INTRODUCTION OF LOANS An arrangement in which a lender gives money or property to a borrower, and the borrower agrees to return the

property or repay the money, usually along with interest, at some future point(s) in time. Usually, there is a predetermined time for repaying a loan, and generally the lender has to bear the risk that the borrower may not repay a loan (though modern capital markets have developed many ways of managing this risk). A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower. In a loan, the borrower initially receives or borrows an amount of money, called the principal, from the lender, and is obligated to pay back or repay an equal amount of money to the lender at a later time. Typically, the money is paid back in regular installments, or partial repayments; in an annuity, each installment is the same amount. The loan is generally provided at a cost, referred to as interest on the debt, which provides an incentive for the lender to engage in the loan. In a legal loan, each of these obligations and restrictions is enforced by contract, which can also place the borrower under additional restrictions known as loan covenants. Although this article focuses on monetary loans, in practice any material object might be lent. Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding

Secured See also: Loan guarantee A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral. A mortgage loan is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security a lien on the title to the house until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it. In some instances, a loan taken out to purchase a new or used car may be secured by the car, in much the same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter often corresponding to the useful life of the car. There are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer. An indirect auto loan is where a car

dealership acts as an intermediary between the bank or financial institution and the consumer. [edit]Unsecured Unsecured loans are monetary loans that are not secured against the borrower's assets. These may be available from financial institutions under many different guises or marketing packages:

credit card debt personal loans bank overdrafts credit facilities or lines of credit corporate bonds (may be secured or unsecured)

The interest rates applicable to these different forms may vary depending on the lender and the borrower. These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these may come under the Consumer Credit Act 1974. Interest rates on unsecured loans are nearly always higher than for secured loans, because an unsecured lender's options for recourse against the borrower in the event of default are severely limited. An unsecured lender must sue the borrower, obtain a money judgment for breach of contract, and then pursue execution of the judgment against the borrower's unencumbered assets (that is, the ones not already pledged to secured lenders). In insolvency proceedings, secured lenders traditionally have priority over unsecured lenders when a court divides up the borrower's assets. Thus, a higher interest rate reflects the additional risk that in the event of insolvency, the debt may be uncollectible. [edit]Demand Demand loans are short term loans [1] that are atypical in that they do not have fixed dates for repayment and carry a floating interest rate which varies according to the prime rate. They can be "called" for repayment by the lending institution at any time. Demand loans may be unsecured or secured. [edit]Subsidized A subsidized loan is a loan on which the interest is reduced by an explicit or hidden subsidy. In the context of college loans in the United States, it refers to a loan on which no interest is accrued while a student remains enrolled in education.[2] Otherwise, it may refer to a loan on which an artificially low rate of interest (or none at all) is charged to the borrower. An unsubsidized loan is a loan that gains interest at a market rate from the date of disbursemen

Personal or commercial See also: Credit_(finance)#Consumer_credit Loans can also be subcategorized according to whether the debtor is an individual person (consumer) or a business. Common personal loans include mortgage loans, car loans, home equity lines of credit,credit cards, installment loans and payday loans. The credit score of the borrower is a major component in and underwriting and interest rates (APR) of these loans. The monthly payments of personal loans can be decreased by selecting longer payment terms, but overall interest paid increases as well. For car loans in the U.S., the average term was about 60 months in 2009.[3] Loans to businesses are similar to the above, but also include commercial mortgages and corporate bonds. Underwriting is not based upon credit score but rather credit rating

Most of the basic rules governing how loans are handled for tax purposes in the United States are codified by both Congress (the Internal Revenue Code) and the Treasury Department (Treasury Regulations another set of rules that interpret the Internal Revenue Code).[6] Yet such rules are universally accepted.[7] 1. A loan is not gross income to the borrower.[8] Since the borrower has the obligation to repay the loan, the borrower has no accession to wealth.[9] 2. The lender may not deduct (from own gross income) the amount of the loan.[10] The rationale here is that one asset (the cash) has been converted into a different asset (a promise of repayment).[11]Deductions are not typically available when an outlay serves to create a new or different asset.[12] 3. The amount paid to satisfy the loan obligation is not deductible (from own gross income) by the borrower.[13] 4. Repayment of the loan is not gross income to the lender.[14] In effect, the promise of repayment is converted back to cash, with no accession to wealth by the lender.[15] 5. Interest paid to the lender is included in the lenders gross income.[16] Interest paid represents compensation for the use of the lenders money or property and thus represents profit or an accession to wealth to the lender.[17] Interest income can be attributed to lenders even if the lender doesnt charge a minimum amount of interest.[18] 6. Interest paid to the lender may be deductible by the borrower.[19] In general, interest paid in connection with the borrowers business activity is deductible, while interest paid on personal loans are not deductible.[20] The major exception here is interest paid on a home mortgage.[21]

A student loan is designed to help students pay for university tuition, books, and living expenses. It may differ from other types of loans in that the interest rate may be substantially lower and the repayment schedule may be deferred while the student is still in education. It also differs in many countries in the strict laws regulating renegotiating and bankruptcy.

