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Ramalingam

Ramalingam Kalirajan  |7026 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 29, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Dr Question by Dr on May 22, 2024Hindi
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Hello sir my housing loan account is with bank of india where my emi starting was 7.25 percent before 3 yrs now it is been increased to 9.75 percent I regularly ask bank official about the increased rate of interest but they tell it is becos of increasing rapo rate And replies since I am a gold costumer of bank my EMI is reduced to 9.25 percent I feel this is also very high Expert please advise

Ans: Thank you for sharing details about your housing loan situation. It is indeed challenging when interest rates increase, impacting your financial planning. Let’s evaluate your current scenario and explore potential solutions to manage your housing loan more effectively.

Understanding Interest Rate Fluctuations
Interest rates on housing loans are influenced by various factors, including the Reserve Bank of India's (RBI) repo rate. When the repo rate increases, banks generally raise their lending rates. Over the past three years, your interest rate has increased from 7.25% to 9.75%, reflecting this trend.

Evaluating Your Current Rate
Although you mentioned you are considered a gold customer with a slightly reduced rate of 9.25%, this rate still appears high. Considering market trends and available rates from other financial institutions, it is crucial to assess if you can secure a better deal.

Steps to Consider for Managing Your Housing Loan
1. Refinancing Your Loan
Refinancing or transferring your loan to another bank offering lower interest rates could be beneficial. Here’s how you can proceed:

Research: Compare interest rates offered by various banks and financial institutions. Look for promotional offers and rates for balance transfer loans.

Calculate Savings: Evaluate the potential savings by considering the new interest rate, processing fees, and any other charges. Online calculators can help estimate these savings.

Application Process: If the savings are significant, initiate the loan transfer process. The new lender will pay off your existing loan, and you will continue with the new lender at the reduced rate.

2. Negotiating with Your Current Bank
Before deciding on a loan transfer, negotiate with your current bank. Here are steps to strengthen your negotiation:

Present Market Rates: Gather information on current market rates and offers from other banks. Present this data to your bank.

Highlight Your Profile: Emphasize your status as a gold customer, consistent repayment history, and any long-standing relationship with the bank.

Request Rate Reduction: Formally request a reduction in your interest rate. Banks may offer a reduced rate to retain valued customers.

3. Switching to a Different Loan Product
Some banks offer different loan products with varying interest rates and benefits. Explore if your bank has alternative loan schemes with better rates and terms. Switching to a more favorable product could reduce your financial burden.

Evaluating the Financial Impact
1. Cost-Benefit Analysis
Conduct a detailed cost-benefit analysis before making any changes. Consider the following:

Processing Fees: Check the processing fees for transferring the loan or switching products.
Prepayment Charges: Some loans have prepayment penalties. Ensure you are aware of these charges if applicable.
New EMI and Tenure: Calculate the new EMI and loan tenure. Ensure it fits your budget and long-term financial plans.
2. Impact on Monthly Budget
Assess the impact of the new EMI on your monthly budget. Ensure the revised EMI is affordable and does not strain your finances. Maintain a balance between meeting EMI obligations and saving for future goals.

Exploring Additional Strategies
1. Prepayment Options
If you have surplus funds, consider prepaying a part of your loan. Prepayment reduces the principal amount, thereby lowering the interest burden over the loan tenure. Most banks allow partial prepayments without any penalties.

2. Increasing EMI Payments
If feasible, increase your EMI payments. Higher EMIs reduce the loan tenure and overall interest outgo. Ensure the increased EMI is sustainable within your financial plan.

Consulting a Certified Financial Planner
A Certified Financial Planner can provide tailored advice on managing your housing loan. They can help you evaluate options, negotiate with banks, and make informed decisions. Their expertise ensures your financial strategy aligns with your long-term goals.

Conclusion
Your concern about the high-interest rate is valid. By exploring refinancing options, negotiating with your current bank, and evaluating different loan products, you can potentially reduce your interest burden. Additionally, prepayment and increasing EMI payments can further manage your loan effectively. Consulting a Certified Financial Planner for personalized advice is also recommended.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |7026 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 07, 2024

Asked by Anonymous - May 26, 2024Hindi
Money
I've availed home loan from HFDC Bank on floating rate and I've been increasing the emi yearly by 10%. The emi per month which started as 35K is now 55K and now when I ask to increase the emi by 10% this year the bank is saying that they have reached the maximum cap to increase thr emi. And they are asking to do part payment as an option instead of emi increase. Is this something normal as I was not told while taking the loan that there'll be a cap.
Ans: Understanding the EMI Cap on Your Home Loan
You've been proactive in managing your home loan by increasing your EMI yearly by 10%. This strategy helps reduce the overall tenure and interest burden. However, facing a cap on the EMI increase can be frustrating. Let's delve into why this happens and what you can do next.

