Different Types of Loans

In this fast world of uncertainity we don't know when a need arrises for money which is beyond our capability or when we lack the desired amount. It is these moments when one thinks of loans. It could be a need well planned like starting a business, building a home , purchasing a vehicle, marriage loan or securing a bright future for one's children by providing them best education through good colleges by student loans apart from these it could also be an emergency caused loan.

Here are few types of loans which are very prevalent among people :

Emergency Loans- Every now and then we have a situation when we are in acute need of money but we are low on savings or have very low income to meet the situation,in such scenarios Loan comes to our aids. In such cases people often opt for short term loan which they mean to pay back in a very short period, like within days, weeks or couple of monthsat maximum. These are emergency loans which can be had at any financial institutions.

Home Loans-Banks are the best places to go when you are thinking of building or buying a home for yourself. People usually apply in banks for large sum of loans for purpose of home in haste without even taking few things in consideration. One must look for a bank which offers loans on lower interest rates and witha good range of years of repayment schedule.

Car Loans/ Auto Loans-One of those needs which has become the most important reasons for the people of India to seek loans these days. With the fall in automobile prices and many low budget cars flooding the Indian market, the Indian masses are considering it imperative for themselves to have a vehicle. This type of loan is offered irrespective of what type of car one needs to purchase. The amount of loan that you want to borrow and the interest rates will heavily depend on your credit, your monthly income and your age. If you have a poor employment history then that will also have a negative effect on the total amount and the interest rate associated with the loan.

Student Loans- One can apply for a student loans if he/she is going to a college or a trade school. One must get in touch with government or private banking institutions or money lending institutions to borrow student loans. What one must keep in mind while seeking these loans is that he/she must negotiate a deal with the money lending organisation for the interest on the amount to be as low as possible. In this respect a person going to a trade school is bound to be asked less interest than the one going to a college.In trade schools , as soon as you complete your graduation or the course your loan repayment schedule begins.

Personal Loans- People need loans for varied reasons and sometimes these reasons have nothing to do with any basic necessities of like medical, car or home loans like for example personal needs like traveling during holidays , cosmetic surgeries, wedding and many such other needs comes under the category of personal loans. Usually personal loans carry a higher interest because these suffice the personal needs of people. Before seeking personal loans one must go for some personal research in regard with personal loans through internet.

Credit Cards- Credit Cards have become a current rage among the people all around the globe. It still has to catch up with the middle-classed Indians but its already famous among the affluent society of India. In fact many people presume that life becomes very easy when one has credit card. But the fact is that the credit card makes one's life easy by allowing one to buy things at one's will with no worry at that moment but one has to pay very high interest on them. Infact the credit cards are the biggest loan industry in the world.

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Major Banks in India

Following are the major banks of India arranged in alphabetical order:

• Abu Dhabi Commercial Bank
  
• American Express Bank
• Andhra Bank
• Allahabad Bank
• Axis Bank (Earlier UTI Bank)
• Bank of Baroda
• Bank of India
• Bank of Maharastra
• Bank of Punjab
• Bank of Rajasthan
• Bank of Ceylon
• BNP Paribas Bank
• Canara Bank
• Catholic Syrian Bank
• Central Bank of India
• Centurion Bank
• China Trust Commercial Bank
• Citi Bank
• City Union Bank
• Corporation Bank
• Dena Bank
• Deutsche Bank
• Development Credit Bank
• Dhanalakshmi Bank
• Federal Bank
• HDFC Bank
• HSBC
• ICICI Bank
• IDBI Bank
• Indian Bank
• Indian Overseas Bank
• IndusInd Bank
• ING Vysya Bank
• Jammu & Kashmir Bank
• JPMorgan Chase Bank
• Karnataka Bank
• Karur Vysya Bank
• Laxmi Vilas Bank
• Oriental Bank of Commerce
• Punjab National Bank
• Punjab & Sind Bank
• Scotia Bank
• South Indian Bank
• Standard Chartered Bank
• State Bank of India (SBI)
• State Bank of Bikaner & Jaipur
• State Bank of Hyderabad
• State Bank of Indore
• State Bank of Mysore
• State Bank of Saurastra
• State Bank of Travancore
• Syndicate Bank
• Taib Bank
• UCO Bank
• Union Bank of India
• United Bank of India
• United Western Bank
• Vijaya Bank

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RBI set to cut rates further

RBI is set to cut its short-term borrowing and lending rate further by about 100 basis points by March, 2009 as it steps up its damage control efforts for the Indian economy under jolting effects of the global crisis, ICICI securities said .
A Prasanna and Abhishek Panda, the unit's economists, pointed out to the series of recent weak data which indicates that external demand has severely collapsed and tighter financial conditions are not helping the cause either.

"All said, a slowdown is set in stone and the Reserve Bank of India(RBI) may have to move quickly to limit the downside risks and to restore confidence among domestic and foreign investors." They went on to add that the exports in October fell by 15% and the commercial vehicle sales fell by 36%, its biggest fall in a decade.
It must be taken in account that RBI has already cut its Repo Rate by 150 basis points and reduced banks' CRR by 350 basis points since October in order to infuse the cash in indian market which is facing one of the worst liquidity crunch.
"We see a reasonable probability of a fragmented electorate resulting in a weak mandate leading to delays in critical reform measures that may be required to boost the economy in the short- as well medium-term," they said.ICICI said while the exact timing of the cut was difficult to predict, it may even reduce both its lending and borrowing rates by 50 basis points in November.
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Central Bank Needs to Reduce Rates

A former governor of reserve bank of India, Bimal Jalan said that India needs to cut intrest rates further as two cuts in interest rate has still proved to be inadequate ."Policy makers should lower benchmark rates further if necessary to enable banks to cut their loan rates", Bimal Jalan, the top official at the Reserve Bank of India from 1997 to 2003, said in an interview yesterday in New Delhi. "Measures taken by the central bank and the government in the past month have helped bring the crisis under relative control.''
The global financial crisis has led to shortage of money in Indian banking sector which has resulted in lender's inability in providing leading companies with loans which in turn has caused production cut at companies including Ashok Leyland, the nation's second-biggest maker of commercial vehicles, and JSW Steel Ltd.
Demand for domestic loans increased after Liquidity crunch in overseas banks following the seizure in credit markets and the collapse of Lehman Brothers Holdings Inc. on Sept. 15. State Bank of India, the country's largest, cut the rate it charges its best clients to 13 percent last week from 13.75 percent, the highest in a decade but ICICI Bank Ltd., the second biggest, hasn't reduced its 17.25 percent charge.
"We need to create conditions so that loans are available at interest rates at pre-crisis levels, as other sources of finances have dried up,'' said Jalan, 67. "I am in favor of further reducing the cash-reserve ratio and the repurchase rate, if necessary.''
The benchmark Bombay Stock Exchange Sensitive Index has declined almost 50 percent this year and the slowing demand will still hurt companies' profits more.

India's central bank cut its benchmark Repo Rate by 1.5 percentage points in two stages starting Oct 20th to 7.5 percent from a seven-year high of 9 percent. It has also lowered CRR (the amount lenders must set aside as reserves to cover deposits) by 3.5 percentage points in a month, freeing up as much as 1.4 trillion rupees ($29.5 billion) in cash to ease lending by the banks. "The action taken by the Reserve Bank seems to be absolutely appropriate,'' the Cambridge and Oxford alumni Jalan said. "The most important thing is giving assurance to all the players that a line of credit is available at a price before all the shakiness stared." Higher borrowing costs and prices have discouraged spending by consumers who rely on loans to buy cars and motorbikes. Passenger car sales in India fell 6.6 percent in September, the most in more than three years, the Society of Indian Automobile Manufacturers said this week.

Vehicles sales, also including trucks, two-wheeled scooters and motorcycles, tumbled 14% , the biggest drop in almost eight years, the automobile grouping said Nov. 10. India's industrial production growth grew 1.3% in August, the slowest pace of expansion on record.