A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan. However, the word mortgage alone, in everyday usage, is most often used to mean mortgage loan. The word mortgage is a French Law term meaning "death contract", meaning that the pledge ends (dies) when either the obligation is fulfilled or the property is taken through foreclosure.[1] A home buyer or builder can obtain financing (a loan) either to purchase or secure against the property from a financial institution, such as a bank, either directly or indirectly through intermediaries. Features of Home loan(mortgage loan) mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of paying off the loan, and other characteristics can vary considerably. In many jurisdictions, though not all (Bali, Indonesia being one exception[2]), it is normal for home purchases to be funded by a mortgage loan. Few individuals have enough savings or liquid funds to enable them to purchase property outright. In countries where the demand for home ownership is highest, strong domestic markets have developed Car loan The subject of car finance comprises the different financial products which allows someone to acquire a car with any arrangement other than a single lump payment. The provision of car finance by a third party supplier allows the acquirer to provide for and raise the funds to compensate the initial owner, either a dealer or manufacturer.[1][2] Car finance is required by both private individuals and businesses. All types of finance products are available to either sector, however the market share by finance type for each sector differs, partly becausebusiness contract hire can provide tax and cashflow benefits to businesses.[3] Personal Car Finance is a complete subsector of personal finance, with numerous different products available. These include a straightforward car loan, hire purchase, personal contract hire (car leasing) andPersonal Contract Purchase. Therefore car finance includes but is not limited to vehicle leasing. These different types of car finance are possible because of the high residual value of cars and the second hand car market, which enables other forms of financing beyond pure unsecured loans. [4]

Car finance arose because the price of cars was out of the reach of individual purchasers without borrowing the money. The funding for personal car finance is provided either by a retail bank or a specialist car financing company. Some car manufacturers own their own car financing arms, such as Ford with the Ford Motor Credit Company and General Motors with its GMAC Financial Services arm, which has now been renamed and rebranded as Ally Financial. The funding supplier may retain ownership of the car during the period of the contract for certain types of financing. This interim ownership by a third party and subsequent leasing to the acquirer is far more typical for business assets than private ones, with the option of vehicle leasing being the major exception for private consumers. The finance is arranged either by the dealer which provides the car or by independent finance brokers who work on commission. Individual brokers will provide any solution for which the individual can get credit approval, but their own particular lifestyle and cost considerations that should determine the choice of finance option. The leasing share of the US consumer automotive industry expected to grow by 1825% [5] though this is growing again after the credit crisis cause major leasing companies to exit the market in the US. The [(credit crisis of 2008)] and subsequent recession saw the second hand car market collapse and funding companies had to sell their returning cars at much lower prices than expected. Some major providers stopped offering private contract hire during this period.[6]

Long-term liabilities are liabilities with a future benefit over one year, such as notes payable that mature longer than one year. In accounting, the long-term liabilities are shown on the right wing of the balance-sheet representing the sources of funds, which are generally bounded in form of capital assets. Examples of long-term liabilities are debentures, mortgage loans and other bank loans. (Note: Not all bank loans are long term as not all are paid over a period greater than a year, an example of this is abridging loan.) By convention, the portion of long-term liabilities that must be paid in the coming 12month period are classified as current liabilities. For example, a loan for which two payments of $1000 are due, one in the next twelve months and the other after that date, would be 'split' into two: the first $1000 would be classified as a current liability, and the second $1000 as a long-term liability (note this example is simplified, and does not take into account any interest or discounting effects, which may be required depending on the accounting rules). Also "long-term liabilities" are a way to show that you have to pay something off in a time period longer than one year.

A long term loan is of several years duration, generally 3-5 years, but can be considerably longer (for example in the case of over-sized works). The initial period of loan should be stated in the loan agreement and must never be open-ended. The loan can be renewed at the end of the loan period if both parties agree.

Long term loans: Loans are considered as long term loans if they are for more than three years by the definition of most financial institutions. However, most long term loans are for more than ten years, and, in fact, can be as long as twenty years. A long term loan will generally be put up against collateral or security. Whether it is property, equipment, or some other asset, there usually has to be something securing a long term loan. The rate of interest for short term loans is never fixed arbitrarily. The magnitude of the loan amount, length of the payment period, records of the regular source of income of the person taking loan and his collateral status are seriously counted prior to fix the rate of interest. Advantages of long term loans: Long-term loans are usually available are cheaper rates. As long term loans are secured by collateral the lender charges lower interest rates. Long term loam allows one to borrow large amount. Disadvantages of long term loans: Long term loans are subject to interest rate fluctuations. The total interest paid is substantially higher in case of long term loans

Short term loans: Short term loans are designed for shorter repaying duration and therefore are not bound by long term obligation. Short term loans are obtained for a smaller amount as you need to repay it quickly and may be provided for any purpose including educational expenses, home improvements, auto repairs, clearing smaller debts etc. Advantages of short term loans: Short term loans do not usually require collateral Short term loans are made available in several days or even hours

 Short term loans require little paperwork Short term loans provide you with money when you feel a sudden unexpected need With short term loans you do not burden yourself with long term obligations Disadvantages of short term loans: Short term loans are usually more expensive. As short term loans are not secured by collateral the lender raises interest rates to cover the risk they bear with your short term loan. The lender of short term loans is likely to investigate the credit history of the borrower and it will be offered only when it is found satisfactory. Short term loans are obtained for a smaller amount No related posts.

