Detailed Guide to Pradhan Mantri Awas Yojana (PMAY) scheme

Have you dreamed of your own house? Are you planning to buy your first house?

But, buying own house is not possible without taking loans and paying heavy EMI’s. However, now it is quite possible for new home buyers with subsidized loan given under “Pradhan Mantri Awas Yojana” which is an initiative by government under “Affordable Housing for all by 2022” in the country. It is also referred as credit linked subsidy.

With this scheme you can buy a new home/flat, construct a house or you can enhance your home by adding room, toilet or kitchen. Till date 15 Lakhs house has been constructed and 75 Lakhs loans has been sectioned under this scheme. The overall structure of the scheme is not easy to understand. So, let’s understand all the elements in simple points.

1. Who can opt for PMAY?

  • A First time home buyer, who does not have any home on his name or in name of any family member.
  • He or his family should not have availed any central assistance under any housing scheme of government.
  • An individual who has a pucca house and wants to enhance it by adding toilet, room or kitchen etc.

Family includes Self, Spouse and Children. But, if daughter/son is earning adults(irrespective of marital status), than he/she will be treated as a separate entity. So, this means even if parents and earning children are staying in a house owned by parents, they can individually opt for PMAY provided he/she doesn’t have nay house own name.

2. What will be the eligibility and subsidy?

Government has categorized different groups taking their annual earning in to consideration, which will be helpful in evaluating eligibility and amount of subsidy. Following table shows different groups and other criteria.

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Groups Annual Income Maximum loan amount for subsidy Interest rate for subsidy Maximum Subsidy Amount Allowed Area
Economically Weaker   Section (EWS) Upto Rs. 3 Lakhs Upto Rs. 6 Lakhs 6.50% Rs. 2.60 Lakhs 30 sq. mt. (322.917 sq. ft.)
Low Income Group (LIG) Rs. 3-6 Lakhs Upto Rs. 6 Lakhs 6.50% Rs. 2.60 Lakhs 60 sq. mt. (645.834 sq. ft.)
Middle Income   Group-1 (MIG 1) Rs. 6-12 Lakhs Upto Rs. 9 Lakhs 4% Rs. 2.35 Lakhs 160 sq. mt. (1722 sq. ft.)
Middle Income   Group-2 (MIG 2) Rs. 12-18 Lakhs Upto Rs. 12 Lakhs 3% Rs. 2.30 Lakhs 200 sq. mt. (2152.78 sq. ft.)


*1 sq mt = 10.7639 sq ft

*Maximum term allowed for subsidy is 20 years for all the 4 groups. That means subsidy will be calculated for the term of loan or 20 years whichever is less.

*Interest portion of EMI at subsidized rate will be discounted at 9% to get the net present value of subsidy.

Let’s understand the above table through case studies-

1. If your annual earning is Rs. 3,00,000 and you have taken home loan of Rs. 10 Lakhs for 15 years at 8.50% interest p.a. So, what will be the subsidy amount?

As your earning is Rs. 3 Lakhs, you fall in EWS group. So, You will get 6.5% of interest subsidy on Rs. 6 Lakhs of loan for term of 15 years provided the house area is not exceeding limit of carpet area of 30 sq. mt. The amount of subsidy will be Rs. 2.09 Lakhs (Back calculation – considering EMI at 6.5% on loan amount of Rs. 6 Lakhs for 15 years and interest portion out of it discounted at 9% to get NPV).

2. If your annual earning is Rs.8,00,000 and you have taken home loan of Rs. 20 Lakhs for 25 years at 8.50% interest p.a. So, what will be the subsidy amount?

As your earning is Rs. 8 Lakhs, you fall in EWS group. So, You will get 4% of interest subsidy on Rs.9 Lakhs of loan for term of 20 years and not 25 years (as maximum term is 20 years)  provided the house area is not exceeding limit of carpet area of 160 sq. mt. The amount of subsidy will be Rs. 2.35 Lakhs (Back calculation – considering EMI at 4% on loan amount of Rs. 9 Lakhs for 20 years and interest portion out of it discounted at 9% to get NPV).

You can refer the video given below to understand PMAY –

3. Will subsidy be given for existing home loan?

The subsidy under this scheme can be availed on existing home loans sanctioned on or after 17/06/2015 for EWC section and LIG section. And for MIG 1 & MIG 2 subsidy can be availed if loan is section on or after 01/01/2017.

So, if you have an on going home loan which you received in 2017. In that case also you can apply under PMAY to avail subsidy. And the amount of subsidy will be calculated as per your current income earning section i.e. if now you are earning 10 Lakhs then you will fall under MIG 1 and original term of loan will be taken in to consideration.

4. How to enroll to avail benefits under this scheme ?

You can enroll for this scheme online or offline. In offline mode you need to visit the bank from where you want to apply loan or where your home loan is existing, get the form of PMAY and fill & submit the same.

For the online mode you need to follow following steps –

Step 1#: Go to the website of PMAY. Below given page will appear –

proceedure for enrolling under PMAY scheme

Step 2#: Click the citizen assessment drop-down and select the benefits under three components as shown below.

pradhan mantri awas yojana citizen assessment


Step 3#: Once you click the benefit under other 3 components, the below window appears. Now enter your Aadhaar details and or virtual ID and click on check.

pradhan mantri awas yojana check aadhar existence

Step 4#: Once you check your Aadhaar card existence, the below page will appear. Fill the form with required details. To give you a glimpse, screenshot is attached.

information of beneficiary being covered under PMAY slum development

Step 5# Attach required documents

documents required for loan under PMAY scheme

Once your application is submitted, after due examination if you are a eligible beneficiary under PMAY, you will be added to the list of beneficiary. You can find it on the website of PMAY in beneficiary tab. If your name comes in beneficiary list then you need to inform about the same to the bank from where you have granted loan.

5. How will I receive the interest subsidy benefit under PMAY Scheme?

The Bank (where you have applied for a loan under this scheme) will claim subsidy benefit for eligible borrowers from National Housing Bank (NHB). The NHB will conduct due diligence to exclude claims where the customer has submitted multiple requests. Then all the eligible borrowers will receive the subsidy amount to the Bank.

Once the Bank receives the interest subsidy, it will be credited upfront to the loan account. Therefore it is called credit linked subsidy. For example, If the you avails a loan for Rs. 8 lakh and the subsidy received is Rs. 2, 20,000. The subsidy amount (Rs. 2, 20,000) would be reduced upfront from the loan amount (i.e., the loan would reduce to Rs. 5, 80,000) and then you would pay EMIs on the reduced amount of Rs. 5, 80,000.

And also in case your EMI is on going and you are eligible for subsidy. Then you may be offered by your bank for using subsidy as credit so your EMI will be reduced or for reducing the term of loan. I would suggest to go with reducing term of loan.


Is woman co-ownership is mandatory for availing subsidy?

Yes, for EWS and LIG class of subsidy woman co-ownership is mandatory whether it be the case of new house or addition of kitchen/toilets etc. And for MIG 1 & MIG 2 it is not compulsory to have a woman co-owner to the house property.

Can I do renovation/up-gradation in an existing house with the help of this scheme? 

Yes, you can if you fall under MIG 1 or MIG 2 section. You can not avail subsidy for renovation if you fall under EWS or LIG.

