(The following is a transcription from a video I recorded. Please excuse any typos or errors.)
In this article, we’re going to talk about whether or not there’s a Stock Market crash coming soon.
And just like anyone else, I don’t know. I have my opinions and we’re going to talk a little bit about those. I’ll also give some of the reasons, three reasons, why I think we are probably going to be seeing a market crash soon. Considerably bigger than what we saw in February.
I hope that I’m wrong. I really do hope that I’m wrong. I’m not trying to be a doom and gloomer. I’m not trying to be any of those things, but there’s some writing on the wall and I think it’s naive to pretend like it’s not there. And, I don’t want to do that and that’s kind of where we are with everything.
If you would like to watch this Stock Market discussion, you can view it here:
First, I’ll talk about the three different things that all clicked for me. Where I’m going to start preparing for a Stock Market crash because I think the likelihood of this happening is getting higher and higher.
And then after we discuss the three reasons why, we’re going to discuss the five things that I’m doing to actually prepare for it.
The first reason on this list is a New York Times article I read, titled “Worst Economy in a Decade: What’s Next? Worst in our Lifetime.” And I’m not an economist by any stretch of the imagination, but you can kind of see what’s going on here. Long story short, the Gross Domestic Product (GDP), and this in the first quarter of this year, dropped by 4.8%.
And there’s a couple of different things here. What that means for us, is that this is the first decline in GDP in the U.S. since 2014. And it’s the worst quarterly contraction since 2008 when the country was in a deep recession.
According to the writer in this article, he then interviewed a chief economist for a credit insurance company. In which he said, “The worst is yet to come.” Because the first quarter ended on March 31st (when a lot of the actual problems that have happened from this whole epidemic or pandemic), and then April 1st is when the second quarter started. Then all the bad stuff really started kicking into gear in April. And so what we have going on is most likely the second quarter of this year is going to be way, way worse than this first quarter in terms of GDP.
This guy goes on to say that this is going to be the worst in our lifetime. He said, “They are going to be the worst in the post World War Two era.” And besides that, there’s a couple other things they talk about here. Consumer spending fell by 7.6%. And again, this is the first quarter. It’s going to be way, way worse. On top of that, 30% of auto sales were down. Just so many different things.
But, the GDP alone is not super solid reason to base the potential of a Stock Market crash. That in and of itself doesn’t make me think, “All right, there’s a problem.” It’s just the GDP.
But this Business Insider article, pulling that in with the above article, is really, really interesting to me.
I’ve been a student of Warren Buffett for a long, long time. Warren has this ratio that he uses. Which is basically, probably the best, the single best measure of where valuations for the market as a whole come from. He said, “This ratio is probably the one thing if you’re going to look at anything to see whether the market is puffed up and ready to collapse, this is the one thing you should look at.”
Warren also said that, “It’s a very strong warning signal when the indicator peaked.” And he said this right before the “.com” burst in the late 90s and what we had happened then.
Let me tell you about this metric, it’s called Buffett Indicator. They’ve named it after Warren because he talks about this metric all the time. He says, “It takes a combined market capitalizations of a country’s publicly traded stocks and then divides it by the GDP.”
We were just talking about the GDP in the above article. Which dropped by 4.8% in quarter one, which is likely to go way beyond in quarter two. So with that ratio, he says just before the “.com” bubble burst in 2000, it’s surged to 118% for that ratio. And so that was the big warning sign that something was going to come.
In 2008, right before the financial crisis (the big recession we had at that point), it went over 100%. And as of quarter one of this year, with that GDP dropping 4.8%, it is at 180%.
So, in 2000, or right before the “.com” bubble burst in 2000, it was at 118% and now it’s at 180%! So yeah, it’s just way, way higher than it should ever be. And it’s just a very big warning sign of things to come.
The Buffett Indicator
Here’s a chart to show you The Buffett Indicator. It shows the “.com” burst of 2000. As well as the recession of 2008. And just look where we are right now in 2020.
After 2020’s quarter two, when all this stuff comes out at the end of June (when we see quarter two results), I think this indicator is going to be way up there. If it hasn’t crashed already.
And then you think about the reality of what this all looks like. In our town, we’re starting to open the doors up a little bit and people are starting to go out again. They’ve opened up restaurants, but there’s still social distancing in restaurants and people are wearing masks.
The point is the transition out of this, and I think we all know this, is not a flip a switch and now we’re all done back to normal. This is a long drawn out process that I think is going to continue. It’s just going to take a while.
I have a lot of friends, being in Nashville, who are musicians (touring musicians). And they’re like, “I can’t imagine we’re going to play a show this year.” How is a concert going to happen with social distancing? What does that look like?
I think we’re all trying to figure out optimistically what church is going to look like, hopefully soon. But a concert? When is that going to happen again? Anyway, point is that this is not going to be something we’re just going to fly back out of. And as a result, all of these things, all of these problems are just going to spread and just take a while to come back.
