure of at least 3 years (continuous) ITR of last 3 years Documents Required for Personal Loan The common documents required for an online personal loan approval are given below: For Salaried Individuals. 1. Identity & Age Proof 2. Completely filled personal loan application with photograph 3. PAN Card 4. Residence proof – Passport, driving licence, Voter ID, postpaid/landline bill, (electricity/water/gas) 5. Bank statements for the last 3 months(preferably your salary account) 6. Salary Slips of last 3 months 7. Form 16 or Income Tax Returns of last 3 years

For Self-Employed Individuals 1. Identity & Age Proof 2. Completely filled personal loan application with photograph 3. PAN Card 4. Residence proof - Passport driving licence, Voter ID, postpaid/landline(electricity/water/gas) 5. Bank statements for the last 3 months(preferably your salary account) 6. Salary Slips of last 3 months 7. Last 3 years Income Tax Returns with computation of Income 8. Last 3 years CA Certified / Audited Balance Sheet and Profit & Loss Account

Types of Personal Loan: Here are the different types of online personal loan: Personal Loan for Home Improvement There's something that can be always done to your home and this is where an instant personal loan can help you fulfill them. From remodelling your kitchen to making your house a perfect mix of comfort and durability, a personal loan for home renovation can be the solution. Personal Loan for wedding In India, a normal wedding cost 25 lakhs on an average! Exhausting all your savings for all the wedding expenses is not an ideal option. This is where you apply online personal loan and cover the expenses. Now, planning a wedding is now easy. Personal Loan for Travel you can get personal loan to cover your travel expenses. Since it is convenient and an economic option, it can be an open option. Moreover, it can alternate your uses with your credit card and help you save on interest costs.

Fresh Funding Meeting working capital requirements can be a daunting process and without raising fresh funds, the everyday operations can get affected. A personal loan can be the best alternative option to meet your short-term working capital requirements such as cover accounts payable, wages, etc Top Up Personal Loan Top up personal loan is a facility provided by financial institutions to customers that allows you to borrow a certain amount of money over your personal loan. The interest rate for a top up loan is slightly higher than the regular personal loan. Personal Loan Balance Transfer Did you know you can save thousands on your interest costs on a personal loan? Well, that is what a balance transfer can help you with. You can pay off your existing loan with a new loan at a lower-interest rate. Please note there is a charge associated with a personal loan balance transfer.

The Consequences of a Personal Loan Default If there is no resolution, you will have to face the personal loan defaulter's punishment in India. As this is an unsecured loan, you will be placed on a loan defaulters list. This will also reflect on your credit history and severely affect your ability to secure loans in the future. Furthermore, you may also be booked under section 420 of the Indian Penal Code, which involves imprisonment. Personal loan schemes https://www.centralbankofindia.co.in/en/node/420

What is Home Loan? A home loan is basically a financial support solution, which allows individuals to borrow funds from large financial institutions in order to purchase property or build a house on a property. Home loans come with predefined interest rates and repayment tenure. The lender can be any financial institution, including banks.

The borrower can pay back the loan amount through easy EMI options The lender retains its ownership of the property when the borrowed amount is cleared with pre-defined interest. Home loans are solely provided for any property purchase, construction, renovation, or repair purposes. Depending upon the lending company, these loans may vary between Rs. 50,000 to over Rs. 5 crores, with flexible payment options within a tenure of up to 30 years, depending upon the funds borrowed.

Eligibility to Avail a Home Loan Although the eligibility criteria vary with the financial institutions, some standard criteria are as follows – The age limit of the applicant for salaried must be between 23 to 63 years. The age limit of the applicant for self-employed must be between 25 to 70 years. The applicant must have a minimum CIBIL score of 750. The monthly salary of the applicant must not be less than Rs. 25,000. The work experience of the salaried professional must be at least 3 years. In case the applicant is an entrepreneur, his/her business must be more than 5 years old.

Documents Required to Apply for Home Loan The online loan application process is hassle-free and required zero paperwork. However, there are some documents to keep handy while filling up your online home loan application form. Here are the important documents required to apply for an online home loan – KYC documents Address proof Identity proof Latest salary slips Bank account statement of last six months Proof of business continuity Clean title deed and complete documentation of the property. For different home loan schemes visit

Pradhan Mantri Awas Yojana (PMAY) Narendra Modi, the Prime Minister of India, launched the Pradhan Mantri Awas Yojana(PMAY), on 1 June 2015. PMAY Scheme, an initiative of the Indian government, aims at providing affordable housing solutions to the urban poor. The objective is to render housing for all by 2022, as the nation celebrates 75 years of its independence by that time.

