Top 10 tricks used by Agents for misselling financial products

Buyers Beware. This is the mantra one has to follow in Indian financial markets. From last many years agents and so-called “Financial Advisors” are using fancy words and tactics to lure investors and sell them inappropriate products like wrong Mutual funds,ULIPS, ULPP’s and Endowment Policies. In this article we will see what are the common tactics used by agents and how we should handle them and demand logical explanation. Note that this is not an exhaustive list and there are many more miss-selling techniques which is not covered here. Lets see them one by one.

1# High Dividends declared by Mutual funds.

This is very common tactic used by agents. Even the mutual fund companies advertise about big dividend payout to lure investors. Investors who do not how mutual funds with dividend options work fall in the trap thinking that dividend is something extra which they get apart from growth, where as the reality is that dividend is your own money which comes back to you and then NAV goes down by that much quantity. Have a look atDifference between Growth and Dividend option in Mutual funds

2# Premium can be stopped after the first 3 years

This is a very effective statement because every investor wants “no trap” investment option, hearing that we just have to premiums for 3 yrs and still our insurance cover and policy will keep running makes us interested in these products. There are two wrong things here: Firstly, ULIP premiums can be stopped even before 3 yrs, there is just lock in period of 3 yrs, even some agents don’t know that you can stop the premiums of ULIP’s anytime after 1 yr and you won’t loose 100% money, the other thing is that advising paying premiums just for 3 yrs is wrong thing as ULIPs are long-term products and should not be used for short term. This is against the basic principle of any equity related product.  

3# This fund has returned 36.6% annual return in last 4 years

Last 4-6 yrs have been extremely good for Indian markets and performance of every mutual funds , ETF or Equity linked product has been great. This single most fact has been used by agents and they have been advertsing about the “great performance” of their respective ULIP’s and mutual funds . What one has to really look at are the returns a product has provided over and above its benchmark or other peers . If Nifty has given 40% return and a mutual funds with bench mark as Nifty has given 41% , there is nothing great in this . In fact its better to use Nifty ETF’s then and get 40% return without the fund manager risk and other costs associated with Mutual fund . We should also ask the agent about the performance of product in bad times and not just good times .

4# ULIPs offers guaranteed returns

This is not true! Any Unit Linked product does not come with Guaranteed returns. Agents some times just say this to attract customers and moreover their Greed! There might be the case that there is some guarantee for initial years premium or over all but then it will be so low that its not even worth considering. A simple thumb rule is that anything beyond Bank FD returns will always carry some level of risk otherwise why will someone buy FD at all if they can get some guaranteed returns. Nothing comes free in this world, there is always some risk involved.

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5# This is regarding 180% – 250% guaranteed return plan Sir.

Now a days I can see this strange thing with most of the products, that they have started giving “guaranteed returns” with first year premiums. This has two reasons, people in India like words like “guaranteed” and “secure” especially at times when markets are doing bad, second reason is that they can use these words at the time of promoting their products, I get a lot of calls which start with “Hello sir, this call is regarding 250% guaranteed return plan sir, Can i explain it to you?” I can sense that sense of pride in the caller’s voice clearly when they say this even though they dont know whom they are talking too. My first question to them is “Just tell me the IRR of this policy” and then starts the process of “wait sir, let me transfer the call to my senior” and then “wait sir, Let me transfer the call to the regional manager and CEO” who have no idea what is IRR!!! Finally

6# I will give you 10% of Cash back on premiums paid .

ULIPs and an endowment plans have very high commissions in the first year [See a case of miss-selling in ULIP]. So agents lure customers by giving back some part of their commissions back, in this way they get more clients and more money overall. Don’t fall in trap of this. Many agents also offer to pay your premiums for 1 yr so that you fall into the trap and take the policy.

7# Money doubling in three years

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This is again based on past performance, ask for the average rate of return over long termand anything above 15-16% should look unrealistic. Many agents tell the illustration by taking 20% or as high as 30% as return, they will show your last 5 yrs data when this has actually happened, but its not a right thing for 2 reasons. First reason is that as per IRDA they are supposed to show you illustration with 6% and 10%, nothing other than this. Ask the agent to explain why they are showing you anything other than 6% or 10%. The other reason is that 20% and 30% are not realistic returns from equity in very long run, you should not expect more than 12-15%. see this article which explains what are the realistic long term returns from Equity

8# You also get Free Insurance and Tax Benefit.