Description of charges

New Car Loans

FC Charges

6% of Principal Outstanding for preclosures within 1 year from 1st EMI

5% of Principal Outstanding

for preclosures within 13-24 months from 1st EMI

3% of Principal Outstanding for preclosures post 24 months from 1st EMI

No foreclosure allowed within 6 months from date of availing the car loan

Stamp Duty

At actuals

Late Payment Penalty

2% per month

Processing fees

Up to 2.5 Lakhs: Rs. 2625/-

Over Rs. 2.5 Lakhs up to 4 Lakhs: Rs. 3650/-

Over Rs. 4 Lakhs to 5 Lakhs: Rs. 4100/-

Over Rs. 5 Lakhs up to 10 Lakhs: Rs. 4450/-

Over 10 Lakhs: Rs. 4950/-

Cheque swapping charges

Rs. 500/-

Loan cancellation / re-

Charges Rs. 1000/-

booking charges

In the event of cancellation, both, cancellation and interest charges will be borne by the customer.

Duplicate Repayment Schedule charges

Rs. 500/-

Legal, Repossession & Incidental charges

At actuals

Duplicate no due certificate / NOC

Rs. 500/-

Transaction fees for Suraksha Kavach

Rs. 500/- per case

Loan Reschedulement charges

As applicable at the time of reschedulement

Special NOC

Rs. 500/- per request

CIBIL Charges (only on request)

Rs. 50/-

Description of Charges
Foreclosure charges

eCbop Home Loan

No prepayments allowed in first 6 months 6 months - 5 years - 1.5% of original loan amount 5 years -10 years - 0.75% of original loan amount > 10 years - No closure fee For Gold Category 6 months - 5 years - 2% of original loan amount > 5 years - No closure fee eBOP customers: Loan repaid from own sources - no FC charges Loan repaid from other sources - regular FC charges. 2% per month

Charges for late payment of EMI

Cheque swapping charges

Rs. 500/-

Bounce Cheque Charges

Rs. 500/-

Duplicate Statement Charges (per statement)

Rs. 100/- per page, Maximum Rs 300/-

Issue of Duplicate Provisional Interest Certificate

Rs. 300/-

Issue of Duplicate Interest Certificate

Rs. 300/-

Fee

Amount to be Paid

Duplicate Balance Certificate

Rs. 300/-

Issue of Amortization Schedule (Duplicate)

Rs. 300/-

Switch from Variable to Fixed

Not Applicable

Switch from Fixed to Variable

Not Applicable

Photocopy of Documents

Rs. 500/-

Rack interest rate

Salaried - 15.75% to 22.25% Self-employed businessman - 17.50% to 22.00% Self-employed profession - 14.50 to 15.00%

Loan processing charges

Up to 2.50% of the loan amount subject to a minimum of Rs. 1000

Prepayment

Salaried - No pre-payment permitted until repayment of 12 EMIs Self-employed - No pre-payment permitted until repayment of 6 EMIs Salaried - 4% of the principal outstanding after repayment of 12 EMIs. For top-up/enhancements 2% of the principal outstanding Self-employed - 4% of the principal outstanding after repayment of 6 EMIs NIL

Pre-payment charges

No Due Certificate/No Objection Certificate (NOC)

Duplicate of No Dues Certificate/NOC

Rs. 250/-

Solvency Certificate

Not applicable

Charges for late payment of EMI

24% per annum on amount outstanding from date of default

Charges for changing from fixed to floating rate of interest

Not applicable

Charges for changing from floating to fixed rate of interest Stamp duty & other statutory charges

Not applicable

As per applicable laws of the state

Credit assessment charges

Not applicable

Non standard repayment charges

Not applicable

Cheque swapping charges

Rs. 500/- per event

Loan re-booking charges/re-scheduling charges

Rs. 1000/-

Loan cancellation charges

Rs. 1000/-

Cheque bounce charges

Rs. 450/- per cheque bounce

Legal/incidental charges

At actual

CIBIL Report Copy Charges

Rs.50 per copy

LOAN PAYMENT The most typical loan payment type is the fully amortizing payment in which each monthly rate has the same value overtime. The fixed monthly payment P for a loan of L for n months and a monthly interest rate c is: