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Monday, 9 December 2013

Employee Interest Free Loans





In some instances, employers may see fit to offer their employees a number of benefits in addition to their salary. These often include fringe benefits (Benefits In Kind) such as pension contributions or access to a private healthcare 
scheme. Sometimes, however, employees may also be offered interest-free or low-interest loans.

Loans from employers are sometimes offered solely for specific purposes. For example, many companies have begun offering interest-free loans in order that employees can purchase bicycles or public transport passes in an effort to reduce the company's overall carbon footprint. Others offer such loans for their employees to buy gym membership in order to encourage general workplace wellbeing. 




In some circumstances, however, employers may offer low-interest or interest-free loans for any purpose, acting therefore as a sort of personal bank to their employees.

Employee Benefit TrustsIn most cases, these loans will be run through an Employee Benefit Trust, or EBT. 

These Trusts are established by the employer and run by a trustee, and are normally funded by contributions from the employees. This normally begins with a minimum first sum, after which individuals are encouraged to build up the pot as much as they can. In return, employees have access to a number of highly tax-efficient benefits. Furthermore, they are attractive to employers as all contributions to the EBT will be entitled to Tax Relief, as well as being exempt from PAYE and National Insurance Contributions.





 
From an employee's point of view, loans offered through an Employee Benefit Trust 

can be a very cheap way of borrowing money. First, it is important to understand 

how the loan is paid back. This type of loan is judged to have no repayments 'in 

perpetuity' – in these circumstances, the term of perpetuity is judged to be 80 

years. Instead, the money is recovered by the employer through wage deductions. 

Furthermore, as the employer is already receiving tax relief on the EBT, the loan 

is unlikely to incur any interest, making it a far more attractive option than a 

high street bank.

Tax Relief

The savings on these loans, however, are two-fold. Not only is the employee 

unlikely to be required to pay interest, they will also receive personal tax 

relief on the sum that they have borrowed. If, for example, the recipient of the 

loan is a higher rate taxpayer, they will be required to pay only 2.2% in Income 

Tax each year. This starkly illustrates the benefits of these loans; if the same 

employee were to take the sum as, for example, a bonus rather than an EBT loan, 

they would be required to pay income tax at 50% as well as National Insurance 

Contributions.
Although there is considerable tax relief available on interest free loans, it is 

important to remember that in some instances you may still be required to pay 

income tax. Although the loan itself is subject to tax relief, the purchase that 

you make with the loan is counted as a benefit in kind and may therefore be 

taxable.

Loans must be reported to HMRC if the recipient earns more than £8,500, using form 

P11D. It is likely that you will have to pay Class 1A National Insurance 

Contributions on the cash value of your purchase; whether or not you will also be 

required to pay income tax will depend on the nature of the purchase. 

More information on benefits in kind, including examples of what is and is not 

taxable, is available in an article elsewhere on this blog .....
Thanks,

Surbhi Maheshwari [MBA Fin / Mktg ] 
Manager Finance
On Line Assistence :
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Thanks,

Surbhi Maheshwari [MBA Fin / Mktg ] 
Manager Finance
On Line Assistence :
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Thursday, 5 December 2013

Different Forms of Advances by Commercial Banks - Loan Types





Advances by commercial banks are made in different forms such as demand loan, term loan, cash credit, overdraft etc. These forms of advances are explained below.

1. Demand Loan

In a demand loan account, the entire amount is paid to the debtor at one time, either in cash or by transfer to his savings bank or current account. No subsequent debit is ordinarily allowed except by way of interest, incidental charges, insurance premiums, expenses incurred for the protection of the security etc. Repayment is provided for by instalment without allowing the demand character of the loan to be affected in any way. There is usually a stipulation that in the event of any instalment, remaining unpaid, the entire amount of the loan will become due. Interest is charged on the debit balance, usually with monthly rests unless there is an arrangement to the contrary. No cheque book is issued. The security may be personal or in the form of shares, Govt. paper, fixed deposit receipt, life insurance policies, goods, etc.

2. Term Loan

When a loan is granted for a fixed period exceeding three years and is repayable according to the schedule of repayment, it is known as a term loan. The period of term loan may extend up to 10 years and in some cases up to 20 years. A term loan is generally granted for fixed capital requirements, e.g. investment in plant and equipment, land and building etc. These may be required for setting up new projects or expansion or modernization of the plant and equipment. Advances granted for purchasing land / building / flat (Apartment house) are term loans.