Is it mandatory to fetch Adhaar card details for all the members of the beneficiary family?

Yes, for processing the subsidy under PMAY for MIG 1 and MIG 2, it is mandatory to furnish the Aadhaar card details of all the family members.

I hope this article has helped you in understanding that how one can avail benefits under PMAY Scheme. Please feel free to ask your doubts or queries the in comment section.

Is it possible to take loan against Fixed Deposit?

FD is one of the most popular investment option in India due to its numerous advantages like safety, fixed interest earning and easy to understand product. And now you can easily get a loan against your FD even if you don’t have a credit score or meet any income earning eligibility criteria to apply for a loan.

So, One of the main advantage of holding a Fixed Deposit (FD) is that you can secure a loan amount below your FD amount, without actually breaking it!

Can I get loan against my fixed deposits?

Eligibility criteria, documents required and how to apply?

In order to apply for Loan against FD, you will have to approach your bank manager, fill the desired form and submit the important documents. Many banks such as PNB, HDFC etc… are offering online facility for loan against FD.

Eligibility criteria for taking the loan against FD

  • You need to have a year old active fixed deposit with the bank.
  • Applicant should be at least 21 years old
  • Applicant has to be resident citizen of India
  • Individual, sole proprietorship, societies, HUFs etc are eligible.

Documents required for taking the loan against FD

  1. Application form
  2. Fixed Deposit receipts
  3. A cancelled cheque might be required if the loan is being taken from financial institutions other than banks
  4. Duly signed agreement letter
  5. Passport size photographs
  6. Valid photo identity proof

Let us see a video to understand it more clearly –

Interests charged on the loan amount

The interest rates charged for FD loans as compared to traditional loan interest rates are very less. It is generally around 2% to 3% more than the FD interest rate.

Example – Ram is having a FD worth Rs 10,00000. He is earning an interest rate of 6.5% on his FD; if he applies for loan against FD then here he will be charged an interest rate of 8% to 8.5% on the loan. The interest charged here is much less than the average loan interest rate that usually ranges from 9% to 15% (varies from banks to banks).

Below is an indicative chart of different banks with interest rates on overdraft of FD

what are the interest rates of different banks on loan against FD?

Is pre-payment of loan against FD allowed? If yes, how much is the penalty charged?

Yes, pre-payment of loan is allowed with no penalty charges. If you are thinking of taking loan against your FD, and you know that after few days or few months you can make pre-payment of the existing loan then you will be at profit because pre-payment is also allowed that too with no penalty charges.

How long can be the loan tenure?

The loan tenure against fixed deposits depends on the tenure of the fixed deposit. The tenure of loan will not be more than the term of fixed deposit. In most of the cases tenure of loan is 3 years.

Example – Sham wants to avail a loan on his fixed deposit (whose maturity is in 5 years). He can avail the loan only after completion of one year of FD. If he takes loan then he will have to repay the loan within the next 4 years, before the maturity of the fixed deposits.

Loan against FD vs Breaking the FD

The natural question here one will ask is, why not break the FD itself and use the money? Why one should apply for the loan??? Let us see the difference between the both and then one can take the decision.

Difference Between Loan against FD and Breaking of FD

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Features Loan Against FD Breaking of FD
Ease of getting money Money will be received after procedure of loan sanction is over  Money is received immediately either in cash or Bank
Interest Rate Interest on loan amount has to be paid No need to pay interest
Sanctioned amount Limitation on amount received (Up to 90% of FD) You get the entire amount you invested so far


You can see in the table above, all points favour breaking of Fixed deposits, but one reason why you can think of taking the loan against FD is-

The human tendency, that you repay the loan in EMI form easily rather than again creating the FD. If you break the FD and use the money, there is no compulsion for you to again save money and create the FD and it might happen that you will not have wealth at later point.

However, if you take a loan against FD, then the FD exists and you will look at the loan repayment as your primary objective and forced to pay back the money.

One more reason of taking loan against FD is, IF you are asked for a financial help by some relative or friend and if you choose to get loan for them against the FD. Then, they will be more serious in repayment of EMI because then they will be knowing it well that you have facilitate them a loan which has to be repaid on time. So, it will become obligatory for them to repay.

And in the same condition if you break FD and give the money as loan, its a transaction between you and your friend/relative and there is a tendency of all human beings to not return the money on time and become very casual about it, if it is not legal obligation over some one.

That was all about the loan against FD .. Do feel free to ask any doubts in the comment section.

Joint Home Loans – The Pros, Cons and Myths!

Buying a house isn’t easy today if you are living in a metro city like Mumbai, Pune, or Delhi. It’s nearly impossible to pay the full price of a house unless you have massive savings or an existing real estate that you can resell. This is the reason why most people take home loans, or rather joint home loans.

joint home loan

What is a Joint Home Loan?

As the name implies, a joint home loan is a home loan that you take with another person, who is usually your spouse or a sibling. There are many reasons why people avail of joint home loans instead of standard home loans, one of which is bad credit.

Let’s understand why.

No matter what kind of loan you apply for, the lenders always check your credit report to assess your creditworthiness. This a standard practice to reduce the risk of non-performing assets. So, if your credit report looks fine which means that you don’t have a history of late payments, loan defaults, etc. and your credit score is high, then you can avail a loan easily.

However, if that’s not the case, not all hope is lost as an alternative option exists! That’s when you can get a co-borrower to take a home loan with you. If their credit score is good, then it can balance yours and make it easier to get your loan approved.

People also take joint home loans when they aren’t capable of repaying the full amount on their own. By dividing the loan’s burden with their spouse or a family member through a joint home loan, the debt can be repaid easily. Now that you know what a joint home loan is, let’s take a look at some of the major pros and cons of the same.

Pros of Joint Home Loan

  • The chances of getting a home loan at attractive interest rates are much higher in a joint home loan compared to the regular home loan.
  • You can get larger amounts in a joint home loan that can help you afford an expensive property.
  • As per the income tax regulations, joint home loans allow both co-borrowers to claim tax benefits under Section 80C. They each can deduct up to 2 lakh INR from the interest amount and 1.5 lakh INR from the principal amount from their taxable incomes.
  • If you are unable to get a home loan due to poor credit score, then a joint home loan can be your best bet.

Cons of Joint Home Loan

  • If your co-borrower in unable or simply refuses to pay the EMIs, then your credit report apart from theirs is affected.
  • Joint home loans can raise all kinds of legal problems if the co-borrowers are married to each other and get separated by divorce even as home loan remains to be repaid. If the property is registered in the name of one co-borrower, then after the loan has been fully repaid, he/she will become the rightful owner even if the other co-borrower has also paid their share of the EMIs.

Common Myths About Joint Home Loans

A joint home loan is a massive financial obligation. Apart from the huge EMIs that are particular to these loans, the tenures are not lesser than 15 to 20 years which means you pay the EMIs for a large portion of your life. Thus, it’s a good idea to do extensive research before you finally start submitting applications for a joint loan.

It would help if you also were wary of some of the most common myths about joint home loans that mislead borrowers:

Myth #1: A Co-Applicant is Required Just for “Formality.”

A co-applicant is as much responsible for a loan’s repayment as the primary borrower. In other words, signing on the dotted line imposes legal and financial obligations which is why it’s strongly recommended that both co-applicants read the fine print and ask as many questions as they need until they have a good understanding of the agreement they are about to enter into.