It also aims to make housing available to specific demographics, such as economically challenged groups, women, and minority people, including Scheduled Castes and Scheduled Tribes. Under this initiative, affordable houses will be constructed in selected cities and towns,using environment-friendly construction methods for the benefit of India's urban poor. Beneficiaries under PM Awas Yojana are also eligible for interest subsidy under the Credit Linked Subsidy Scheme if they make use of a loan to buy or build a house.

Who Will be the Beneficiaries Under This Scheme? A beneficiary family will comprise the wife, husband, single daughters, and/or sons who are unmarried. A beneficiary family should not be an owner of a pucca house either in their own name or on behalf of their family member in any part of the country (India).

What are the Features of PMAY? 6.50% p.a. is the subsidy interest rate given under the PMAY Scheme on housing loans to every beneficiary for a period of 20 years. The division of ground floors will be given preference to senior citizens as well as differently-abled citizens. Construction would be made using safe and environment-friendly technology. The scheme encompasses the country's entire urban area, including 4041 legislative towns with first priority given to 500 Class I cities. That is going to be done in 3 stages.The PM Awas Yojana credit-linked subsidy feature gets introduced in India from the veryinitial stages in all legislative towns.

EDUCATIONAL LOANS Education loans are basically a form of monetary assistance availed by students to meet the expenses associated with their studies. Education loans can be taken by means of funding, scholarships, financing and rewards, and are granted in cash, which has to be repaid to the lender along with a rate of interest. Bank’s conditions: While sanctioning a loan, the bank will check if a student has actually secured admission to a course, the quality of the college and the course (whether it is recognised by the University Grants Commission or the All-India Council for Technical Education), and, where applicable, the credit history of the co-applicant or guarantor.

Here are the other main attributes that work in its favour: Quick processing Minimum documentation Quantum of finance enlarged to include hostel fees, computer cost, etc. No collateral security insisted upon No third-party surety Cheaper rates of interest Longer repayment period No need to pay back loan till completion of course Easy EMIs for regular repayment

Documents: The most commonly required documents are: a) proof of admission (educational loan cannot be applied without proof that admission has been secured in the selected institution); b) schedule of fees from the institution; c) mark sheet of the last qualifying examination; d) details/statements of bank accounts held by the student applicant for the last six months; and e) photographs. Educational loan schemes link https://sbi.co.in/web/interest-rates/interest-rates/loan-schemes-interest-r ates/education-loan-scheme https://www.pnbindia.in/education.html

Repayment: Most banks ask you to start paying off the loan either six months or one year after you complete the course, or six months after you have secured a job, whichever happens first. It is important to remember that the higher the amount, the longer you get to repay. However, this does not mean that you are not charged any interest for that period. Although some banks may defer interest payment, interest is actually calculated from the day of disbursement of the loan.

Criteria for availing car loan Car loan is a financial assistance taken to purchase a car with minimal initial payment from your own pocket. The borrowed money from the lender can be repaid in equal monthly instalments over a period of time with an agreed rate of interest. Normally, car loans are secured with the Particulars Details Minimum Age of the Applicant 18 years Maximum Age of the Applicant 60 years for salaried applicants and 65 years for self-employed applicants Minimum Annual Income Rs.3 lakh Car Model Any approved car model Type of Employment Salaried or self-employed Country or Place of Residence India (rural/semi-urban/urban areas) Duration of Stay in Current A minimum of 1 year Residence

Features and Benefits of Car Loan When it comes to car loans in India, in general, the following features and benefits are offered. Note that, the following is a generalized look at the advantages offered by car loans. Individually, car loan lenders may have highly customized and specialized offerings for their customer base. It helps you purchase a car even if you don’t have all the money for it right now. Most car loans will finance the on-road price of the car. Some car loans will even finance 100% of the on-road price. This means no down payments. With some banks offering financing in the crores, you are not limited in your choice of cars Most car loan offerings in India are secured loans. This implies that the car serves as the security/collateral for the loan.