“Free”, we love this word. You can see that even I have used this word at the top of the page right hand side of this page to lure visitors to subscribe to this blog. It works in most of the cases. There is nothing called as “Free Insurance”, most of the investors do not understand how insurance works and what are the terminologies, they don’t know that there is something called as “mortality charges” which we have to pay as cost of Insurance. Apart from this agents also stress on tax saving part which is not something which is unique to those products. We have tax savings on different products anyways.

Dont forget to grab your Free Ebook by Subscribing to this blog by Email or RSS.

9# These are most bought product in the market and have good returns .

Now this is vicious circle, ULIPs are around 70-80% of the products sold by Life insurance companies these days, the reasons are simple. They are explained by agents in such a way that things looks so rosy that customers feel its a worth buying product. So agents pitch these products to other investors and then they feel “if everyone is doing it then it should be right thing“, far from the actual and real truth. Common sense is not common, so don’t do what others are doing just blindly, think about it yourself, evaluate it. You should rather be doing what very less people do. Buy Term Insurance which is not even 1-2% of policies sold  .

10# Low NAV of a NFO from mutual funds

Most of the NFO’s pay very heavy commissions to agents. This is the reason agents tell investors that they should invest in this mutual funds because they will get more units. Even Investors confuse NAV of mutual funds as share price of a company. At the end itsfund performance which should matter and not NAV number, truly speaking we should request IRDA to ban publishing NAV numbers. Some agents also lure investors saying that they should buy low NAV mutual funds because they will get more units and then more dividend as dividend is paid per unit basis. This is true but again at the end investor will not benefit as dividend is nothing but their own money.

This Article Credit Goes To Its Source Jaagoinvestor

Source link : http://www.jagoinvestor.com/2010/01/top-10-tricks-used-by-agents-for-misselling-financial-products-and-how-to-deal-with-it.html

Under Construction vs Ready to Move Property – Which one ?

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There is absolutely no confusion in saying that everyone wants to buy a house, a dream home which they can call their own. However, one big confusion among buyers is whether to buy an Under-Construction Property or a Ready to move in Property. Each of these options has its own pros and cons and it is extremely important to be aware about the advantages and disadvantages of Under construction and Ready to move properties. Lets look at them:

Negative Points of Under Construction Properties

1. Delay in project & Dispute of the Land & Permissions

If you know of any project which was delivered on the exact day that it was promised, its rare! Delay in the project for various reasons is one of the top most issue with under construction properties. On an average 2 years is the deadline given by the builders, but it gets delayed and further delayed most of the times. 2 yrs can turn out to be 4 or 5 yrs of wait in a lot of cases and this adds to the frustration of buyers.

This delay is caused mainly because of the dispute on the land, cash crunch and most of the times incomplete permissions from authorities. Builders start the construction after obtaining most of the required and most important permissions, but at times there might be few permissions which are still going on, but builders start the construction. So it becomes very important thing for a buyer to check all the required permissions and the ownership details of the lands. This is very true for small builders especially.

One important point to note is that even though the house is delayed by just 1-2 yrs and finally comes in your hand, but in a lot of cases promised amenities are given after a long period and some people are still waiting for that swimming pool which was promised in 2001 .

2. You don’t get what you see

The biggest issue, I repeat – the biggest issue of under construction properties is that you never get what you are promised or have seen as sample flat . Sample flats are built-in a way and decorated in a manner that your heart will met down and you will sell your self to grab that opportunity, and over years you will build so much expectations from your under construction house. But when you really get the possession, you will realise that a lot of things are not up to the mark and not as per the promise done. Sometimes layouts are changed & you may not like the new one.

Another issue is over promise in many things. For example – Some builders give false promises that Municipal Corporation Water Supply will be made available in the society after 3-6 months of completion of construction of society, but some builders never fulfill this problem once all the flats in the Society are sold. The builder’s objective of selling the flats is fulfilled and then he is not interested in the problems that people face. A lot of times oral promises are done on many things like cost of parking, extra facilities like swimming pool, gym etc and then they are not fulfilled. And at the end, you are in a situation where you can’t do anything. Either take it or fight a case against the builder and many hassles that come along. Hence please never agree to any oral agreements under any circumstances – Always insist on written agreements with clear delivery milestones etc. One bad experience from T. Ashok is like this

The builder did not construct shelfs and almirahs as promised. He left the house only with walls and lafts. So, I had spent more than 2 lacks for wooden works in kitchen and two bed rooms. Really that was a big burden for me apart from loan amount. So, here after anybody buying house, must ask the builder to mention all in agreements like painting, shelfs, windows, doors,etc., otherwise they may suffer like me.