Myth #2: Only One Co-Borrower Can Receive Tax Benefits

People think that in joint loans, only one of the co-borrowers can receive tax benefits. However, this is further from the truth as both co-borrowers are equally entitled to these benefits. This means that you and your co-borrower both get to enjoy lower individual taxable incomes. That said, you must know about Section 24 of the Income Tax Act which sheds light on taxation in joint loans.

As per Income Tax guidelines, a co-borrower can claim tax benefits only if he/she is also a joint owner of the property. This clarification is important because many times, people take joint loans to increase the loan amount and make the process easier. However, merely being a co-borrower doesn’t make you eligible for the tax benefits. You must have ownership rights over the property as well.

Myth #3: Roping in a Co-Applicant is a Sure Shot Way of Getting a Home Loan

It’s true that it’s easier to get a home loan with a co-applicant compared to when you apply just by yourself. However, there is no guarantee that you will get approved for a loan. This is because home loans are highly risky for the lenders, even if they are secured against the homes they are availed for.

So, a co-applicant can’t help with the application if they don’t contribute to your “creditworthiness”. In other words, a co-applicant can make it easier to get a home loan only if their credit score is high and their income big enough to cover the EMIs.

Failing to Prepare is Preparing to Fail!

Joint home loans have their pros and cons as explained above. However, there are many other factors that you must consider including the interest rates, income, financial projections for the future, and buying a new home vs. an old home. After all, once you borrow money from a bank, there is no turning back. So, take your time and pick the right loan at the right time. Good luck!

Applying for home loan? Here are 4 highly critical checklist you should follow

Are you going to apply for a home loan in the near future? If Yes, then this article is written exactly for you, because I am going to share with you a checklist which you should follow to make sure that your loan application process is smooth and also to increase the chances of your loan application getting approved.

We all take various kind of loans these days, be it home loan, car loan, personal loans or even credit cards. I will show you some very important checklists which if you follow; you will save yourself from various issues faced by other loan seekers.

Note that while this article is primarily written with a home loan in mind, but the checklists discussed will also apply for any kind of loan.

Checklist one should follow before applying for home loan in India

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Checklist #1 – Check your CIBIL report/Score in advance

Don’t underestimate the role of credit reports/score in loan approval process these days. The first thing the lender looks at is your credit score/report when you apply for any kind of loan (even credit card).

The moment you enquire for a loan with a lender, they check your report from CIBIL or any other credit bureau like Equifax or Experian and based on the remarks on your report and your score, they either reject your loan application or forward your case for further checks.

There are many real-life cases, where a person applied for a loan and found out that it got rejected because of this credit report is messed up. It might be due to a credit card settlement he did a few years back or because he was not able to make timely payments on his past loans.

Imagine a person who has already paid the booking amount for a car or a house and then he is stuck because he/she can’t get the loan approved. That’s not a situation; you would like to get into!

personal loan rejected because of CIBIL

CIBIL score of 750+ is a good score

How much CIBIL score can be considered good enough to get any kind of loan? Well, there is no guarantee that you will get a loan just because your credit report is high, but as per CIBIL, out of every 100 people who got a loan approved, 79 people had a score of more than 750.

This means that if your score if more than 750 out of 900, there is a good chance that your loan will be approved, provided there are no bad remarks on your report and other things like income proofs are in place.

cibil score required for home loan approval

Apply for your CIBIL report in advance

So when should you apply for a CIBIL report?

I think it should do it much before you apply for a loan. I suggest at least 6 months in advance because if there is some issue in the report, you get enough time to rectify that mistake.

There are many cases, where a person applied for a home loan after paying the down payment money, and their home loan is not approved because of CIBIL related issues. Now they are stuck as they are not getting back their down payment money back and their application is also not getting approved.

They run around to fix their issues or try to improve their CIBIL score, but now it’s very late because it takes many months to follow up with CIBIL or Banks involved. Last-minute fixes do not work, that’s the reason this check needs to be done well in advance.

Checklist #2 – Make a simple Cash flow statement

If you are applying for a big loan like a home loan or a car loan, then it’s very important to understand where you stand financially. You should have a very clear idea about the maximum down payment you will be able to make (and you should also try for that) and what is the realistic EMI you can pay each month.

As our wealth is scattered across various financial products like saving bank account, fixed deposits, mutual funds etc, it’s important to note it down in an excel sheet to get better clarity.

You should also list down the income and expenses details so that you can get an idea about how much you save each month. Your surplus each month is a very important criterion used in calculating your loan eligibility by the lender.

Below is a sample working of cash flow in an excel sheet, which gives the good enough indication of the down payment amount and the potential EMI a person can afford.

sample cash flow calculation before applying for a loan

Download this Excel Sheet and Calculate your numbers

It should not happen that you applied for a loan much beyond your capacity and then at the last minute, you are wondering where you will arrange for extra money. It can be a very frustrating situation, where you are stuck in a deal and you are not able to figure out how to arrange for the money.

Checklist #3 – Increase your home loan eligibility

When most of the buy a house, they wonder how big a house they will be able to afford? Just because they have a high salary, they think that they will get a big loan, which most of the time is true, if you don’t have any existing loans.

But then a lot of people have several small loans running like a personal loan or a bike loan or any other consumer loans, and these small loans come in the way of your loan eligibility because they show up in your “pending loans” or “Existing EMI” list.

So one the actions you should take is to close off any small loans you have because they will increase your “surplus” as the EMI will get stopped, and also you will have one less commitment to take care of and lender likes that.

Below are some handy tips if you want to increase your home loan eligibility.

Let’s see an Example

Suppose, your per month income is Rs 1 lacs and you have a bike loan (or personal loan) currently running with Rs 8,000 EMI per month with 10 more installments to go. Now with this profile you are eligible for Rs 43 lacs of home loan.

How can you increase your home loan eligibility in this case? You can prepay your entire bike loan as it’s a small loan if you look at the outstanding amount; you can dig into your other savings and pay it off. This will surely reduce your savings a bit, but increase your loan eligibility by another 8-9 lacs because now you have another Rs 8,000 surplus each month.

See the home loan calculator snapshot below which shows you this.

Home loan eligibility calculator example

Even your CIBIL report will also show that you have successfully completed and paid off a loan provided you do this a few months in advance before you apply for a home loan.

Close you credit card outstanding also

You should also consider to pay off your entire credit card outstanding bills. May people keep rolling their credit card debt by paying the minimum dues, but that’s not a good thing if you want to get some loan in coming future.

If you are looking for a home loan, then go to this home loan eligibility calculator, enter your details and our trusted partner will help you in securing the best home loan. You also transfer your home loan by applying here

Also, decide if you want to apply for a joint home loan

One way of increasing your home loan eligibility is to add your spouse or any other earning member from your family as a co-borrower of the property. This is one factor you should consider if the spouse is already an earning member. Even if it’s not a significant amount, still mentioning that they bring in some small income helps your loan application, as it adds to the “stability” factor.

Checklist #4 – Arrange all documents required for a home loan

Some background preparations on the documentation front can help you save last-minute hassles and running around. I have often seen many people running around, for ITR proofs and other documents because they didn’t plan well in advance. Below are various documents that might be required for your home loan documentation purpose.

It’s a good idea to prepare a file and arrange all these documents well in advance. These documents are keeping in mind a salaried resident Indian.