Procuring a car loan is usually simple when compared to other loan products. Individuals with slightly unpleasant credit scores can also hope to procure one. However, this option differs from bank to bank. Car loans in India often offer fixed interest rate options. This means, you are always assured of a fixed amount that needs to be repaid monthly. Many lenders will offer interest rates based on your credit score so a high score to get you a cheaper loan. Car loans are not meant for just new cars. A used car loan can help you buy a pre-owned car.

Car Loan Approval - Steps to Get the Loan Approved Faster When you want to receive funds to purchase the new or used car that you have been eyeing for a while, it is better that you opt for a pre-approved loan. To avail such a loan, you can follow a few steps to quickly receive the required funds. Check Your Credit Report You can check your credit report to verify your standing in terms of credit score. A score of 750 or more can get you a lower interest rate. However, the interest rate for a score of 650 to 750 will be slightly higher. If you have defaults in your report, or have a very low score, your application may be rejected. Look for Car Loan Options There are multiple options available in the market through which you can get a loan to purchase your new or used car. You should check the car loan interest rates of different banks and car financing firms in order to find the one that fits your needs.

Borrow as Less as Possible By paying a larger amount upfront as down payment, you can reduce the sum that you will have to borrow in order to match the price tag of the car you have chosen. If you borrow a lesser amount, you will be in a better position to repay your loan quickly since a smaller loan amount means smaller EMIs or a shorter loan tenure. Additionally, the amount that you will have to pay to your bank or car financing organisation as interest will also reduce. Be Sure to Choose a Plan That Fits Your Budget The repayment capability of an applicant greatly impacts the approval of a loan that he or she has applied for. As you decide to get a loan to purchase the car that you have always wanted, you should make sure that you choose a scheme that you can afford. If you are already paying EMIs for other loans that you have availed, you should ensure that you can also pay the EMI of the car loan that you choose.

Pay Attention to the Terms of the Loan A car loan that has low monthly EMIs but consists of a longer tenure might not be viable for you. Before you finalise your financing scheme, you should always try to opt for a plan that carries the lowest interest rate and the shortest loan tenure as possible. Avoid being tricked into an expensive payment situation by ensuring that the loan terms are conclusive. Get a Car Insurance with Complete Coverage While offering a loan, the main concern of banks and NBFCs is not to incur any losses. Therefore, having a full-cover insurance is a requirement for many organisations before sanctioning a car loan as it helps recover the balance debt in case there is an accident wherein the borrower is at fault.

Pre- payment a Car Loan When you take a car loan, you can repay it in equated monthly instalments (EMIs) till the end of the repayment tenure. However, if you decide to pay off the outstanding loan amount before your tenure ends, you will be foreclosing or prepaying your loan. The foreclosure/prepayment facility is offered by most lenders for a penalty fee though some lenders may allow you to foreclose/prepay your car loan without charging you any penalty.

SAVINGS & ITS BENEFITS

WHAT IS SAVINGS ? Savings is the portion of income not spent on current expenditures. Because a person does not know what will happen in the future, money should be saved to pay for unexpected events or emergencies. An individual’s car may breakdown, their dishwasher could begin to leak, or a medical emergency could occur. Without savings, unexpected events can become large financial burdens. Therefore, savings helps an individual or family become financially secure. Money can also be saved to purchase expensive items that are too costly to buy with monthly income. Buying a new camera, purchasing an automobile, or paying for a vacation can all be accomplished by saving a portion of income.

HOW MUCH MONEY SHOULD BE SAVED? To be considered financially secure, an individual or household should save at least six months’ worth of expenses. For example, a household that has 2,000 per month of expenses should have at least 12,000 in savings ( 2,000 multiplied by 6 months). To reach this amount, it is recommended that 10-20% of net income should be saved until the appropriate amount of savings is reached. Net income is the amount of an individual’s take-home pay after taxes and other deductions have been taken out of a paycheck.