The Concept of EMI Caps
Banks set EMI caps to manage risk and ensure borrowers don't overextend themselves. This cap is based on factors like your income, existing liabilities, and overall repayment capacity. While increasing EMI is beneficial, banks also need to mitigate the risk of default.

Why You Weren't Told About the EMI Cap
It's common for borrowers to be unaware of all the terms and conditions at the loan's inception. However, it's the bank's responsibility to ensure transparency. The EMI cap might not have been highlighted during your loan agreement, leading to your current surprise.

How Floating Rate Loans Work
Floating rate loans have interest rates that change based on market conditions. This variability means your EMI can fluctuate. When you increase your EMI, you're effectively paying off more principal, reducing the interest over the loan's life. However, this flexibility comes with limitations, like the EMI cap.

The Bank's Suggestion of Part Payment
Part payment involves paying a lump sum towards your loan's principal amount. This reduces your outstanding balance and, consequently, the interest burden. While it doesn't increase your EMI, it lowers the overall loan tenure and cost.

Is Reaching the EMI Cap Normal?
Yes, reaching the EMI cap is normal. Banks have internal policies to safeguard against potential defaults. They assess your repayment capacity and set a maximum limit on EMI increases to ensure you don't overcommit financially.

Exploring Alternatives to Increasing EMI
If the bank has capped your EMI, consider these alternatives to manage your loan effectively:

1. Part Payments
Making part payments is an effective way to reduce your principal amount. This method reduces your interest outgo and shortens the loan tenure. By strategically planning part payments, you can achieve similar benefits to increasing your EMI.

2. Loan Restructuring
You can request the bank to restructure your loan. This involves renegotiating the loan terms, possibly extending the tenure or adjusting the interest rate. This can provide more flexibility in managing your repayments.

3. Refinancing Your Loan
Refinancing involves transferring your loan to another lender offering better terms. This can include a lower interest rate or higher flexibility in EMI adjustments. However, ensure that the benefits outweigh the costs associated with refinancing.

Assessing the Impact of Part Payments
Part payments can significantly reduce your loan's interest burden. Let's calculate the impact of a Rs. 1,00,000 part payment on your loan.

Assumptions:

Original Loan Amount: Rs. 50,00,000
Interest Rate: 7.5% per annum
Remaining Tenure: 15 years
Without Part Payment:
Monthly EMI = Rs. 46,468

Total Interest Payable = Rs. 33,64,306

With Part Payment of Rs. 1,00,000:
New Principal Amount = Rs. 49,00,000

Monthly EMI = Rs. 46,468 (unchanged)

Revised Tenure = Approximately 14 years and 10 months

Total Interest Payable = Rs. 32,97,126

Interest Savings = Rs. 67,180

As seen, even a modest part payment can lead to significant savings.

Benefits of Increasing EMI and Part Payments
Increasing your EMI and making part payments offer numerous benefits:

Interest Savings:

Both strategies reduce the principal amount faster, leading to lower interest outgo.

Shorter Tenure:

They help in shortening the loan tenure, allowing you to become debt-free sooner.

Improved Credit Score:

Timely and increased repayments improve your credit score, enhancing your future borrowing capacity.

Financial Discipline:

Regularly increasing EMI and making part payments instill financial discipline and better money management.

Challenges and Considerations
While these strategies are beneficial, they come with challenges:

Liquidity Constraints:

Increasing EMI or making part payments require surplus funds, which might strain your finances.

Opportunity Cost:

The funds used for part payments could have been invested elsewhere, potentially yielding higher returns.

Prepayment Penalties:

Some loans have prepayment penalties. Ensure your loan terms allow part payments without hefty charges.

Strategic Financial Planning
A Certified Financial Planner (CFP) can help you navigate these complexities. They can provide personalized advice based on your financial situation and goals.

Steps to Optimize Your Home Loan Repayment:
Assess Your Finances:

Evaluate your income, expenses, and financial goals to determine the feasibility of increasing EMI or making part payments.

Plan Part Payments:

Schedule part payments when you receive bonuses, incentives, or other windfalls. This can reduce your principal effectively without straining your regular budget.

Monitor Interest Rates:

Keep an eye on market interest rates. If they drop significantly, consider refinancing your loan for better terms.

Consult a CFP:

Engage with a Certified Financial Planner to create a comprehensive financial plan. They can provide insights into optimizing your loan repayment strategy.

Practical Steps for Part Payments
Making part payments can be straightforward. Here’s how to approach it:

Check Your Loan Agreement:

Review your loan agreement for any prepayment penalties or conditions.

Contact Your Bank:

Inform your bank about your intention to make a part payment. They will guide you through the process.

