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5 Less Known Activities You Can Actually Fund Through Bank Loan

Here are the lesser-known expenses that you can fund with the help of bank loans

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Bank Loan
There are 5 Less Known Activities You Can Actually Fund Through Bank Loan. Pixabay

Unplanned expenses can crop up anytime in your life. With a fixed amount of salary, sometimes you are left without savings for an unforeseen expense. However, with numerous loan options available from all sizes of banks, you can relax and take a deep breath. 

In today’s world, there is a variety of loan options offered by financial institutions, such as personal loan, car loan, education loan, house loan, and so much more. Given the factor that it is not always necessary that you need to go for a loan because you want to buy a car or a house. Here are the lesser-known expenses that you can fund with the help of bank loans: 

1 Planning a Family Vacation

It is said that the best travel experiences are unplanned. However, when you make random family vacation plans, you don’t always have enough money kept aside for it. Catering to such needs, there is an ample number of banks that offers personal loan for planning a family vacation. These loans provide a lower interest rate than that of any credit card. So, if you are planning to go for that trip that you have been preparing for so long, taking a loan from a bank is your best bet.

Bank Loan
However, with numerous options from Bank Loans, you can relax and take a deep breath. Pixabay
  1. Funding a Wedding

In India, weddings are considered a matter of pride. You love to go big and plan a spectacular big fat wedding. However, big celebrations often cost big money. The day to day expenses makes it impossible for you to stop and think about saving for your such expenses. So, what do you do when you go across your wedding budget? It’s simple; you can take out a loan to fund your wedding expenses. 

The best part of taking personal loans for a wedding is that you can repay the loan in inexpensive Equated Monthly Instalments (EMIs) over a flexible tenure of your choice. You can compare the EMI on an online EMI calculator to get a fair understanding of the ratio of principal interest to the interest due, based on the tenure and the interest rates.  

  1. Renovation of Home 

If you are a homeowner, the chances are that with time they’ll need repairs. Though, unfortunately, most of the upgrades come along with a hefty price tag. To ease this issue, you can go for a personal loan offered by reputed financial institutions like Axis Bank. First, make a list of the renovations that are required and the amount of money that you will need for the same. Then, with the help of an EMI calculator, you can evaluate the amount that needs to be paid through the EMI and let you make an informed decision about the loan. 

Bank Loan
However, mutual funds Investment with a Bank Loan can be risky as the returns are market linked. Pixabay
  1. Investing in Mutual Funds

You must have heard the financial lingo “invest a loan,” which means that you take a loan from the bank to invest in mutual funds. Taking a loan to invest in mutual funds can be fruitful in many parts like you can have a higher return on investment of the loan as opposed to a lower risk level of investment. However, mutual funds Investment with a loan can be risky as the returns are market linked. Therefore, you need to assess your risk tolerance and start by investing small amounts in different fund options. You can invest in SIP after calculating the monthly SIP amount using online SIP calculator and get good returns. When you keep such instances aside, investment is one of the lesser-known activity that can be funded by a bank loan.

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  1. Pay the Credit Card Bill

Indians have made the usage of credit card an essential part of their life. There are times when you need money to buy a gadget or a home appliance on an urgent basis. You might not have savings to match such emergencies and end up using your credit card. At the end of the month, you must clear your credit card bill, but you do not have enough in your account for the same. For such instances, you can take a personal loan to pay your credit card bills.

Next Story

Here’s Why India Should Expand its Financial Infrastructure

Building credit institutions of tomorrow

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Finance infrastructure
The focus on the microstructure is a must to create the necessary dynamics that can help finance and expedite infrastructure creation in India. Pixabay

BY TAPONEEL MUKHERJEE

Given India’s need for infrastructure expansion and the infrastructure financing gap, attention needs to turn from the overall macroeconomic view on sectors and funding towards the microstructure of the credit markets in India. This focus on the microstructure is a must to create the necessary dynamics that can help finance and expedite infrastructure creation in India.

At the outset, it may be underscored that infrastructure cannot be looked in isolation from the general commercial credit market. Essentially, the system of financing for creating infrastructure needs to be in sync with the credit market that businesses and consumers have access to. For example, an airport asset at a tourist destination does well if the hotel infrastructure at the destination and ancillary tourism-related infrastructure are well developed. Regardless of whether the business is that of an airport, hotel or tour operator, everyone needs access to both short-term credit and long-term credit.

Finance infrastructure
The credit financing needs of infrastructure and consumer-facing businesses can be met better by focusing on the creation of institutions. Pixabay

Essentially, financing is a crucial driver of these businesses, irrespective of the structural differences between them. The credit financing needs of infrastructure and consumer-facing businesses can be met better by focusing on the creation of institutions and supporting regulations that allow for institutions that focus on different parts of the interest rate term-structure. India will need institutions that can cater to both short-term and long-term credit needs. However, the skill sets and the nature of balance sheets required will be fundamentally different for both markets.

The short-term credit needs, broadly termed as “working capital” needs, will need access to balance sheets that have a focus on generating returns on capital pools that have a “money-market” nature. Essentially, businesses and institutions that need to make returns on short-dated capital and are focused on doing so are required. The credit lending institutions needed are those with specialised credit risk underwriting skills which help them source the capital and generate returns by lending to a broader credit spectrum on the short end of the interest rate curve.

Primarily, credit provision in the two years and shorter credit periods. It cannot be overemphasised that such short-term credit-focused institutions need to have specialised skill sets that can help them appreciate the specific lending situation, create structures that de-risk the cashflows and hedge duration risk. Primarily, deliver the excess credit spread on the short end of the curve that will be attractive to investors looking for short-term yield pick-up. On the long-end of the interest rate term structure, India needs term lending institutions.

Credit businesses that can understand long-dated assets, mitigate risks and deliver high-quality risk-adjusted returns for the credit risk undertaken. The balance sheets that need to finance such assets are those looking for annuity type returns. The difference in the fundamental nature of the short-end and long-end credit markets should be borne in mind. Credit underwriting skills, balance sheets required, and the nature of businesses are all fundamentally different in the two cases. However, both markets need to coexist and grow together. One cannot push the growth of one without developing the other.

Finance infrastructure
Essentially, the system of financing for creating infrastructure needs to be in sync with the credit market that businesses and consumers have access to. Pixabay

A lot has been said about the global low-interest rate regime and how the capital pools are looking for returns. In that context, creating such credit institutions must be viewed as building “bridges” that can assist the capital in flowing towards the capital-constrained sectors. Ensuring institutions, regulations and structures that can make credit businesses attractive for investors is the first critical step. In layman terms, the first question to ask as an investor is, “do I have access to a market with adequate regulations that can help me build an investment vehicle for a credit business?” The next question to ask is if as a credit business, “I have access to market instruments and securities that allow me to manage my risk exposure?” And, lastly, given the risk involved, “does the tax structure allow me a return that is attractive on a risk-adjusted basis?” The above analysis is one that every investor looking at the credit markets will do, regardless of whether the capital is domestic or foreign.

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As India looks to unleash its economic potential, access to credit will be a crucial pillar of growth. The specialisation of skills and balance sheets will be a significant driver for creating the credit institutions of tomorrow that can cater to the varied credit needs in a dynamic and complex economy such as India. (IANS)