ROLE OF DEPOSITORY INSTITUTIONS IN SAVING MONEY A depository institution is a business that offers financial services to people, such as savings and checking accounts. Unlike money stored at home which could be lost to a fire, burglary, or some other type of disaster, money stored at a depository institution is protected from loss. Depository institutions offer accounts that earn interest, allowing customers to take advantage of the time value of money. The time value of money means money paid out or received in the future is not equivalent to money paid out or received today. Interest is the price of money. When depositing money at a depository institution, an individual may earn money from interest. The amount of interest earned is determined by calculating a percent of the total amount of money deposited. This percentage rate is known as the interest rate. Savings accounts, money market deposit accounts, and Certificate of Deposits are the most common depository institution accounts that earn interest.

Benefits of savings Helps in emergencies: Emergencies are always unexpected. . Cushions against sudden job loss: . Helps to finance vacations: . Limits debt: . Gives financial freedom: . Helps prepare for retirement: . Helps finance further education: . Helps to finance the down payment for a mortgage

MANAGEMENT OF SPENDING Spend management is a process of collecting, maintaining, categorizing, and evaluating spend data to reduce procurement costs, improve efficiency, monitor and control workflows, and regulate compliance. What Is a Personal Spending Plan? A spending plan is an informal document used to determine the cash flow of an individual or household. A personal spending plan, similar to one's budget, helps outline where income is earned and where expenses are incurred. When paired with a financial goals worksheet, the personal spending plan can be used to create a roadmap for monitoring spending, as well as helping determine the most appropriate methods for saving.

Understanding Personal Spending Plans A personal spending plan is a more individualized and flexible take on the traditional budget. While many people may be familiar with their sources of income, such as a salary from a job, fewer know the patterns that may be associated with where that income is spent. A family may want to integrate a household spending plan in order to track what each member of the family spends and find ways to save or budget funds. The personal spending plan is often more detailed than a standard budget because it requires more information about each item. By documenting and categorizing all sources of spending, individuals and families can better understand whether funds are being spent on items that

WAYS TO MANAGE YOUR EXPENSES OR SPENDINGS 1. Make a Budget Develop a realistic budget and stick to it. Review your budget periodically and revise it when necessary. There are many easy ways to develop a budgeting system such as spreadsheets or online software and apps. These programs will help you determine how much you are spending and saving. 2. Stop Purchasing Based on Impulse Curb your impulse buying. If you see something that you want to buy, don't buy it right away. Go home and think it over. If you do this, you probably won't return to the store to make the purchase. Ask yourself if you really need this object and chances are the answer is: you don't.

3.Learn How To Manage Debt If you have multiple balances that you need to pay off, you'll need to develop a plan that is effective to manage your debt. Consider attending a personal financial management course to learn how to manage your debt. Some of the things you might be able to do to get to a point where you can manage your debt include: Talking to your creditors to negotiate better rates Consolidating your loans (loan consolidation) Seeing if there are alternative financing solutions

4. Limit Debt Limit the amount of debt that you take on. A rule of thumb is monthly payments on your debts (not including your mortgage) should not exceed 20% of your take-home pay. 5. Control Monthly Expenses At Home Cutting down on monthly expenses can save you a great deal of money. Some bills may seem insignificant by themselves; but when you see the cumulative, the cost can be enormous. Consider cutting back on recurring money drains such as: Streaming services (Netflix,Prime, Disney , etc.), Cable Excessive energy use Large cellphone bills Also, take the time to check your credit card and bank accounts to see if you are paying any unexpected recurring bills.

6. Identify Ways To Cut Expenses and Save Money Look for ways to cut expenses that are effective and easy to implement. If you typically eat out or order in, consider other cost-effective ways to eat at home. If you don't go to the gym often, maybe it's time to cancel your membership. These simple cutbacks can help you increase your savings. 7. Pay Off Debts In Full Charge only those items that you can pay off in full when you receive your credit card bill. Don't get into the habit of maxing out your credit cards and just paying the minimum payment. This irresponsible habit means you're continually spending more money than you have and you are collecting significantly more debt due to high credit card interest rates.

8. Keep Your Mortgage and Rental Payments Reasonable Don't saddle yourself with huge housing costs. Only take on obligations that you can easily afford now. A general rule of thumb is that rental payments should be either one-fourth or one-third of your monthly income. For example, if an individual makes 3,000 a month, a rent price of 1,000 or less will allow him or her to save comfortably. 9. Develop Alternatives To Spending Money Make it a hobby to develop alternatives to spending a lot of money. Instead of dining out, go for a walk and have a picnic. Rent books at the library instead of buying them. Try to take advantage of promotions going on in your city. For example, many cities have a day where museums are free or even half off.