On top of that we’ve added, I think, $2 or $3 trillion to our national debt. So what does that mean? There’s so many brilliant economists who can talk for hours about this and that’s fine. I have people emailing me all the time who have massive overspending problems. They are adding $1000s a month to their credit cards and are just way upside down. So how do you get out of this? Where do you think this is going to end? But if you apply just a little bit of common sense to this, we can see where this may be going.
Just imagine yourself, and don’t think just about the right now, but look down the road six months or even two years. Where do you think this is going if you continue in this pattern with this habit? Anyone can see this is not going to end well. There’s going to be a crisis here. Something bad is going to happen, and that’s where we are as a country with our national debt. And the debt was huge before, and it’s just gotten so much bigger and it’s just going to continue to get bigger.
On YouTube, my wife Linda and I discussed a $2000 a month stimulus package that has been proposed. It would be $2000 a month per person over the age of 16 for six months with the option to extend for 12 months. So literally every American over the age of 16 will get $24,000 given to them by the government. This probably won’t happen. But the point is that our government is just going to keep trying to do whatever they can do to solve this problem.
I’m not saying that we shouldn’t try to fix it, but the problem is … It’s a BIG problem. And, I don’t know the answer and I don’t have the solution. All I’m saying is it’s becoming easier and easier to see this and realize that something is going to happen, something has to give.
How I’m Preparing
For me personally, I have concluded that I’m going to start doing a little preparing for what could be a bad crash. Who knows, maybe as bad as the Great Depression. What would that look like?
I’m asking that question, not because I want to sit and be negative and focus on the negativity, but I also don’t want to be naive. I have grandparents who lived through the Great Depression. What did they learn that we know nothing about, or my generation knows nothing about? That would be good for me to be thinking about at this point.
And I would rather be thinking about it now than thinking about it a week after it happens, and try to think “How can I prepare for that?” So with all that said, let’s talk about five different things that I’m doing to kind of prepare a little bit.
One of the things I’ve done is that I’ve sold off a lot of our stocks, and the reason being is because I’m convinced more and more that selling off your stocks all the time just because you think something might happen and trying to time the market is just generally a bad idea. Most people will suggest that and I agree. It’s not a great idea to try to time the market. But, on the other hand, I’m becoming more and more convinced that the odds of something bad happening sooner rather than later are pretty high and I’m willing to take the risk of missing out on the gains as we come back out of this thing, to be better positioned to reinvest or survive, if need be, when that situation happens.
Now, we’ve held onto a few different stocks that made sense to me. One of which was Amazon. I think Amazon is going to come out of this looking pretty good. It seems like everybody’s complaining about how long it’s taken to get their orders from them, but the reality is that they have met the demand really, really well.
And a lot of people would be in really big trouble if it weren’t for Amazon. Not to mention that they just hired 175,000 new people. So they’re supplying work to such a large percentage of our country as well.
Someone was just asking about Amazon earnings. Bezos did come out to the shareholders, and said, “We’re basically going to reinvest every ounce, every dollar of profit that we got,” or something like that. I forgot what he said exactly.
So shareholders might not be happy and the stock price might come down for a little bit, but I think long term, which is exactly how Bezos thinks. He went like 15 or 20 years without making a profit because they just continually invent reinvested, and so he thinks very long term. And I think long term, it still makes a lot of sense.
Another thing I’m doing is I’m building up our savings. If I had debt that I was paying off, that would be something that I would be thinking a good bit about as well. But I would be even more concerned about having a good, solid emergency fund built up. And so what we’re doing is with some of this money that’s coming, this stimulus check. We are going to use some of it, but a lot of it’s definitely going to savings just to continue to build up that buffer. I just want to be as well positioned as we can be for something that may happen.
Another thing that I have been doing, or I’m not stopping doing, is buying a little bit of cryptocurrency. Which might sound weird, but I think it’s just interesting. It’s a little bit of a gamble, but I think it’s a little bit of a hedge.
This is what my thinking is, that it’s a little bit of a hedge against what’s going on. And if we have a really bad Stock Market crash, where whole currencies are just clobbered and with the United States dollar just continuing to give out all this money, the power of the dollar is just not going to be nearly as strong. And with cryptocurrency just being an independent currency that’s not attached to any one country.
It’ll be interesting to see. Cryptocurrency fared fairly well through this thing. It definitely went down with the market, but some of what I was reading was that that was actually because a lot of institutional investors like mutual fund managers and things like that were selling off all their positions in their cryptocurrency as soon as all that happened.
I have no idea what’s going to happen, but this is one thing that we’re just continuing to do a little bit, purchasing cryptocurrency.
Another thing we’re doing, is stocking up on food. And not in a hoarder way, or filling our entire closets in our bedroom with canned goods. But just buying food that’s on sale, shelf stable food that’s on sale, is just one of the best investments that you can make. You know what I mean?