3. Overdraft

An overdraft is a fluctuating account wherein the balance sometimes may be in credit and at other times in debit. Overdraft facilities are allowed in current accounts only. Opening of an overdraft account requires that a current account will have to be formally opened, and the usual account opening form completed. Whereas in a current account cheques are honoured if the balance is in credit, the overdraft arrangement enables a customer to draw over and above his own balance up to the extent of the limit stipulated. For example, if there is a credit balance of Rs.40,000/- (approx. $890 USD) in a customer's current account and an overdraft limit of Rs. 50,000/- (approx. $1,113 USD) is sanctioned to the party, he can draw cheques up to Rs. 90,000/- (approx. $2,003 USD). There is no restriction, unlike in the case of loans, on drawing more than once. In fact, as many drawings and repayments are permitted as the customer would desire, provided the total amount overdrawn, i.e. the debit balance at any time does not exceed the agreed limit. This is a satisfactory arrangement from the customer's point of view. He need not hesitate to pay into the account any moneys for fear that an amount once paid in cannot be drawn out or borrowed again, unlike in a loan account. As in the case of a demand loan account, the security in an overdraft account may be either personal or tangible. The tangible security may be in the form of shares, government paper, life insurance policies, fixed deposit receipts etc. i.e. paper securities. A cheque book is issued in an overdraft account.

4. Cash Credit

A cash credit is essentially a drawing account against credit granted by the bank and is operated in the same way as a current account in which an overdraft limit has been sanctioned. The principal advantages of a cash credit account to a borrower are that, unlike the party borrowing on a fixed loan basis, he may operate the account within the stipulated limit as and when required and can save interest by reducing the debit balance whenever he is in a position to do so. The borrower can also provide alternative securities from time to time in conformity with the terms of the advance and according to his own requirements. Cash credits are normally granted against the security of goods e.g. raw materials, stock in process, finished goods. It is also granted against the security of book-debts. If there is good turnover both in the account and in the goods, and there are no adverse factors, a cash credit limit is allowed to continue for years together. Of course a periodical review would be necessary.





5. Bills Purchased

Bills, clean or documentary, are sometimes purchased from approved customers in whose favour regular limits are sanctioned. In the case of documentary bills, the drafts are accompanied by documents of title to goods such as railway receipts or bills of lading (BOL). Before granting a limit, the creditworthiness of the drawer is to be ascertained. Sometimes the financial standing of the drawees of the bills are verified, particularly when the bills are drawn from time to time on the same drawees and/or the amounts are large.

Although the term "Bills Purchased" seems to imply that the bank becomes the purchaser / owner of such bills, it will be observed that in almost all cases, the bank holds the bills (even if they are indorsed in its favour) only as security for the advance. In addition to any rights the banker may have against the parties liable on the hills, he can also fully exercise a pledgee's right over the goods covered by the documents.

6. Bills Discounted

Usance bills, maturing within 90 days or so after date or sight, are discounted by banks for approved parties. In case a bill, say for Rs. 10,000/- (approx. $223 USD) due 90 days hence, is discounted today at 20% per annum, the borrower is paid Rs. 9,500/- (approx. $211 USD), its present worth. However the full amount is collected from the drawee on maturity. The difference between the present worth and the amount of the bill represents earning of the banker for the period for which the bill is to run. In banking terminology this item of income is called "discount".
Thanks,

Surbhi Maheshwari [MBA Fin / Mktg ] 
Manager Finance
On Line Assistence :
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Forex Basics - Forex Trading Basics





If you are a beginner in forex trading, this is the place to start. The following 

articles will help you gain an understanding of the forex market and how it works.

What is forex? Why trade forex?

The foreign exchange market – or forex for short – is the buying and selling of 

currencies, and it’s one of the fastest growing markets in the world. 

Forex trading works much like it does with stocks, you buy low and you sell high. 

The benefit of trading forex is that you don’t have to choose from thousands of 

companies or sectors. Plus, you can make things even simpler than choosing which 

company to buy.

For example, most people, even those that are new to forex, have an opinion on the 

US dollar and the US economy. They can easily take their opinions and translate 

them into a forex trade. Buying or selling US Dollars as simple as they buying or 

selling a company’s stock.

