Financial Cocktail Samosas: Bitesized money morsels for YOU, 14/10/2020

Financial Cocktail Samosas_ Bitesized money morsels for YOU, 14_10_2020

Home loans are expected to get cheaper further

The recent monetary policy review of the Reserve Bank of India has been an interesting one. While the RBI has not directly cut rates, it has taken some significant steps that could result in loans becoming cheaper. One such step is reducing capital allocation against home loans for banks. How it works is slightly complicated, but with this step, the RBI has made it easier for banks to lend more. With excess liquidity at their disposal and easier norms for lending, it is being expected that banks will lend more, that too at a lower interest rate.

RBI has also taken steps to reduce the borrowing costs in the system for companies. All of this combined could result in lower interest rates. How this will actually pan out needs to be seen over the next 3-6 months, but the innovative approach of the RBI deserves full marks.

Don’t forget to disclose pre-existing illnesses while buying health insurance policies

We always encourage our investors to share all the information correctly, especially related to existing diseases, while buying insurance policies, be it life or health insurance policies. Please remember that non-disclosure or hiding information related to pre-existing illnesses and diseases are the biggest cause of claim rejections.

Even if you have a pre-existing disease, it does not make sense to hide it from the insurer; nor should it deter you from buying a health insurance policy. If you disclose a pre-existing condition; the insurance company may agree to cover your it at the usual or slightly increased premium, or it may put some waiting period clause after which the pre-existing disease will get covered. In the scenario of the company charging you an additional premium, you are still secure as the insurance will honour the claim after the waiting period and not decline it. If the pre-exiting disease is not declared and this is discovered later, it is a sure-shot decline of cover scenario.

Do you know your credit score?

Many of us may not be aware of organisations called Credit Bureaus’, which give us scores based on our financial transactions, especially those related to loans and advances.

These scores play an important role when we apply for fresh loans such as home loan, car loan or a personal loan. Lenders pull out the credit scores and reports generated by the credit bureaus and after evaluating it, they decide on our credit worthiness—whether they can give us a loan or not, if yes, how much loan they can give and at what rate.

To keep your credit score healthy, here are few tips. Don’t exhaust your credit limit—if you have a credit card with a limit of Rs 1 lakh, don’t spend more than Rs 60,000 to Rs 70,000; if you spend more it adversely impacts your score. Pay your EMIs on time, borrow only as much as you can pay, and make sure the cheque you write does not bounce.

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