KYC related Documents

  • 2-3 Passport Size photos of applicant and co-applicant
  • Identity proof like PAN or Voter ID card, Passport, Aadhar card
  • Address proof like Electricity bill, Telephone bill, Employer Certificate, Aadhaar Card

Income & Employment-Related Documents

  • Past 3 months salary slips
  • 3 yrs ITR (Income tax Returns)
  • Latest 6 months bank statement attested by the bank in original
  • Latest Form 16 for 2/3 yrs
  • Proofs of all savings like FD’s, mutual funds, gold etc (for a down payment)
  • All ongoing loan account statement for past 6-12 months
  • Relieving/Experience letter of the previous company if current employment is less than 2 yrs old

Property Related Documents

  • Original copy for Sale Deed or Agreement to Sale
  • 7/12 extract
  • Commencement Certificate
  • NA certificate
  • Search and Title Report
  • Building Completion Certificate (if available)
  • Latest Tax receipts
  • Development Agreement

Below is a video from IREF, where a guy (seems to be from a bank) is explaining the home loan process and overall documentation requirement. It’s a 7-8 min video in Hindi, kindly view the full video to understand why some document is needed.

Extra documents for self-employed and business professionals

In case you are not a salaried person, then some documents will be different in that case, which is as follows

  • 3 yrs ITR, along with profit and loss statements certified by a CA
  • Your bank account statement for last 1 yr
  • Shop Act License
  • Partnership deed or Company related documents
  • Brief write-up about your business and the nature of work/revenue

This common floor article mentions even detailed list of documents

Some Important points to remember before applying for a home loan

  • In case you are planning to quit your job or planning to change the job, it’s better to first apply for a home loan and then quit/change, otherwise, it will get very tough to get a home loan later.
  • If you are sure of getting an increment very soon or your pay rise is on the cards, then wait a bit and apply for the home loan later as it will increase your home loan eligibility

I hope this article gives a clear direction and action checklist to someone who is looking forward to a home loan or any other loan. Please share any other critical checklist which I have missed out. Also, I request other members to share their experience when they applied for a home loan.

6 smart ways to PAY OFF your credit card debt trap in India

1,90,000 crore was spent using credit cards in India in the year 2015. Over the last decade, the usage of cards has increased many folds and while that’s great for the economy, it also means more and more people getting into credit card debt as many people are now dealing with credit cards.

In the graph below which was published by Livemint, it shows the growth in the card usage in our country

credit card transactions in India

How investors get into Credit Card Debt Trap?

Credit cards if not used properly can get you into debt trap very easily. We get several emails and comments regarding how to handle credit card debt. Below is one of the comments

“I have a SBI card in which I have an outstanding balance of Rs 100000 so I went for settlement and they offered me a settlement amount of Rs.78000. Can it get it still reduced? Because I am not in a position to pay this amount”.

A lot of investors who do not use credit card in a wise manner end with a large outstanding on their cards and finally have to go for credit card debt settlement which lowers their credit score and puts a black mark on their credit report and this inturns hampers their chances of getting loans in future.

In this article, I am going to share some of the options which one can explore. If you want to quickly look over those 6 points, you can just watch the video below

Note that these points to be looked in order. I mean first, you see if option 1 is applicable to you or not. If not, then you move to option 2, if it still does not help you then you move to another option.

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Option #1

Break your investments and pay the bill

Option #2 

Pay off the credit card debt in 5-6 payments

Option #3 

Take a loan from friends/family and pay off the credit card outstanding amount

Option #4

Take a personal loan to pay off credit card debt

Option #5 

Convert your credit card loan to EMI

Option #6 

Use a Credit Card Balance transfer facility


So here you go

Option #1 – Break your investments and pay the bill

There are many people who keep rolling their credit card debt, and at the same time have money in their bank account or a fixed deposit. It does not just strike them that they can just pay off the full outstanding by breaking their FD or cash into the account.

This happens out of ignorance most of the time.

So if you can restructure your money here and there and can pay off the credit card debt, it’s the best option.

Option #2 – Pay off the credit card debt in 5-6 payments

If option #1 is not feasible for you, then the next best option is to pay off the debt in 5-6 parts. Most of the people get too attached to the minimum balance amount and then they just stick to it because that’s the minimum required to be paid to save the penalty.

But then the interest is anyways to be paid, which makes sure you never get out of the debt.

So go beyond the minimum balance amount and pay 3-4X of the minimum balance each month. For example, if your credit card debt is Rs 2 lacs and the minimum due amount which can be paid is Rs 10,000.

Then try to pay 2-3X of that amount, which is Rs 30,000 or Rs 40,000 per month. If not that much, then at least 20,000. That way at least you will pay off the entire debt in next 1 yr if you are disciplined enough.

minimum due payment credit card debt

Option #3 – Take a loan from friends/family and pay off the credit card outstanding amount

The 3rd option is to try to get some loan from friends or family members and pay off the credit card debt in one go and then pay back the person later as per what you agreed with him/her. One can often get free loans without any interest from a close friend or a sibling if you communicate your problem well.

Make sure you pay them back exactly within the time frame mentioned.

Most of the people have burned their fingers by giving money to their friends and relatives because it gets very tough to ask back the money and it can bring sourness in the relations due to money matters.

So you can also choose to pay some interest because the person can anyways earn some money from FD, so better offer to pay 10% interest per year. It’s a win-win situation if it works out!

Option #4 – Take personal loan to pay off credit card debt

If you don’t get loan from someone close in family/friends, then you can go for a personal loan and use that money to pay off the card outstanding. Interest will be in the range of 14-18%, but still, it’s better than paying 40% on a yearly basis.

This does not clear your debt, but just shifts your debt from credit card to a personal loan. Much better option. For those who already have a home loan going on, they can also look at the top-up loan facility which will be much cheaper to a personal loan.

Option #5 – Convert your credit card loan to EMI

If you are not getting a personal loan, then you can convert your debt to an EMI option from the same lender. Almost all the big banks give an option to convert the credit card debt to EMI for tenures like 3/6/9/12/24 months. The interest can range between 13-18% depending on the lender.

convert to EMI credit card

Option #6 – Use a Credit Card Balance transfer facility

There is a facility called Balance Transfer provided by many credit card companies, where you can switch your current credit card outstanding to a totally new credit card. In this case, the new credit card will pay off your old credit card and will also offer you some benefits like an interest-free period of 3 months or low interest for the first few months.

credit card balance transfer facility

Almost all the major credit card companies like SBI credit card, ICICI credit card, and HSBC have this credit card balance transfer facility service with them. SBI credit cards even provide 0% interest for the next 60 days.

However, before opting for this option, please check if there is any processing charge or not? It might happen that the lender is providing free interest period, but then high processing fees will nullify the advantage 🙂

However, note that this is a temporary solution for the next 2-3 months and by that time you should look for further solutions.

Use your credit card wisely

Below are some high-level points which will save you from getting to credit card debt

  • Pay your Credit Card 3 days before the due date, keep a reminder on the phone if it helps
  • Don’t spend much more than you can afford.
  • Carry debit card instead of credit card, You will pay only what you have
  • Don’t keep very high credit limit, if you can’t control yourself when it comes to spending

Please share if you have any more solutions?