Also, another advantage of the FX market is that it doesn’t begin at 9AM and end 

at 4PM. Trading takes place 24 hours a day, 5 days a week. For most people 24 hour 

trading means they can trade before or after work. Plus, you have the flexibility 

to make your trades online.

Plus, you can buy and sell at any time, in up trends (also called bull markets) 

and in down trends (also called bear markets).





What is Forex?

You may have noticed that the value of currencies goes up and down every day. What 

most people don't realize is that there is a foreign exchange market - or 'Forex' 

for short - where you can potentially profit from the movement of these 

currencies. The best known example is George Soros who made a billion dollars in a 

day by trading currencies. Be aware, however, that currency trading involves 

significant risk and individuals can lose a substantial part of their investment. 

As technologies have improved, the Forex market has become more accessible 

resulting in an unprecedented growth in online trading. One of the great things 

about trading currencies now is that you no longer have to be a big money manager 

to trade this market; traders and investors like you and I can trade this market.
Forex in a nutshell
The Forex market is the largest financial market on Earth. Its average daily 

trading volume is more than $3.2 trillion. Compare that with the New York Stock 

Exchange, which only has an average daily trading volume of $55 billion. In fact, 

if you were to put ALL of the world's equity and futures markets together, their 

combined trading volume would only equal a QUARTER of the Forex market. Why is 

size important? Because there are so many buyers and sellers that transaction 

prices are kept low. If you're wondering how trading the Forex market is different 

then trading stocks, here are a few major benefits.
Many firms don't charge commissions – you pay only the bid/ask spreads.
There's 24 hour trading – you dictate when to trade and how to trade.
You can trade on leverage, but this can magnify potential gains and losses.
You can focus on picking from a few currencies rather than from 5000 stocks.
Forex is accessible – you don’t need a lot of money to get started.





How is Forex traded ?

The mechanics of a trade are virtually identical to those in other markets. The 

only difference is that you're buying one currency and selling another at the same 

time. That's why currencies are quoted in pairs, like EUR/USD or USD/JPY. The 

exchange rate represents the purchase price between the two currencies.
Example:
The EUR/USD rate represents the number of USD one EUR can buy. If you think the 

Euro will increase in value against the US Dollar, you buy Euros with US Dollars. 

If the exchange rate rises, you sell the Euros back, and you cash in your profit. 

Please keep in mind that forex trading involves a high risk of loss.
Important: be aware of the risks:
Finally, it cannot be stressed enough that trading foreign exchange on margin 

carries a high level of risk, and may not be suitable for everyone. Before 

deciding to trade foreign exchange you should carefully consider your investment 

objectives, level of experience, and risk appetite. Remember, you could sustain a 

loss of some or all of your initial investment, which means that you should not 

invest money that you cannot afford to lose. If you have any doubts, we recommend 

that you seek advice from an independent financial advisor.
Thanks,

Surbhi Maheshwari [MBA Fin / Mktg ] 
Manager Finance
On Line Assistence :
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Wednesday, 4 December 2013

Different Kind of Loans In India against securities



In my previous blog (http://best-loan-offers.blogspot.in/2013/12/different-types-of-loans-provided-by.html)   I have discussed What are the different types of loans you can take in India ? But do you always think about Personal loan when you want a loan? A lot of people despite having different kind of assets go for personal loan even if they have other options where they can mortgage an existing asset and take a loan at lower interest rate. In this article I will give you 5 alternatives to personal loans and tell you a little bit about each.

Personal Loan

Before we move forward let us once again understand a basic rule of lending. There 

are two kind of loans , Secured Loan and Unsecured Loan , as I have already 

discussed in my previous blogs.
 
Secured loan is a loan where a lender has access to some kind of asset so that 

incase you run away, he can liquidate the asset and take his full or partial money 

back, as there is a sense of security in secured loans, you have to pay a lower 

rate of interest on these loans. However an Unsecured loan is a loan where the 

lender has no access to any asset and incase you run away, bank has no way to get 

back that loan , that’s the reason you have to pay very high interest rates on 

these loans, Personal loan and credit card are examples of these loans.

The biggest reason why someone should go for these alternative loans is that the 

processing of these loans are much faster and better interest rates compared to a 

personal loan. 

So now lets see some alternatives to personal loan incase you posses an asset.