3. Quality of work may be compromised

Another issue is the quality of work that gets done. The quality of the construction material used, Doors and windows fillings can be compromised with, electrical sockets and switches can be of cheap quality, plumbing can go horribly wrong and even the facilities like parking space, children playing area and other amenities might be below the mark or what you expected and when you complain about all this, there will be all sort of explanations like losses in other schemes, cash flow issues and the cost increase by builders and a new series of promises that it will be done soon. For an example watch this video experience for bad quality of construction and unkept promise by Unitech

4. Income tax claim is headache unless you get the possession certificate

I hope you knew that you can avail for tax benefits only after you get the possession of the house. Saving tax on the EMI’s is one of the big reason why many people plan their house buying, only to realise later that they never thought about this aspect. So if you are going to buy under construction property , be ready to pay rent + EMI and not getting any tax benefit unless you get the possession certificate, and incase the construction gets delayed by few months to 1-2 years, it will be frustrating.

Positive Points of Under Construction Properties

1. You start paying slowly & conveniently

The best part of Under construction properties is that it is affordable for most of the people through a home loan. When I say “affordable”, all I mean is that from payment perspective life is easy. You make a down-payment which is generally 20% of the property price and then start making the monthly EMI’s each month and this is how a lot of people are able to own the house. Later after few years , a lot of people feel comfortable as their salaries go up, but the EMI’s value is very much the same. Even if one is not taking a home loan, they can pay the money in parts as it can be construction linked payment.

2. Choices of floor or location are much wider

There are various locations where new projects come up, so the choice in terms of location or which floor you want are generally high. If you are not happy with 12th floor, you can pay more and take the 3rd floor, but in case of ready to move apartments, if 12th is available, then that’s all you have. No choice!

3. Good scope of Price Increase

Under Construction properties are generally in the outer area’s or the non-core part of the city and hence the price appreciation due to future development is good in under construction properties. However this is not true in each and every case. You still have to look at the location and future plans around that area. But the point is that compared to ready to move in apartments, under construction properties have more potential for price increase.

Negatives Points of Ready to Move Properties

1. A lot of legal work and documentation

Generally there is a lot of legal work and documentation required in case of Ready to move properties compared to Under construction, because there are no fresh documentation, but a lot of “transfer” documentation.

2. You need to arrange all the money in one shot for down payment, registration etc

In case of Ready to move in properties, all the payment has to be made upfront and all at one time. There is no stages in payment like you have in Under construction properties. So even if you are buying it on home loan, you have to pay all the down-payment, registration charges, stamp duty etc all at one go.

3. Chances of getting duped!

In case of ready to move in properties, there is a big risk of getting duped. You have to make sure that you investigate things very properly. There are cases where same property has been sold to more than 1 person. Make sure you hire a good real estate consultant or a good lawyer who can study the documents well and the fine prints.

4. Inflated Price already

The price appreciation in case of Ready to move properties is generally lower than Under Construction properties from percentage increase point of view (not absolute increase). Most probably the ready to move in properties which are much older than 5 yrs, a lot of development around them has already happened and the price appreciation has taken place for most what is deserves.

Positives Points of Ready to Move Properties

1. You buy what you see

When you buy Ready to move properties, you exactly get what you have seen. There is no chances of getting duped at least in those things which you can feel and experience. This is not in the case of Under construction properties , because you never see the actual thing , you see samples or the “projections”. It’s a good idea to talk to the people around or the neighbors about the water/electricity and other things and take their feedback.

2. Immediate relief from Rent & travelling cost

A lot of people who are paying very high rent or travelling very far for their work tend to buy the ready to move houses because they want immediate relief from the high rent or travel cost and one can get it in ready to move properties.