Do you know the hidden truth behind ‘Pre-approved loans’ in India

Have you ever received a phone call from your relationship manager telling you that, there is a pre-approved loans especially for you?

A lot of people get excited about this fact, that there is a special offer for them and that the bank is ready with the red carpet waiting top hear a – “Yes, I am interested” from them.

However, what’s happening deep down in these cases is often not known to general public. You as a customer should be fully aware of what goes behind pre-approved loans (It’s also called Instant Approval some-times). You should be aware about the reasoning behind lenders offering these type of loans.

Pre-Approved loan


What does “pre-approved” loan means?

Let me not reinvent the wheel here. One of the best explanation of pre-approved loans is given by wikipedia. I am quoting it here. You will understand what it means

In lending, pre-approval has two meanings:

The first is that a lender, via public or proprietary information, feels that a potential borrower is completely credit worthy enough for a certain credit product, and approaches the potential customer with a guarantee that should they want that product, they would be guaranteed to get it.

This rarely happens in the financial services industry, and when it does happen, it is usually loaded with fine print that is not immediately disclosed. Usually, what happens is pre-qualification, instead.

Although, to a typical consumer, “you’re pre-approved” means “you already passed the approval process and therefore are guaranteed to be immediately granted the loan if you apply,” the literal meaning is different. The literal meaning is “at a stage before approval.”

Thus, pre-approved creates no obligation whatsoever on the lender and no rights whatsoever to the potential borrower. “Pre-approved” is thus a popular advertising catch phrase to induce people to apply for a loan.

So, in a nutshell, when a lender says that your loan is pre-approved or you are eligible for instant approval, it means that based on your profile information like your income, your payment history till date, your debit/credits in your bank account, your cibil report status and the score and many other things – they have short-listed you and preferred you over other customers.

Few parameters about you are already known to lender and based on that information, you can now apply for the loan. However its not correct to say that the loan is already approved or any kind of guarantee that you will get it for sure.

These offers just means that the first level check is complete and you have passed that, you will most probably get the loan if you move ahead.

But, you still have to follow all procedures

You still have to follow all the procedures, produce all the documents asked and at the end, the final decision will be taken by the lender if they want to give you the loan or not.

An important point to note is that pre-approved loan comes with a time limit. If you get an offer for the loan and if you accept it, you need to close the deal within few months (generally 6 months). You will be paying a processing fees, if its applicable for the instant approved loan.

Advantages of Pre-approved loans

Note that, I don’t want to show pre-approved loans in a bad light in this article. While there are few things one should be aware about, still there are some benefits of pre-approved loans, which you should know

Benefit #1 – Better Negotiation power in your hands

If you have a pre-approved home loan on your side, then you have a better negotiation power in front of builder, you can show him that your loan is already approved and your chances of buying the house is stronger.

Builders love committed buyers and they might extend the discount of few points to you, if they can sense your position. Also you can talk to your lender about anything which is concerning you about the loan and negotiate it with them.

Benefit #2 – Less processing time

Because the loan is pre-approved. Most of the background checks is already done, your basic details are with the lender. Now its all about producing the documents asked and take it to next level. Hence the overall processing time gets reduced and things happen faster.

Benefit #3 – Possibility of Lower interest rates
Most of the times, a pre-approved loan comes with a lower interest rates. This is because of the reasons like its the bank who wants you to take the loan and they have to offer you something interesting.

And the other reason is that pre-approved loans are offered to those who have a good history of payment or who have a stable cashflow and banks don’t mind lowering interest rates to them because they are not high-risk customers.

Pre-approved loans are a tool for cross-selling and meeting of targets by banks

To understand this whole game of pre-approved loans, you just need to think like a lender. A person who already is a customer is a good candidate for other products too. Let’s take an example.

Imagine a customer who had taken a home loan from a bank, and already 1-2 yrs have passed.

Now if you think carefully, you will realise that a person of that profile, might be needed additional money for home furnishing, might want to upgrade his car, might need some money in between vacations, home renovation or might have emergencies in life and above all, this person earns well enough (because he bought a home loan).

Hence, the lender keeps bombarding with offers like car loan, personal loan and other kind offers. So the point to understand is that, these pre-approved loans are a way of cross-selling their other products to you.

Below you can see a screenshot from my mailbox and will understand what I am talking about.

personal loan pre approved loan

Apart from this fact, another thing is that banks have their internal targets to meet. Each branch of bank is given a monthly or quarterly target to meet and in that pressure, they have to find customers and sell the products.

That’s the reason you will see your relationship officer calling you from time to time to tell you about the “exciting offer” especially offered only to “premium customers” like you.

Role of Psychology in pre-approved Loan

“Supply creates its own demand”

This is the best quote of economics which explains why pre-approved loans work many a times. We live in the world, where are consuming mainly because someone wants us to consume and not because we want to consume it. If you offer something to a big group, chances are, few people from that group will come with all the reasons why they need your product.

Coming to the example of pre-approved loans, if you keep offering the loans to a big mass from time to time, Its highly probable that few of them would take it just because its available.

Consider an example:

Assume, that I have an old car (which I have in reality) and I am thinking to upgrade my car (which, I am not thinking in reality). I have some money in my bank account which can be used for making the down payment. Now at this stage, imagine I get an email or call offering me a car loan saying – “Pre-approved card loan only at 8.99% upto Rs 6 lacs”.

Imagine what will happen….

Even though I was not consciously thinking to upgrade my car, still just because an offer like that is available, I might be tempted to go for it. I will magically come up with all the reasons why I must take the loan, and how I deserve a better car .. blah blah .. The deal will give me an external push and look like a win win deal.

I might not have applied for the car loan myself if the loan offer was not there, because, it was not a lot of pain for me to actually apply for loan and upgrade my car. I will be involved in my life issues and keep postponing my wish.

However, not all examples are like this. A lot of times, people take the loans they don’t need at all. The pre-approved loans make them hungry for something their body does not need. Just because it’s available easily, a lot of people fall for it and get into the never ending cycle of debt a lot of times.

Don’t apply for pre-approved, if you don’t need it

You might be aware that any kind of loan application goes into your CIBIL report. So make sure you apply for the pre-approved loans only if you are really serious about the loan. Don’t just opt for it for the sake of it. Don’t click that “Apply now” button just to check if you are really going to get it.

At the end, I would say do not just discard the pre-approved loan, neither see them with too much of doubt. Look at it as a normal loan offer and do all the checkups and introspect if you really require it or not.

Do you have any experience of getting these kind of offers? Do you fall for them?

4 important things to complete when you Close your Home Loan

It’s a dream of most of the homeowners to own a house without any loan on their head. It’s a great moment in their life, when they pay the final EMI of their home loan or pre-pay the full outstanding balance and clear the home loan fully. It’s a moment of pride and happiness. It’s a great relief for someone who was paying the EMI from so many years continuously.

closing home loan

However in that excitement, a lot of people do not take all the required actions and later suffer because of small things they didn’t complete after closing their home loans. In this article, I want to share few things every home owner should complete, when they are closing their loan.

While I am focusing totally on home loan closure in this article, but whatever I am going to share also applies when one closes a car loan, education loan, personal loan or any other kind of loan.

Point #1 – Take back your original Documents from Lender

This is a no-brainer.