1. Loan against Gold

Lets me start with the best option to take a secured loan in India. You can pledge 

your Gold jewellery and take a loan from Banks and companies like Muthoot Finance 

or Mannapuram Gold. The best thing about gold loan is that the processing is 

extremely fast (from few hours to 2-3 days) depending on your case. The way it 

works in Gold loan is like this – The higher the margin of safety you leave , the 

lower the interest rate. Here is an example , if you have gold worth Rs 10 lacs 

and you are ready to pledge it for a loan of just 5 lacs, then you are leaving a 

comfortable margin of Rs 5 lacs for Bank (incase you run away or gold prices 

decline) . So in this case you will get a very good interest rate offer , but if 

you take a loan which is 80% or 90% of the worth , then you will be asked for a 

very high interest rate. Generally the interest rate asked is between 12% – 15% .
There are no pre-processing charges or too much documentation involved in gold 

loan, in most of the cases the only thing required is your address and id proof. 

that’s all and you can get a loan within 24 hours easily .

2. Loan against your Insurance Policies (LIC/SBI)

Lets talk about LIC policies here. You can also get a loan on your LIC policy 

incase its eligible for loan (most of them are) . But to get loan on your LIC 

policy, it should have a SURRENDER VALUE, which happens only after payment of 3 

yearly premiums. Only after that you can avail for a loan which would be around 

90% of Surrender Value. Lets see an example – Ajay has a LIC endowment policy 

which has a yearly premium of Rs 50,000 . He has paid 10 years premium (total 5 

lac) , the surrender value of his LIC policy is around 3 lacs at the moment. So he 

can get a loan of around 2.7 lacs.
One can take a loan either from LIC itself (recommended) or from banks, for which 

they will have to pledge their LIC policy totally to them. So incase they are not 

able to pay the loan, their LIC policy will be surrendered and company will take 

their money back. The best part of these loans is that you get it only at an 

interest rate of 9-10%. So if you have a LIC policy and it has a respectable 

Surrender Value , then you can take Loan against these policies and not take 

personal loan which has hefty interest rates. Check the loan amount available on 

your LIC policy by just sending this SMS – ASKLIC YOUR-POLICY-NUMBER LOAN to 56677



3. Loan against Fixed deposits
Incase you have a Fixed Deposit for long-term and would not like to break it in 

times of emergency, you always have an option to take a loan against that Fixed 

Deposit. The interest rate you will have to pay on that loan should be 1-2% higher 

than the interest rate earned on the FD and the loan amount available to you would 

be around 75% – 80% of the FD current Worth. For an example – suppose you have a 

FD which has its current worth at 10 lacs and you are earning 10% on that FD , 

then you can get around 8 lacs of loan at 12% interest rate . This is one good 

option incase you do not want to break the FD and also want to take a loan.






4. Loan against Property
You can also take loan against your property (Residential and Commercial) . Banks 

give loan upto 50% of market value of the property or 30-40 times your monthly 

income . The interest rate charges is in range of 13-16% depending on how big the 

loan is and how much margin you can leave. Loan against property is generally 

recommended for those who want a big amount as loan for purposes like expansion of 

business, wedding or some big-ticket expenses. Incase you need just 2-3 lacs of 

loan then it’s not recommended.
There can be processing and prepayment charges in these loan against properties 

(LAP) . A good place to compare the loans against property is policybazaar page . 

Public sectors banks like Bank of Baroda, SBI banks are known to not charge the 

prepayment penalties and have lower processing charges . All the loans against 

property comes at FIXED interest rates.




5. Loan against Other investments
Shares and Mutual Funds – There are loans offered against Mutual Funds and Shares 

, but there is a list of approved Funds and Shares which can get loan, also as the 

values of shares and mutual funds are highly volatile, there is high level of 

margin required on it , Means that if you have shares worth Rs 10 lacs , the 

amount of loan you can get is much lower than 10 lacs.
Public Provident Fund - You can get loan on your PPF account also , but there are 

some restrictions , you can only get loan from the 3rd year to the 6th year and 

the amount of loan will be only 25% of the balance in the account 2 yrs back . For 

example – If you want to take the loan in 5th year after opening your PPF account 

, then you will only get loan of 25% of the balance in 3rd year , if the balance 

was just Rs 2,00,00 in 3rd year, then you can only take loan of Rs 50,000 .