3. You can know what kind of people live around you

This is one big advantage of ready to move houses. You can already see who your neighbours are, what community they belong to , what income level they have and if you would like to be with them or not . In case of under construction houses , you are never sure what kind of people will be around you.

Conclusion

So the final conclusion from various experience is that if you want to buy the house from investment point of view, then buying an under construction house makes sense. However if its mostly from living purpose and you want to consume it for your own purpose, then buying a ready to move house makes more sense. Also all the pros and cons discussed can vary from case to case and the points discussed here are based on a general information and feedback

Source : http://www.jagoinvestor.com/2012/03/under-construction-vs-redy-to-move-property.html

ALL YOU NEED TO KNOW ABOUT HUF

ALL YOU NEED TO KNOW ABOUT HUF

Do you know how you can use Hindu Undivided Family (HUF) to reduce your overall tax liability? In this article I will give you tips and real life examples on how you can use HUF to save taxes legally. Before that let’s understand what HUF is.

The concept of HUF says that apart from individuals there is another separate entity called “Family” which can also have its own assets and liabilities and even regular source of income, which should be taxed separately. For example, if an ancestral residential property is rented out, then the rent arising would be considered as Family’s income and not as income of individual. In real life this rent is shown as income of one individual and he pays the tax on it, however a HUF can be formed and the rent can be shown as the whole family income (HUF) and it can be taxed separately.

Until a few years, many Indians used to keep multiple PAN cards and used to show Income under different PAN cards and used these tricks to avail the benefit of slab rates by showing themselves as different persons. This however is illegal by law and is a punishable offence as one person cannot have more than 1 PAN Card. But, one legal way of obtaining an extra PAN Card is to form an HUF. As the Income of an HUF is taxable in the hands of HUF and not in the hands of any Individuals, a separate PAN Card is issued for an HUF and the benefit of slab rates can be availed on this PAN Card.

Formation of HUF

A false impression amongst people is that HUF needs to be created whereas the truth is that an HUF comes automatically into existence at the time of marriage of an Individual and no formal action needs to be taken for the same. However, in case a person who wants to specifically register for creating an HUF, he can furnish a creation deed on a stamp paper (The Format of Creation Deed can bedownloaded from here) .As HUF is governed by the Hindu Law and not by the Income Tax Act, individuals belonging to other religions are not allowed to form HUF except Jain’s and Sikhs who can create HUF even though they are not governed by the Hindu Law. Two entities are extremely important for you to know in HUF are the coparceners and members.

Coparcener is someone who has the right to demand the share of the property of family; coparceners are generally the Karta (Main decision maker of family, usually the Father , but Manmohan Singh had 5 years ago brought an amendement which stated that Females can become Karta & there can be an all female HUF as well), then sons & daughters, grandsons and great grandsons in order of their first right. Wife of the Karta is not a coparcener or even spouse are not coparceners and hence can’t demand/ ask for any share in HUF, they are just merely members of HUF.

Example of Tax Saving by forming an HUF

As discussed above, the main advantage of an HUF derives from the fact that an extra PAN Card is issued for the HUF. We’ll explain this benefit with the help of following example.

Lets say there are 4 members in a family

• Husband – Salary 9 lacs
• Wife – Salary 7 Lacs
• 2 Children without Salary
• Additionally, one  ancestral property which fetches them an annual rent of 6 Lacs p.a

Now the Question is – In whose hands should this Rental Income of Rs. 6 Lakhs p.a. be taxed? In real life, the most sought after solution is to show the rent as income of wife or anyone who has no income or less income so that the tax liability is least. But is it the best solution? Let’s see 3 different cases here in which this additional rental income can be shown and how tax can be saved!

Option 1 – If this Rental Income is shown in the hands of the Husband.

Option 2 – If this Rental Income is shown in the hands of the Wife

As this Income is arising to the family as a whole, the Govt has also extended this option of taxing this Income in the hands of the whole Family. Although very few people in India know this fact family income can also be taxed in the hands of the whole family by forming an HUF.

Option 3 – If this Rental Income is shown in the hands of the HUF

The above 3 options clearly indicate that Option 3 is the best option as the least tax would be payable by the family if the Rental Income is taxed in the hands of the HUF. The tax saved by showing this income in the hands of the HUF is Rs. 1,18,000 (i.e. difference between “tax paid if rental income is taxed in the hands of HUF” and the “tax paid if shown in the hands of the wife which is the 2nd best alternative”)

Please Note: For the sake of simplicity, Taxes have been computed without taking into account the “Deductions available under Section 80C” and “Education Cess applicable on the Tax Payable”

Procedure to create HUF

These are the steps to create capital of a HUF.

• First one should open a bank account with the name of Hindu undivided family like “AJAY HUF” with a stamp, ID Proof and the proof of the members of the family of HUF.
• Important :- While opening a Bank Account in the name of HUF – Banks always ask for a rectangular stamp which states the name of the HUF and also the Karta who is signing it. A round stamp is not accepted as per RBI Circular. The same applies at the time of opening of bank account of Sole Proprieter as well.
• Next is to apply for PAN (Permanent Account Number) of the income tax.
• Now transfer money by gifts etc to HUF capital keeping in view the clubbing provisions and tax on gifts under Income tax act, Remember there is no Tax on gifts in kind though they may attract clubbing provisions in some cases.

3 real life tricks of saving taxes through HUF

1. Saving tax by getting gifts

One way of saving tax is by transferring the money received from strangers or family are taken as giftsin name of HUF. So if Ajay starts his HUF called “Ajay HUF” and he is getting some gifts from his father, friends or anyone else, he can ask them to give it to “Ajay HUF” and not Ajay itself. That way the gift will be treated as income/asset of HUF and taxed separately. One important point here, if some stranger is giving gift to HUF, there is a limit of Rs 50,000 on which no tax has to be paid, but actually it can go up to Rs 1.8 lacs as the taxable limit is that much, and if one also has to do investments of 1.2 lacs (total 80c limit), then one can afford to receive up to Rs 3 lacs of gifts in a financial year and there will be no tax liability at all.

2. Assign ancestral properties and wealth to HUF and invest it

If family is going to receive an ancestral property or any wealth, then it’s better to transfer it on HUF name so that whatever earnings happen in future in form of rental income or capital appreciation of assets becomes income of HUF itself and taxed in its own hands. That way the total tax liability of family can be minimized.

3. Use HUF income for expenses and Insurance for Family

As HUF enjoys separate tax benefit under sec 80C, one can use the income of HUF for buying Life & health insurance for family and the permissible deductions can be availed for tax purpose in hands of HUF, so if the total premiums for insurance requirement of family is Rs 50,000 per year, then It can go from HUF income and also the individual can exhaust his 1 lac limit separately via PPF, ELSS and other tax instruments. Also family day to day expenses can be used from HUF income and hence it will leave other members with more disposable income which one can use to service higher EMI’s if required.

Some important Points you should know about HUF

• For creating the HUF one need to get married, there is no need to have child or children for creating the HUF.
• An HUF can recieve any amount in gift from bigger HUF’s (HUF of Father, HUF of Grandfather) or any gifts received by the members of HUF (birthday, marriage, etc.) can be treated as assets of HUF , but stranger can gift HUF, not more than 50000 rupees.
• Daughter also continues to be a Coparcener after her marriage of that family whether she also will be a member of HUF of her husband. So that way daughters can be co-parancers in two HUF’s 
• HUF can pay remuneration to the KARTA of family for the interest and expenditure to run the family business.

Be cautious with HUF creation

While all the above points excites people on opening a HUF account immediately and start taking tax benefit, there are some caveats and one has to be little careful. Remember that HUF is a separate entity and represents the whole Family. So once some assets is assigned to HUF, then it becomes part of HUF only and one can be suddenly take money from HUF for personal purpose . If other co-parceners of HUF demand the partition of HUF only then one can get his/her share of the HUF. Otherwise it will not break. Also for taxation point, a lot of people mislead the tax department buy using fake HUF transactions and therefore, HUF is looked with high degree of scepticism.

If the HUF is not formed properly and if the assets are income are fudged for evading tax, it can get you in trouble, therefore it’s highly advisable to hire a good CA and create your HUF in the best possible manner with right advice. There is no harm in paying 10,000-12,000 to a CA if HUF can give you 5-10 times tax savings. It would be a great investment, not an expense!