Make sure that whenever you close a home loan, you take back all the important document you had submitted at the time of taking the loan. Original documents are really important to collect, because in future if you want to sell the house or want to take loan against property, that time you would require all the documents. Some of the documents we are talking aboout are …

  • Original Sale Deed
  • Original Conveyance deed
  • Power of Attorney
  • Possession Letter
  • Your Payment Receipts
  • Any Cancelled Cheque’s given

Some lenders even give you a copy of letter, mentioning what all documents were submitted by you to the lender at the time of taking the loan. Below is a sample list of documents mentioned by HDFC LTD to one it’s loan takers. It clearly mentions exactly which documents were taken by the bank at the time of giving the home loan. This really helps, because there is no confusion later and lender is also accountable towards the customer.

documents list home loan

Make sure you personally go to the branch and collect all the documents yourself. Do not ask the lender to send the documents via courier or speed post. There are tons of cases where the documents were misplaced and investors had to run from pillar to post to get them back.

After getting the documents, you should also check if they are in good condition and no pages are missing from between. Also – If you can’t collect the documents yourself for some reason (like when you are out of country) then you can give an authorization letter to someone trusted, who can collect the documents on your behalf or ask bank to wait till you come back yourself and then take the documents.

Point #2 – Take NOC from the lender

NOC or No Dues certificate is a legal document provided by the lender, which certifies that you have repaid the full loan and no outstanding balance exists. The document will have the lender stamp of the lender. It’s extremely important document, which you should collect from the lender. Below you can check out the experience of one investor who had no proof of closing the loan and how he faced issue due to that.

NOC document

Usually, NOC/NDC is dispatched by the lender after the loan is fully paid. But if you do not get it by default, then you should talk to your lender. I have already written in details about the NOC and its importance

Point #3 – Remove Lien from Registrar Office, if any 

Let’s first understand what is the meaning of “Lien”?

Lien means “a right to keep possession of property belonging to another person until a debt owed by that person is discharged.”

lien meaning home loan

What is means in simple language is that, the lender will keep the right to sell the property themselves, if the loan taker is not able to pay back the loan. These days banks do not put a lien on property, because they anyways check the background of the customer properly and keep the original documents in their custody. But at times, it can happen that due to customer background or on a slight suspicion, lender wants to put a lien on property, which is done in registrar office.

So you should surely check with your lender, if they have put lien on your property or not?

And, If they have – then you should ask them to help you to remove the lien and overall process. Some people will ask – “What happens if I do not remove the lien?”

If you do not remove the lien from your house, then you will face difficulty at the time of selling the house in future, and at that time you have to visit the lender again anyways. So please make sure you complete this part as soon as your home loan is closed.

Once you clear the lien from your property, you can verify it back by applying for a new encumbrance certificate, which should mention that there is no encumbrance with the property, means no one has any legal rights in the property. You should see that its mentioned in the certificate. I was able to find a sample certificate on the internet which you can see.

encumbrance certificate sample

Even if you are planning to not sell your house in future, still make sure you don’t skip this step, Its always a good idea to make sure 100% process is followed.

Point #4 – Make sure your CIBIL report is updated with CLOSED entry

CIBIL report is one document which records each of your loan entry and all your actions of payment. Each lender checks this CIBIL report before giving any kind of loan to you (even when they give you a credit card).

Once your home loan is closed, your bank should update CIBIL, that you have closed your home loan and an entry called “DATE CLOSED” should appear on your report with the date of closure.

But many a times, banks delay this small action or completely ignore it for months and years. Your CIBIL report might not have that updated entry. So you should double check with your bank at the time of closure of loan that they will update the CIBIL very soon.

update cibil report after closing loan

So when should you check your CIBIL report again? A good practice is to check it after 60 days of closing the loan and verify if there is an entry of “DATE CLOSED” with a date on it.

Make your Home loan closure 100% full proof

I have tried to make sure that you take all the last mile steps after closing your homeloan. Even if you prepay your home loan early, still you need to take all these steps, otherwise your home loan closure will not be 100% full proof.

Let me know if you want to add some other point in this list and I would be happy to add it.

How Top up loans are good alternatives of Personal Loan ?

Imagine you already have a home loan and now after few years of payment, you again need some extra loan for some purpose? What would you do? One would ideally think of applying for a fresh loan from scratch and might get it too. But there is a faster option to get a loan if you already have a running home loan and its called top-up loan.

Top up loans

How does top-up loan works?

When you take a home loan for the first time, you have some home loan eligibility up to which you can take the loan. If you have consumed that full limit, then you are not eligible to get any further loan immediately, but over the years when you have paid back some part of your loan and if your income has also increased, then it may happen that your loan eligibility has gone up. At that point, you are eligible to take up a top-up loan which is over and above your existing home loan. What exactly happens if you get a loan up to an amount of your loan eligibility minus your existing outstanding loan.

Almost all the bank rules say that you are eligible for a top-up loan only after 6-12 months of paying off the earlier loan because only after some time is over, your loan eligibility changes.

Let’s take an example

Assume that Ajay, a software engineer working in Bangalore has an income of Rs 10 lacs a year. Assume that his loan eligibility was Rs 50 lacs and he takes a home loan of Rs 45 Lacs. Now assume that he has serviced the loan EMI for the next 3 yrs and now his overall income has gone up to 12 lacs per annum and his outstanding loan balance now is only Rs 38 Lacs. Now based on his current income, his new loan eligibility is 55 lacs.

Now if he applies for a top-up loan, the bank will deduct the 38 lacs of an outstanding loan from his new loan eligibility of 55 lacs and only provide him 17 lacs (55-38) of the top-up loan. The documentation and the overall process will be faster in this case, as there is an existing relationship and also the history is known by the bank. Below is the graphical representation of the same example I took above.

Top up loan example in India

You need to have a good repayment track record to avail a top-up loan. Just because you have some loan eligibility does not mean that there is a guarantee of getting a top-up loan. The final decision is always with the loan provider. The bank will also investigate with you the purpose of taking the top up loan. Below you can see for what purpose the top up loan can be taken.

  • Renovation at home
  • To be used as a personal loan
  • To buy another property
  • To buy a plot or Land
  • Purchase of consumer durable products
  • Children’s marriage/education
  • Business requirements
  • Medical expenses

5 Benefits of Top-Up Loan

Benefit #1- Tax Benefits on a top-up loan 

You will get tax benefit on a top-up loan only if the loan amount is used for buying a house (on principle and interest) or if you are using it for renovation purpose (interest part). For any other purpose, if you use the money, you will not get any tax benefits.

Benefit #2- The interest rate for a top-up loan 

A The interest rate for the top up loan is around 1.5% to 2% higher than the home loan interest rate of the bank, which means it can go up to 11.5% to 14% finally.

Benefit #3- No Security Required

A top-up loan does not need you to mortgage some asset, because its given on top of your home loan and anyways your home documents are with the bank. So one important point to note here is that even if you close your original home loan, you need to also close your top up loan before you can ask back your original house papers from the bank.

Benefit #4- Top-up loan amount 

 Generally, the amount of top-up loan cant exceed the original home loan amount you have taken and also there is always an upper limit defined by the bank for the top up loan, which can range anywhere from 15-40 lacs. So if you have taken a Rs 30 lacs home loan, you can take the maximum top-up loan of another Rs 30 lacs if your eligibility supports you after some years.