Cooling inflation has given the central bank more room for interest-rate cuts, Jalan said. India's inflation rate, measured by wholesale prices, slowed to a five-month low of 10.68 % in the week ended Oct. 18th because of waning consumer demand and a decline in commodity prices.

``Circumstances are good as far as inflation is concerned,'' he said. ``If you see a spiking of inflation, then your options become limited.''

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Glossary of Banking Terms

GLOSSARY

AER - Annual earnings rate on an investment.

Annuity - A life insurance product which pays income over the course of a set period. Deferred annuities allow assets to grow before the income is received and immediate annuities (usually taken from a year after purchase) allow payments to start from about a year after purchase.

APR - The annual percentage rate of interest, usually on a loan or mortgage, usually displayed in brackets and representing the true cost of the loan or mortgage as it shows any additional payments beyond the interest rate.

Bank Statements - This is a statement from the bank giving details of transactions in the relevant account. It can be requested at any intervals required, usually monthly.

Bear Market - A bear is somebody who believes that the market is falling and a bear market is a falling market. See bull market for the opposite.

Bounced Cheque - when the bank has not enough funds in the relevant account or the account holder requests that the cheque is bounced (under exceptional circumstances) then the bank will return the cheque to the account holder. The beneficiary of the cheque will have not been paid. This normally incurs a fee from the bank.

Bonds - These are securities which pay interest at specified intervals and the principle amount of the loan is paid at maturity.

Bull Market - A bull is somebody who believes that the market is rising and a bull market is a rising market. See bear market for the opposite.

Cashback Mortgages - This is when the mortgage provider lends the money for the mortgage and, in addition, a lump sum to pay for, for example, building work to be carried out.

Central Clearing Time (in England and Wales) - This is the time that it takes for the monies from a cheque to be taken out of the payee's account and put into the payer's account. This is three working days in England and Wales, as long as the cheque was paid in before 16.30.

Certified Documents - These are photocopies of original documents that have been signed by a professional i.e. a solicitor, accountant, teacher, doctor or bank official. The professional also states, on the document, "original seen" since they must be able to verify that these are genuine copies and therefore have to have seen the original, they also date the document and put their full name, profession and their address.

Charges - This is the money paid to the bank for services rendered. Charges include overdraft fees, charges for bouncing cheques, interest on overdraft and any charges that a business account might normally incur.

Charge Cards - Cards which can be used like a credit card but the charge has to be paid off on the due date. They usually have a high limit or no limit.

Cheque Book - A small, bound booklet of cheques. A cheque is a piece of paper produced by your bank with your account number, sort-code and cheque number printed on it. The account number distinguishes your account from anyone elses, the sort-code is your bank's special code which distinguishes it from any other bank. In times gone by, anything with the correct details and a verifiable signature could act as a cheque. Even an elephant was once used!

Cheque Clearing - This is the process of getting the money from the cheque-writer's account into the cheque receiver's account.

CHIP and PIN - A Chip is a small electronic insert placed into a cheque or credit card. The PIN is a four digit personal identification number which is used with the card by the card-holder.

Clearing Bank - This is a bank that can clear funds between banks. For general purposes, this is any institution which we know of as a bank or as a provider of banking services.

Contract Hire - This is a way of hiring an item of large capital value where the maintenance is the responsibility of the company that hires out the item. A fixed monthly figure is paid and the item can be sold, usually to an unconnected third party.

Credit Rating - This is the rating which an individual (or company) gets from the credit industry. This is obtained by the individual's credit history, the details of which are available from specialist organisations (Equifax and Experian are the two big operators in the U.K. www.equifax.co.uk and www.experian.co.uk).

Credit Scoring - This is the process of assessing an individual's credit-worthiness. The process involves taking information from an individual on an application form (for example when applying for a store card) and weighting the answers given. Certain responses will attract higher scores than others and the total score will determine whether or nor the organization wants to do business with the individual, or if they represent too high a credit risk.

Credit-Worthiness - This is the judgement of an organization which is assessing whether or not to take a particular individual on as a customer. An individual might be considered credit-worthy by one organisation but not by another. Much depends on whether an organization is involved with high risk customers or not.

County Court Judgement - This is when a judge at a county or small claims court finds against an individual and they have a county court judgement made against them. This is recorded nationwide (and by the credit tracking organizations Experian and Equifax) so anyone wanting to know the credit-worthiness of an individual will know that the county court judgement exists. Once it is paid off then the record remains but it is shown as being paid which reduces the credit risk associated with the person with the county court judgement.

Direct Debit - An amount of money taken from a bank account, set up by the recipient and can vary in amount and exact time that it is taken from an account. Mortgages are usually direct debits.

Endowment Mortgage - Interest only is paid over the term of this sort of mortgage and the capital is repaid at the end of the term by using the monies from an endowment policy.

Factoring - This is when a business sells its invoices to a specialist company or bank which chases payment and pays a percentage of the invoice back to the original business. The business can then continue with its work and problems from cash-flow are reduced by having money from unpaid invoices up-front.

Hire Purchase - When an item of large capital value is bought over time by paying a deposit and fixing a period over which the loan will run (usually between 12 and 60 months) and then paying fixed and equal repayments over this period.

Identity Theft - This is when criminals use an innocent person's details to open or use an account to carry out financial transactions. It is very easy to do with an individual's personal details, which is why shredding confidential information is so important.

Identity Verification - This is often used by financial institutions to verify the customer and usually takes the form of a pass-word and the answer to an obscure personal question such as the customer's mother's maiden-name.

Interest - The amount paid or charged on money over time. If you borrow money interest will be charged on the loan. It you invest money, interest will be paid (where appropriate to the investment). Interest rates usually bear a close relationship to the Bank of England's base rate. It is expressed in percent.

ISAs - This stands for Individual Savings Accounts. These are available to all UK residents over 18 (mini ISAs are available to 16 and 17-year-olds). Investment limits apply to the total contributions made in any tax year, not to the total in the ISA itself. ISAs can be cash, stocks and shares or life insurance.

Lease Purchase - This is an agreement made on an item of high capital outlay (for example, a car) where the ownership is transferred to the person who is leasing the item at the end of the contract, providing all the terms and conditions of the purchase have been fulfilled.

Money Laundering - This is when money gained from crime is put into a bank so that it can be accessed safely by the criminals and terrorists. It makes the proceeds of illegal activities easier to get to.

Money Transfer - This is the movement of money from one account to another.

Money Transfer Abroad - This is the movement of money from one account to another, the second being in a different country from the first.

Offsetting - This is when the credit balances in a current and savings account are netted off against the account holders borrowings (typically a mortgage) so that the rate paid on the borrowing is reduced as a result of the credit held in other accounts, which reduces the amount that is being borrowed.

Overdraft - This is when a person has a minus figure in their account. It can be authorized (agreed to in advance or retrospect) or unauthorized (where the bank has not agreed to the overdraft either because the account holder represents too great a risk to lend to in this way or because the account holder has not asked for an overdraft facility).

Payee - The person who receives a payment. This often applies to cheques. If you receive a cheque you are the payee and the person or company who wrote the cheque is the payer.

Payer - The person who makes a payment. This often applies to cheques. If you write a cheque you are the payer and the recipient of the cheque is the payee.

PEP - Personal Equity Plans have been replaced by ISAs. Existing PEPs can be retained but, since April 1999, no new ones can be opened.

Phishing - This is when a criminal uses the internet to try to fraudulently obtain details of peoples accounts so that they can use these accounts themselves, usually to take money out of.

Repayment mortgage - This is a mortgage where the sum borrowed is paid off by the end of the mortgage term. It involves monthly repayments which consist of the interest on the loan plus some of the capital borrowed.

Security for Loans - Where large loans are required the lending institution often needs to have a guarantee that the loan will be paid back. This takes the form of a large item of capital outlay (typically a house) which is owned or partly owned and the amount owned is at least equivalent to the loan required.

Standing Order - A regular payment made out of a current account which is of a set amount and is originated by the account holder.

Tessas - Tax Exempt Special Savings Accounts.

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