HUF property cant be mentioned in the WILL

Though HUF is very useful tool but one has to use it very judiciously and thoughtfully. Don’t look for tax benefits only , but practical problems also. Be aware that you cannot make a will out of HUF property. Once transferred to HUF, the assets /property becomes of HUF and you no longer have any individual right on it. To explain with example -

“A”, who has 2 daughters and a son.He long back ago purchased a house in the name of HUF and put that house on rent, so that the Rental income comes to HUF and will not be be added in his or his spouses’s income . But now , he ‘s retired and wants that this property should be transferred to his son after his demise. But this is not possible as that property belongs to HUF. He can’t even write a WILL for HUF property and with the huge rise in Real estate prices, none of daughter is ready to leave her share in it.

Who should actually go for HUF

HUF will be extremely efficient for those people who have a higher income and high saving rate and some form of ancestral assets which can be marked as “Family Assets”. Evaluate if HUF can really give you that kind of tax advantage or not for people who do not have high salary or who do not have a big enough family. So make sure you can get the maximum out of the HUF and understand the limitations of opening HUF before you go for it

Source: http://www.jagoinvestor.com/2011/10/huf-creation-and-saving-tax.html

“I’M FROM IRDA. YOU’LL GET 1.8 LAKH BONUS IF YOU buy A NEW POLICY”

Posing as employees of the regulator or insurance companies, fraudsters are luring policyholders with offers of bonus if they buy a new plan. Here’s how they take gullible policyholders for a ride.

    Ten seconds is all that Vijay Sharma gives a telemarketeer. But since the call was from the insurance regulator’s office, he didn’t disconnect it abruptly. Instead, he put everything else on hold and listened intently. “I am calling from the service management department of the Irda. You are losing money on your Ulips because the bonus that accrued on them has gone to the agent,” the caller explained. “If you want, it can be refunded to your account.” 

    Sharma is usually circumspect about such offers and SMS marketing. However, the caller knew his name, phone number, address and full details of the plans that the Delhi-based sales executive had bought in the past 3-4 years. So, there was very little reason to doubt his words. Besides, he had nothing to lose. 

    Or so he thought. Sharma’s suspicions were aroused when the caller spelled out the terms of the deal. “Your code has been activated and if you link your existing policies with that code, the accrued bonus will be credited to your account directly. To do that, you have to buy a policy from any company through us,” he went on.
    Sharma was lucky not to fall for the fraudster’s bait. Mumbai-based Ajit Majhi did and got

trapped. In February, he was promised a similar deal by someone posing as an official of an insurance company. “She told me that to claim the bonus amount of 84,000, I would have to take another policy of 25,000 from the company,” he said in an angry complaint to a consumer forum. 

    He bought the policy, but far from getting a bonus, his gullibility encouraged the fraudster to go for a bigger kill. She kept fobbing him off with excuses and then announced that the bonus had been enhanced to 1.85 lakh, but that he would have to buy another policy of 50,000. “I told her I couldn’t afford to buy another policy and asked her to give me only the original bonus amount of 84,000,” Majhi said. 

    The fraudster was not finished with the milking. For the original bonus too he had to buy another policy. “I told her I had no money, but she advised me to borrow from friends and repay them when I get the bonus money,” says Majhi. Eventually, he bought another policy of 25,000 in his wife’s name. 

    By doing so, he only dug a deeper hole for himself. He hasn’t got the money yet because there was no such bonus coming his way in the first place. Now he has two insurance policies he didn’t need. “Paying an annual premium of 50,000 will be a burden for me,” he says. Before Majhi fell into the trap, the fraudster was calling him 6-7 times a day. Now, her phone is constantly switched off. 

    A senior manager in the customer care department of the company says that after the first policy was sold to Majhi, the company made a welcome call and explained the features of the policy in detail. Majhi admits he was told that there was no bonus offer. “When I called the adviser, she told me that customer care would not know about the bonus details and it would be credited to my account shortly,” he says. 

    Insurance companies are now warning their customers not to fall for such frauds.

What should policyholders do?
Don’t go by verbal promises: Never believe an offer till you see it in black and white. Also, make sure that the brochure or table shown to you is authorised by the company. Agents often get promotional material printed with promises of lofty returns. 

Check credentials of agent: Make sure you see the seller in person. Check his identity card and other details. This is a litmus test: if he refuses, he is probably not authorised to sell. 

Don’t buy in a hurry: Anybody who pushes you to buy a policy within a deadline is probably mis-selling. Don’t close the deal in the first or even the second meeting with the broker. Ask for at least 7-10 days to study the plan and compare its features. 