Benefit #5- Processing Fees

Almost all the banks will charge a processing fee for approving the top up loan . The charges are same as their home loan processing charges . For example – if you take a case of HDFC LTD , the charge 0.75% of the loan amount or Rs 2,000 which ever is maximum as the loan processing charges for the top up loan.

Top up Loan is a good alternative of Personal Loan

By now you must have understood that a top up loan is a much better alternative to a personal loan. there are a much higher chances of getting a top up loan if you already have a home loan and have a clean and good track record of payment in past. Also if you have already passed 3-4 years of your home loan repayment , you can get a decent amount of top up loan. Given the interest rates of personal loan can be as high as 18-24% , its always a good idea to try for top up loans.

Let me know if you knew about this concept or not ?

6 tricks to increase your Home loan eligibility and learn how its calculated by banks ?

Today you are going to learn how much home loan amount you are eligible for. I will show you how banks calculate your home loan eligibility and what are some of those factors which can impact your loan eligibility.

At the end, I am also going to share some tips you can take to increase your home loan eligibility.


What is Home Loan Eligibility ?

Home Loan Eligibility simply means how much loan amount you can get for buying a home. Just because you are earning Rs 1 lac a month, does not mean that you can take a Rs.50 lacs loan. Its always based on a formula and is calculated based on some formula and logic, which we are going to see today.

There are several other kind of loans like Personal loans, Car Loan, Education loans – but out of all the loans, home loan is the biggest ticket size loan and takes longer to pay off. While this article is true for all kinds of loans, still we will focus on home loan eligibility in this article.

Think from the Lender’s point of view

Before we go deeper into this article, I want you to think like a lender for some time. Think as if you are a lender and you are giving loan to someone. How will you think, how will your thought process be? Think for a minute and trust me, you will yourself realize that calculating someone’s loan eligibility can be very easy.

There are various factors one has to look at before giving a loan to someone. Just because someone is earning a lot of money, does not mean that he/she is eligible to get loan of any amount. There are various other factors which will come into picture.

I have recorded a full video on this topic which you can view below or on this direct link on youtube.

So before we look at those factors, let me quickly show you an example and explain you the simplest way of calculating the home loan eligibility

Example of Calculating Home Loan Eligibility

Lets say Ajay earns Rs 80,000 per month as a Software Engineer. Now its very obvious that he is not left with all Rs 80,000 per month as his savings. After deducting his expenses and commitments, he must be left with some amount.

As a thumb rule, banks in India assume that you are able to save anywhere from 40%-50% of your in hand income. For this example, lets say that the ratio is 50%.

So the bank will assume that the savings per month is 50% of Rs 80,000 , which is Rs 40,000. This Rs 40,000 is available for repayment of any kind of EMI’s .

Now bank will do the reverse calculation and find out how much EMI is required to pay off Rs 1 lac loan using the standard interest rate and tenure. Assuming that the bank takes 20 yrs tenure and interest rate of 10.5% , the EMI required to pay Rs 1 lac loan per month comes to Rs.998.

Now they find out how much loan Ajay can handle if he can pay Rs.32,000 EMI per month, considering Rs.998 is required to pay Rs 1 lac loan. So it would be

Rs.1 lac * 40,000/998 = Rs.40 Lacs.

So this way, Ajay’s home loan eligibility is Rs.40 Lacs.

What if there was an existing EMI of Rs 10,000 ?

Assume that Ajay had an existing personal loan for which he was paying Rs.10,000 EMI per month. In that case, his available saving would not be considered as Rs.40,000 , but 30,000 only (40,000 – 10,000)

In which case, his loan eligibility would be just Rs.30 lacs using the same technique.

Now this is the most simple way of looking at home loan eligibility calculation. There are various banks which use different formulas and calculations, but all of them will revolve around this same logic I explained about.

Important Note

It depends on the bank on how much % saving they assume a person does. In the example above I have taken 50% as the assumption, but some banks might take it as 40% or even 35% .

I calculated home loan eligibility on ICICI’s Home Loan EMI and Eligibility Calculator for the same example above and I got the following result

Home Loan Eligibility Calculator Example from ICICI bank

I checked the same example on CIBIL website and even there website gave me very similar result

Home Loan Eligibility from India

Factors which Affect your House Loan Eligibility

Now lets look a little deeper into some of the core factors which affect your loan eligibility. Some lenders might not use all the factors, but still its a good idea to understand how its related and do something about it.

1. Your Income

The amount of loan you are eligible for depends directly on your income.This is one single factor which impacts your home loan eligibility to the greatest extent. Its very simple, higher your income, higher is the chance of you being able to pay the bigger liability.

Your actual situation might be anything, but the simple logic is that higher income person can pay more EMI and hence he/she can take higher loan.

A person earning Rs 1 lacs has higher chances of affording Rs 30,000 EMI , compared to a person who earns just Rs.40,000 .

Now if you are salaried employee, your income is assumed to be more stable than a person who is self employed or into a business. Its more easier for a salaried person to get a loan compared to a self employed person earning Rs 1 lac a month for obvious reasons.


A lot of banks will ask for your salary slips for past 1 yr and 3 yrs of IT returns, and bank statement for atleast 6 months. This is to calculate and get an idea of your overall cash flows and what are your spending patterns.

A lot of banks do not consider the LTA , HRA and medical allowances you get from the company, so they will deduct those amounts from your yearly take home.

I thought I will mention one important point here. In reality your income can be anything, but what really matters is your income on papers, which is ITR returns you have filed over last 2-3 yrs. A lot of people do not disclose their full income and pay less taxes, Its going to directly impact their loan home eligibility.

For a self Employed Professionals, along with the ITR’s for past 3 yrs, banks also require Profit and loss statement along with Balance sheet certified by a CA for last 3 yrs.

2. Age of the applicant

The age of the applicant also matters to some extent, but not significantly. Paying a home loan is a long term commitment. And banks have to ascertain how long you can pay off the EMI.

A person in his 30’s can pay the loan for next 30 yrs, but a person who is 50 yrs old will retire at 60 and has just 10 yrs in hand and in that case, he can get a loan for lower amount compared to more younger person.

3. Credit history

Your past credit history and repayment record has direct impact on your loan eligibility. If someone has a bad repayment record, then he/she might not get the loan itself. But in some cases where bank considers the application it might happen that they only approve a certain percentage of the eligibility

In our earlier example, Ajay had a loan eligibility of Rs 40 lacs in normal circumstances. Imagine that he has a bad record in past and he had not paid his past EMI’s on time and his overall credit score was bad, then it might happen that the bank agrees to only approve Rs 10-15 lacs of loan instead of his original 40 lacs loan.

4. Profession

Profession of the loan-seeker also matters a lot. Some professions are categorized as negative or risky by the lenders. People in such professions may find it difficult to get a loan sanctioned. What a lender requires is a stable income for a very long term.

So if a person is into jobs which are well paying and which are considered stable like Software Engineers, Banking jobs etc (which are white collar jobs), then the person is eligible for a higher loan amount.

However certain jobs like BPO sector jobs, running your own shop, Insurance Agent have lower loan eligibility because the income is uncertain or the chances of losing a job is higher.

5. Your Relation with the Bank in Past

A lot of banks (especially PSU and cooperative banks) still look at your past relationship very seriously. If you have an account with bank from last 10 yrs, it will matter a lot sometimes. In some cases banks directly issue a loan in multiple of your income.