Documentation:

Ensure you complete any necessary paperwork required by the bank.

Track Your Loan Balance:

After making a part payment, monitor your loan balance and tenure. Confirm that the changes reflect accurately.

Conclusion
Reaching the EMI cap on your home loan is a standard precaution taken by banks to manage risk. While it can be frustrating, alternatives like part payments offer significant benefits. By strategically planning your repayments and engaging with a Certified Financial Planner, you can optimize your home loan management and achieve your financial goals efficiently.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Dr Shyam

Dr Shyam Jamalabad  |78 Answers  |Ask -

Dentist - Answered on Nov 14, 2024

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Dr. Shyam, I had my teeth cleaned 6 months ago and after that was done I saw discoloration on certain teeth that wasn't there before. Years ago I had my teeth cleaned and one particular tooth after the cleaning was sensitive to touch. I had a crown put in from two different dental offices. The first one did the crown right, but was trying to charge me $3,500 more than the agreement they made with Medicare. Medicare corrected that. I other dentist did a crown and it didn't go all the way up to my gums and is sensitive to especially cold things. I'm not having very good experiences with dentist by and large. Can't find an honest one or one that can actually do the job right. I feel being on Medicare your a target to bring in money. Not sure what to do next. Supposed to go back and have them redo the crown that didn't go to my gums, but it also was ttd place to didn't clean my teeth right and discolored some of them. Any suggestions on how to trust there is actually an capable and honest dentist out there who can perform properly?
Ans: Identifying a capable and honest dentist is crucial for your oral health and well-being. Here are some tips to help you find one:

1. Ask for referrals: Ask friends, family, or coworkers for recommendations. They can provide valuable insights into a dentist's work quality and bedside manner.

2. Check credentials: Ensure the dentist has the necessary qualifications, certifications, and licenses. You can verify this information with your state's dental board or professional organizations like the American Dental Association (ADA).

3. Check online reviews: Look up the dentist on review platforms. Pay attention to the overall rating and read the comments to understand the strengths and weaknesses. At the same time, do not rely on reviews alone as these can be manipulated, fake reviews can be easily generated.

4. Evaluate their communication style: A good dentist should listen to your concerns, explain procedures clearly, and answer questions patiently. Ensure you feel comfortable asking questions and discussing your treatment.

5. Assess their facility and equipment: A well-organized and modern dental office with up-to-date equipment is a good sign.

6. Check their approach to preventive care: A capable dentist emphasizes preventive care, including regular cleanings, exams, and education on oral hygiene.

7. Be wary of over-treatment: A honest dentist will not recommend unnecessary procedures. Be cautious if you feel pressured into extensive treatments.

8. Trust your instincts: If something feels off or you don't click with the dentist, it's okay to explore other options.

10. Schedule a consultation: Many dentists offer initial consultations or meet-and-greets. Use this opportunity to assess their approach, ask questions, and gauge your comfort level.

By following these steps, you can increase your chances of finding a capable and honest dentist who prioritizes your oral health and well-being.

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Ravi

Ravi Mittal  |416 Answers  |Ask -

Dating, Relationships Expert - Answered on Nov 14, 2024

Asked by Anonymous - Nov 03, 2024Hindi
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Relationship
Hi, I am 30 years old not married & now my parents are forcing me to get married. I think i am good looking guy. It's not like i have never been with girls. I have had brief flings with multiple girls. And there was one girl whom i was in a platonic relationship with with lot of emotional sharing & have spent a lot of time with her. The same goes with another girl. Both of them have told me that i have been pretty cool & girls would like me to be their bf or husband. But i am not able to accept anyone because of the guilt that of my past that i never had a relationship. Never been able to tell anyone that i had a gf. I know this is wrong to compare my life but i can't stop thinking that way. Can you tell me what to do? Like a contsant regret of not having a very steamy cool fancy relationship from outside. I know relationships have it's own ups & downs. But this guilt is killing me that i missed out lot of things in life & if get married in an arranged marriage i would feel myself to be a looser who couldn't even find a girl on his own. Though i know all of these comparisons are wrong & i should be rational. I am not able to help it. Please help me out
Ans: Dear Anonymous,
Whatever you are feeling, it is very normal. More people than you could imagine go through this same phase. But as you mentioned, these are just thoughts; there is no truth to them. Not having a relationship does not make you uncool. It merely means that you did not meet your perfect match yet. I understand that you feel like you have missed out on something and that feeling is valid. It might not be reasonable, but it's very natural to think this way. I can suggest one thing- why don't you try a dating or matchmaking app to find your own partner? That way, you will be keeping your parents' wishes and won't let yourself down either. It will also give you more control over choosing your life partner.

Hope this helps.

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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