Take a second opinion: Tell the agent you will be discussing the plan with another consultant before deciding. Fraudsters often ask the victim not to discuss the plan with anybody else. 

Use freelook period: If the policy document does not mention the promised benefits, return the policy within the 15-day freelook period. Agents try and buy time till 15 days are over.

Source: ET Wealth 23th Jully 2012

OPT FOR FLEXI HOME LOANS AND MORE ON SURPLUS FUNDS

How savings account-linked smart housing loans can take care of your emergency needs as well as bring down your loan liability

Home buyers in India have little say in the interest rates on their loans. A high credit score, healthy repayment record, bigger pay package and so on do not fetch any discount in interest rates. They hinge primarily on the overall interest rate scenario in the economy. That is why products with flexible interest payable are a big innovation in the home loan space. Although they are nowhere as popular as the regular home loans, banks such as SBI, Citibank, Standard Chartered, HSBC, among others, offer loans where the interest payable can be flexible. 

THE WORKINGS
These products – called flexi or smart loans – come with some variations, but they work like ‘sweep-in, sweep-out’ deposits. Now, such deposit accounts automatically transfer funds that cross the threshold limit in your savings account into a fixed deposit. This helps you take care of your emergency needs and earn higher-than-savings-account return at the same time. ‘Flexi’ home loans use a similar mechanism, although with a slight difference. In this case, your loan is usually linked to a current account. “The loan works like an overdraft account where the interest is charged on the outstanding balance on a daily basis. You have the option of withdrawing the unused amount as per the limit sanctioned,” says VN Kulkarni, chief credit counsellor with the Bank of India-backed Abhay Credit Counselling Centre. “The broad concept used here is that of the weighted average, where your principal outstanding is adjusted for the balance kept in the linked current account,” adds Kapil Narang, COO, Ameriprise India, a financial planning firm. It could especially benefit borrowers who may have bought an under-construction property, with payments made to the builder being linked to the stage of construction. Here, you would be paying relatively small amounts in installments. If you have a flexiloan, you can withdraw funds only to the extent required and thus save on the interest outgo. Remember, however, that features could vary as per the bank you may have chosen. 

COUNT YOUR BENEFITS
Now, say, you’ve opted for a regular home loan. In this case, your salary would be credited to a savings bank account that will fetch you a return of 4-7%. The amount required for your EMI payment would be transferred to your loan account and the balance would continue to earn the savings bank rate. “In a flexi home loan, the amount lying in your home loan account will be factored in, while interest will be charged only on the outstanding balance on a daily basis. If you have parked your entire salary on the first of the month and have not withdrawn any amount say till the 10th, you will save interest on the loan to that extent,” explains Kulkarni. “In effect, your savings will fetch interest at the rate which you are paying on your home loan. Your return will be around 10.5-11 %, depending on the rate being charged to you. This will enable you to bring down your interest cost and ultimately the repayment period.” This feature could also spur you to use your income judiciously. You can look at parking as much money as you can in the linked current account to reduce the interest burden. Consequently, your total repayment period, too, will shrink sooner. With a regular home loan, on the other hand, a tendency to splurge the amount remaining after paying EMIs sets in. 

WATCH OUT FOR THE PITFALLS
“The rate of interest is usually higher than that of regular home loans,” points out Madan Mohan, independent loan counselor. “Also, borrowers should enquire about the processing charges on such credit facilities. There could be other services charges, too, which a regular home loan does not levy.” Therefore, study the terms and conditions carefully. This apart, you should go for this facility only if you are sure about making optimum use of its features. Remember, this facility will work to your advantage only if you diligently park your surplus funds into the account regularly.

 

GAUGE ITS SUITABILITY
Though the concept may seem attractive, it may not fit into the requirements of all borrowers. “The scheme will be best suited for the double income category, where both husband and the wife have a sufficient disposable income,” says Kulkarni. They can make good use of their surplus money, which otherwise would have been parked in lowyielding savings bank account. “It is also suitable for those who earn certain incentives on a regular basis and can afford to park such extra income in a flexi-scheme. Likewise, all those who find that they can pay more than the stipulated EMI every month could also consider such facilities,” he adds.