6. Your Employer Category

Almost all the banks categorize various big companies into A,B,C category and offer different interest rates to their employees. so employees of Infosys, TCS, Microsoft and companies like that will be offered a better interest rates companies to smaller companies.

Check with the bank about it and you might get a slightly less interest rate, which can matter a lot on long term. You can also get processing fee waiver if special schemes are running.

5 tips to increase your loan eligibility ?

So you understood how the loan eligibility is calculated and some factors which impact it, so now lets see some of the actions you can take to increase your loan eligibility.

Tips to increase your loan eligibility

1. Go for a longer loan tenure

your EMI depends on the tenure of the loan, so if you increase the loan tenure, you might get a higher loan eligibility.

So if you were planning to take a loan for 10 yrs, and assume that your loan eligibility came to Rs 20 lacs, if might happen that it goes up to 30 lacs if you are ready to take a 20 yrs loan. Its as simple as that. This is because you are committing to pay over a higher time frame.

2. Prepay an existing loan completely

If you have any existing loan which is about to complete, then better pay it off completely. This is because in that case, your monthly savings will go up and that will increase your loan eligibility .

For example – imagine you are able to save Rs 40,000 per month. But you have an existing personal loan for which you are paying Rs 15,000 per month EMI and that leaves you with remaining Rs 25,000 only. Now imagine that you have Rs 1 lac in outstanding for that personal loan and its going to complete in next 8 months, after which you will have full 40,000 with you for paying home loan EMI .

But right now your bank will see that you just have Rs 25,000 in hand to afford additional EMI , and you will have a loan eligibility of only Rs 25-30 lacs, where as in reality you know personally that you can afford much more EMI given a chance.

So in this case, its always a better idea to arrange for money from somewhere else and pay off the personal loan fully and that will free your EMI there, and you will be left with full Rs 40,000 in your hand. This simple action will increase your home loan eligibility by a big margin

3. Extend your other loan tenure and decrease the EMI for the other loan

Now this is just an extension of the above trick . You have to think about how you can show the bank that you have a higher amount available with you.

So if you have any other EMI going on and you cant prepay it fully, then at least you can increase the tenure of that other loan, which will decrease the EMI part and that would leave you with more money in your hand each month.

For example, imagine you have another home loan for which your tenure left is 4 yrs and your EMI is 15,000. Now if you cant prepay it fully, what if you can increase the tenure to 10 yrs, may be the EMI comes down to Rs 9,000? That would mean extra Rs 6,000 with you. That can show the bank that you can pay more EMI on the other loan now …

Check this point with the bank when you need the loan. In some banks this thing might not be of any use if they do their calculation on outstanding loan.

4. Include the spouse or parents for the loan application

This is pretty clear. If you include your spouse or parents as additional loan applicants, then your overall loan eligibility will go up because now there is more income to support that loan.

The person you are including should have all the documents and ITR as proof for their income and its stability

5. Add any bonus you are liable of

You should also mention to the banks if you get additional bonus or perks from your employer or if you have any other source of income like rental income, interest from deposits or some other business income apart from your regular income.

Even if you mention that your spouse also earns some additional income which can be used later, then it might help sometimes. This particular point is not going to increase your loan eligibility, but at times this can help you get your loan approved.


The simple point of this article is that banks look at your potential to repay the future loan and there are factors which affect that and you can take some actions to improve your chances of securing the loan or increasing your loan eligibility

Let us know about any questions you have or some thoughts you want to share ?

Why you should collect NOC (No Objection Certificate) once your loan is complete ?

Once you pay off your loan, a big responsibility is off your mind and you feel relaxed. Its a moment where you do not want any further run around and want to now move on to other things in life.

And this is exactly why most of the loan customer do not collect a document called “NOC” or “No Objection Certificate” from their lender and it can get them into trouble later in life. At some places you will hear the word “No Dues Certificate” , but generally most of the executives in real life use the word “NOC” only

Read the incident below to understand its importance

importance of NOC No objection certificate

What is NO Objection Certificate (NOC) ?

With reference to loans, An NOC or No Objection Certificate is a legal document provided by the lender which states that the loan has been complete and their is no outstanding to be paid by the customer as on a specific date. Whenever a person pays off a loan, its important to take this NOC document from your lender.

How to get the NOC ?

Generally, all the lenders dispatch the NOC document to your registered address once your loan is complete. However at times, people do not pay attention to it and loose out on it for some or the other reason. Also if the registered address with lender is your old address (suppose you changed the address in between the loan), then also you will miss the NOC document.

So if you do not get the NOC, better contact your lender and ask for it specifically.

What kind of problems can happen if you dont have NOC ?

A lot of people think that just because the EMI’s are paid off fully, the job is done. However its extremelly important to have a legal document with you which clearly states that you do not owe anything more to then lender.

This way you are protected legally and if someone claims later in life that you owe more to the lender, you can produce the NOC if required. I would like you to have a look at the incident below which create some issue for one of the loan customer, who had paid off the loan, but didnt have the NOC with him

Hi Manish,

I have taken a personal loan from Bajaj Finance in the year 2004. All along, I have been thinking that I have paid the loan. To this effect, Cibil report also says, there is no balance outstanding and the account is closed on 31.12.2008. I don’t have NOC.

Today, I have received a call from a Lawyer saying that he has a summons to arrest me and I need to pay the balance amount of Rs.3750/- and that too I need to pay before 3 pm.

Could you please responds me as to what should I do. My question is will he really have Summons or just he is threatening. I can pay, but he is asking me to pay beofre 3 pm. That’s what I am not able

Here is another incident where Rahul settled his outstanding credit card dues with Standard Chartered bank and didnt collect the NOC . Then after many years he got a notice from the bank to pay 7.7 lacs. Here are his comments

Its been 12 years now, and I dont have the copy of NOC (or No Dues Certificate) with me. How do I prove my case as SCB isin’t ready to check me credit card history to see where the problem was. They just keep saying “they can’t retreive the information as they have sold those accounts to saha finlease.

And what about the notice they sent me asking me to attend conciliation camp to be held on 11th November?

Read the full incident on our forum

How NOC can help you in future if some problem arise

NOC is a legal document which has weightage . It proves that you really have paid off the loan fully and if there is any confusion, then NOC solves it.

Read these two incidents which were shared on our forum and you will understand its importance

Dear Manish,

Same problem as Sandesh I had with Indus Ind Bank Kolkata recently. They told me that my score is very low so they are not considering me. However, I submitted them my CIBIL Report which clearly says 763. There was an issue with a credit card which I cleared 1 year back.

I submitted them the NOC too. The HR here told me that she has forwarded the details to her central office. Now I am waiting to hear from them.


Dear Ravish,

If you have the NOC issued by the bank, saying all dues have been cleared and there is nothing pending, you can get a loan. But as Dear Ashal has suggested file dispute with CIBIL and wait for 2-3 months to get it rectified.

I had the same experience about 3 years back and credit card in question was issued by HSBC. I got the NOC issued by HSBC and applied for loan with HDFC, while submitting the application I informed HDFC about the HSBC story. Later on, HDFC asked for the NOC and cleared my loan.


Go get your NOC right now

So now, if you had any loan in past which you have completed and paid off, make sure you have applied for the NOC and keep it safely in your records