So I hope you have got a clear understanding of what options do you have incase 

you want to take loan against your assets. Note that the lower interest rates are 

one of the reasons why you should go for these alternative loans, but the bigger 

reason can be fast processing of these loans in case of emergencies.
Thanks,

Surbhi Maheshwari [MBA Fin / Mktg ] 
Manager Finance
On Line Assistence :
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Monday, 2 December 2013

An Overview Of Fundamental Analysis For The Stock Market



I'm not a professional trader, expert, nor do I have decades of experience.  
But since this is a personal fiance blog, I'd be remiss if I didn't at least try to give an overview of fundamental analysis. So in this post, I'll try to share a little bit on how ordinary investors can perform fundamental analysis. (Bear in mind, it's an introduction to guide people on understanding it and hopefully encouraging them to do it.)

What is it?

Simply put, it's knowing the business that you're investing in. First you need to know what they do, where the business is, who the customers/target demographic are, and how they operate.

And then you take a look at the finances. And you do that by looking at the publicly-available financial documents (Available at PSE's official website here). Basically you want to know their expenses, how much they make every year (revenue), how much profit they're making, how much debt they have, and how much cash they have to respond to threats or opportunities (cashflow).

And of course, you take a look at the company's management. It can give you an idea if the company is in good hands.

In practice though, it's pretty hard to analyze the management. Mostly, you'll just see biographies with glowing praise. Instead, it might be better to look at their track record. If they worked somewhere else before, what happened there? If they've been with the company for some time, how did the company do over that time span?

An Overview Of Fundamental Analysis For The Stock Market. Part 1 of a 2-part series. In this part we'll go over what it is, what it can do and what it can't do.



What can it do? 

Assuming it's done right, it can:

tell you if the business is growing
tell you if the business is currently under or over-valued (based on it's current share price)
give you confidence that at some point it should give returns on your investment
(and most importantly) prevent you from selling your shares at a loss during a tough market dip, since you'll know if the business is really affected or not.



What it can't do

It can't guarantee a return on your money. For at least two reasons:
A lot of outside forces (acts of nature, technological advancement, or even simply shifting personal or cultural tastes) can impact the business. So keep vigilant even after completing your analysis
Also, there's no guarantee that the stock market will reflect the "true" value (based on your analysis) of the company. Even if you did everything right. It may be overlooked, underestimated or just ignored for some reason.

Lastly, it's important to note that there are variants of fundamental analysis. Just like different technical analysis techniques lean on different indicators/metrics, it's possible to perform fundamental analysis a few different ways.

So I'd like to end part one, by letting uber-famous Warren Buffet say how he does it (skip to 1:41 for the goods):



Note: Valuation = stock price x number of shares. 

In part 2, I'll try to give you an idea about Technical Analysis in Stock Market , which is another most important part for a stocker.




Thanks,

Surbhi Maheshwari [MBA Fin / Mktg ] 
Manager Finance
On Line Assistence :
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Different Types of Loans Provided by the Banks

Types of loans in india,
loan process india,
types of loans in banks,
types of business loans in india,
types of loans in india pdf,
types of bank loans in india,
types of home loans in india,
types of personal loans in india




There are many types of loans provided by the bank. Almost all banks provide the the following types of loans.

Auto / Car Loan
Education Loan
Home Loan
Loan against Shares
Personal Loan

Auto Loan
Most of the banks provide car loans. Car loan also termed as Auto Loan. One can get car loan up to 85% of ex-showroom price of the car with some amount of processing fee. 





Education Loan
Education Loan is also termed as Student Loan.
Educational loan is offered to the students, who are having brilliant academic records, studying at recognized colleges/universities in India or abroad. Educational loan is generally offered to meet the expenses on tuition fees, books and other educational related cost. 

Home Loan
Home loan is one of the fastest moving financial banking products. Like a car loan, most of the reputed banks provides home loan up to the 85% of agreement value of a home or apartment. There are two types of home loans available depends on interest rate. Floating Interest Rate and Floating Interest Rate. SBI, ICICI HSBC, HDFC, AXIS banks are leading in providing home loans. 

Loan against shares
Loan against shares is runs on liquid guarantee. It's very easy to get it if one can have liquid as guarantee against loan. 

Personal Loan
Personal loan amount is depends on the profile of person who is applying for the loan. Usually interest rates are higher for Personal loans.




Thanks,

Surbhi Maheshwari [MBA Fin / Mktg ] 
Manager Finance
On Line Assistence :
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