10. Invest Wisely Make prudent investments. Avoid investments that promise a high return, like penny stocks, junk bonds, and speculative deals. The reason that those investments offer a high return is that they are extremely risky! 11. Don't Cosign or Guaranty Don't cosign or guaranty an obligation for someone else. If that person doesn't pay, you will be responsible for repayment.

12. Obtain Adequate Home and Auto Insurance Be sure that you have adequate insurance on your home, its contents, and your automobiles. An individual can have major bills if they do not have adequate insurance. For example, if you were involved in a major car accident due to no fault of your own and do not have adequate insurance, you may be responsible for most of the cost of repairs and damages out of pocket. 13. Obtain Adequate Health Insurance Be sure that you have adequate health insurance coverage at all times. Health bills can pile up and be in the thousands of dollars. It would be in your best interest to have health insurance to protect yourself from being obligated to pay expensive health bills.

14. Monitor Your Income and Expenses Going Forward Monitoring your income can be very effective in making your budget work. Take a look at your bank statements regularly to identify where you are spending. You can also create a spreadsheet to categorize and track your expenses. This will show you what's really costing you and allow you to start making adjustments to your expenses.

FINANCIAL DISCIPLINE Merriam-Webster defines "discipline" as "a way of behaving that shows a willingness to obey rules or orders." Though most people associate discipline with social behaviors, it also applies to how you manage your money. Financial discipline refers to how well you are able to confirm your spending and saving to the plans that you have set to achieve your monetary goals.

How to be financially disciplined? 1.Organize all your financial documents. Create a file folder or a cabinet or box with sections for all your expenses, insurance, assets, income and liabilities. You could label the folders this way: House/apartment Income Insurance Medical Vehicle Utilities Taxes In each folder put everything associated with the category. For example, under "house/apartment" you would keep mortgage or lease/rent documents. Under "utilities" you'd file gas/electricity, water, sewage, tv/internet, and phone bills. Note everything you spend on entertainment, groceries, and gas.

2. Determine how much you spend in each category. Some expenses are unavoidable, such as mortgage/rent and utilities. However, you could reduce your monthly expenses in other categories by first determining how much you spend there and how much is absolutely necessary. 3. Create a balance sheet with all your income in one column and all your expenses in another. Do this for at least three months to determine a pattern. By doing this you get an idea of how often you eat out and how much you spend on movies or other entertainment. You'll begin to see where you might be able to reduce costs. 4. Set goals. Write down everything you want to accomplish. Include estimates of how much your goals will cost and how long before you achieve them. For example:"Buy a house: 200,000 with a 5% down payment. Save 10,000 by June 2020." This will give you an idea of how much you need to save to reach your goals.

5. Once you've identified your goals, determine which are short-range goals (within five years), and determine how much you will need to put aside every month to reach them. Let’s say you want to buy a 30,000 car. You can take out a loan for 30,000 that you will need to pay back in three years. You will have monthly costs (not taking interest into account) of approximately 833. 6. Save as much as possible for a down payment. This will reduce the amount of the loan and the interest you'll pay on it. Be realistic in setting money aside, because you'll have to continue meeting your living expenses. 7. Ask your payroll department to deposit a certain amount from your paychecks into whatever retirement account your employer offers. By paying yourself first in this way, you can save money for retirement without even seeing it (and being tempted to spend it). Spend only a part of what's left in each paycheck. Try to save as much of what remains as you can. You may find it hard to maximize your savings, but as you near retirement, you will be very glad you did.

8. Deposit some money into a savings account for emergency purposes. Try to maintain an emergency fund consisting of roughly six months' worth of normal expenses. This will help cover costs should you lose your job or become temporarily incapacitated. 9. Find ways to reduce costs. Using a budget will help. Here are some examples: Watch matinee movies instead of higher-priced evening showings. Eat out once or twice a month rather than once or twice a week. Make your own coffee and take it to work or school rather than stopping by a coffee stand on your way. Leave your credit cards home when going shopping. If you're determined to use a card, pick one with a generous rewards program. Don’t go grocery shopping when you're hungry. You may buy more than you need at such times.