Source – Preeti Kulkarni - The Economic Times – 20/07/2012

10 Ways To Create Passive Income

10 Ways To Create Passive Income

lets go a little deeper  and learn ways by which you can create passive income in your life. I could see a lot of you are interested in creating passive income, so now let’s move from just being interested to being committed to creating passive income. To take a step forward, let’s do some brainstorming on how passive income can be created. Don’t just read but really share new ideas that you have in your mind.

The rich get richer. Not only because they have surpluses with which to invest, but because of the overriding emotional release they experience from having wealth

- Stuart Wilde

I really want you to take a day off from your routine life and name the day as “passive income day” of your life. On this day you won’t touch upon other areas of your life you will only and only think about creating passive income. Than the next step is creating a special kind of account in your life “Easy earned money account”, in this account you will accumulate residual income, it should not come from real work and no active labor. Get this very clearly all the money is not always hard earned; you don’t have to sweat under the sun always. Don’t have only one account in your life which is “Hard earned money”.

Here are the 10 ways of creating passive income in life: (Do not discard ideas instead start thinking how the ideas can get into your life)

Real Estate- You can create rental income with the help of real estate if you have two properties the rent you get from one can help you pay the EMI of other property. You can give your office space on rent or your house on rent. You can create boys/girls hostel if you have more than 1 flat. Some even create small office units in one big flat and give it on rent to people who do not have frequent visitors. Make sure that you are selecting right people and paper work is properly done.

ATM Centre- This is one of the best ways of creating passive income. Generally in a building the space which is below the stairs gets sold at lower rate and it is an ideal place for ATM Centre. Banks pay around 50k per month to ATM centre owners but again it depends on the location and the area.

Parking lots- Parking is one of the biggest problems everyone is facing. Our client has created passive income from parking space that he owns in his building. Also I know someone who owns open space next to a multiplex; it is given on rent to multiplex for parking purpose. This may not be possible for all but as I said do not discard ideas from your life.

Websites & Blogs- The machine age is over and we are now into information age where no one cares where your office or how many people staff you have, with the help of internet from a remote place you can create a lot. Always remember that you have one special thing in you which only you can give to the world. Creating a blog or a website is free (or not much money required) and is one of the best ways of creating passive income. You can do this as a part time activity and start creating additional income in your life. This is a slow process and at times takes time for you to attract people.

Advertisement hording- If your building is on main road with proper visibility you can put some banners or hording on the terrace of your building or even in garden or open space of building. If you own terrace rights the money will come to you otherwise it goes to society kitty as passive income. Some permission & authorization might be required to take this step.

Interest income: This is one of the simplest ways of creating passive income. You can either create interest income through bank products or by offering loans to people.

Dividends- You can either receive dividends through Stocks or mutual fund schemes. This income depends on the performance of stock or fund and depends on market conditions.

Royalty Income- Your talent can definitely help you to create passive. You can put something in a book that you would like to share with the world and you can create royalty income in your life. Most people are disconnected with their true talent which is really very important. You really do not need a publisher you can either self-publish it or get in touch with websites who promote new writers.

Referral business model- If you are into business you can create a referral business model where your overall strength increases, business expands and you also get an opportunity to create passive income in life.

Buy cars and give on rent to companies- Many BPO’s and companies hire vehicles on contract. Some people provide vehicles in the company that they are working and create passive income out of it. Here you need to be careful about the terms and conditions and driver who will be handling your vehicle on daily basis.

If you do not have passive income it means you have yet not created it as a project. How many attempts in the past you made and failed at creating passive income, may be none. You are unable to create passive income because you are glued to the idea of only creating active income in life.

Come on make a list of possibilities, make list of people who can help you, see what leverage you can get in creating passive income, see what best you can do with the resources you already have, what talents you have in you that can help you create passive income or TAKE PROFESSIONAL HELP. The biggest opportunities are always hiding in the biggest problems. So if you can’t find opportunities find problems for which you can provide solutions to the world

Creating passive income has to do a lot with your mindset. You will have to step beyond something called farmer’s mindset. Yes farmers do not make money till they do not step out of their house and touch their land, they have to do a lot of hard work to be able to earn from crop that grows in their farm .If you want to find additional stream of income you can help enough people in enough ways. Remember what you are seeking in life is seeking you

Source: Jagoinvestor