Food is something that you’re going to buy anyway, and if you can get it for 25%, 50% off when you buy a bunch of it on sale, why not? And the reality is that buying when you’re not in a time of crisis and just continuing to buy a little bit more than you need to stock up your shelves, that’s completely fine. But if as soon as the crisis hits you run to the store and clean out all the toilet paper then you’re a bad guy and everybody hates you.
I think the smart thing to do is, in a time of peace when there’s not a problem (like right now), just continue to buy a little bit extra than what you need each time. Or if something’s on sale, really stock up. We have a deep freezer so we filled that up with a lot of meat and things that can last for a long time and we’ll try to get it on sale. And it’s just, in general, a good investment.
The reality is, we learned a lot from this pandemic that we’ve gone through the last couple of months. Just seeing a little bit of a market, I wouldn’t call it a crash but just a hiccup, a little bit of a market contraction and problem. And just learning everything that we’ve learned from this, we got to see how society responded. Toilet paper apparently is the answer (so buy your paper now that it’s back on the shelves), but seeing that and seeing how people respond and what are the in demand items.
It’s just been really enlightening, and it’s a good educational thing for us to prepare for what may be to come in the future. So those are the practical things.
I don’t like being a doom and gloom type person. I don’t like talking about the negative as I’m a very optimistic person. But I think the most important thing and the thing that we should be talking about and focusing on the most, because, is we need to get in The Word more.
We need to be in the Bible. This is the thing that’s going to strengthen us and being strong for situations like this. Being strong in The Word, being strong in Christ, is the thing that we need to be able to handle these situations. Whatever the thing is, regardless of whether it’s our own personal crises because we lost our job or a big, broad economic one, that’s affecting everyone, the best thing that we can be doing is being strong in the Lord.
The more that we get into The Word, the stronger that we’re going to be and the better we’re going to be able to handle this. I want to be like Jesus when he was asleep in the boat in the middle of a hurricane and all the apostles are freaking out saying, “We’re going to die, we’re going to die,” and Jesus was asleep.
What would it look like to have that much confidence and that much trust in the Lord? Regardless of what’s going on, we can be at rest and we can be taking a nap in the midst of the storm. You know what I mean? For me personally, that’s where I want to be. And so that’s why I’m really doubling up my Word intake and really trying to, most importantly, get strong in The Word.
So we mentioned some of the practical things we can do to prepare, but to be honest, if I’m not solid in the Lord, it just doesn’t matter. All that stuff just does not matter. I would so much rather have none of the practical basis covered but be in a really solid position spiritually to kind of be able to weather those storms.
Liveops Is Hiring 10,000 Remote Customer Service, Sales Reps
Over the course of three months, customer-service outsourcing company Liveops is filling 10,000 part- and full-time independent contractor openings in 35 states and Washington, D.C. Positions are immediately available.
“As a Liveops agent, you can work when and where it best fits your personal schedule,” CEO Greg Hanover said in an announcement, noting that the openings are a good opportunity for those who aren’t ready to return to offices or storefronts amid the pandemic.
The hiring initiative focuses on two key remote positions: customer service agent and a licensed insurance sales agent.
To meet basic qualifications, you should have:
- Experience handling inbound calls
- At least one year of customer service experience
- Computer and typing skills
- English fluency
As a licensed insurance agent, you’re also required to have life and health insurance producer licenses in at least three states that Liveops operates.
Both positions are available in Alabama, Arkansas, Arizona, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Michigan, Minnesota, Missouri, Mississippi, Montana, Nebraska, New Mexico, Nevada, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Virginia, West Virginia, Wyoming and Washington, D.C.
For the daytime positions, Liveops recommends you schedule at least 15 hours per week, between 8 a.m. and 10 p.m. Eastern on weekdays and between 9 a.m. and 6 p.m. Eastern on Saturdays.
Liveops pays a per-minute rate of talk time plus applicable commissions and incentives. The base per-minute rate for the customer service agent is 25 cents (potentially $15 an hour). For the licensed insurance agent, the per-minute rate is 30 cents (potentially $18 an hour) plus a $7 sales commission per call.
According to self-reported earnings on Glassdoor, Liveops agents tend to earn between $9 and $16 an hour, with a most commonly reported hourly rate of $14.
As an independent contractor, you’re expected to have your own equipment ready to go, including a telephone and laptop computer with a hard-wired internet connection. Your set-up must meet certain home-office requirements.
Still on the fence? Have any burning questions? Before you apply, you can talk directly with one of Liveops’ talent acquisition specialists at a live-streamed information session. The company holds the events twice a week: Mondays at 3 p.m. Eastern and Wednesdays at 6 p.m. Eastern.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
Best Interest Rates on Cash – June 2020
Another month of slight rate drops, although bank accounts can still beat out Treasury bonds and/or brokerage cash sweep options by a significant margin.
Here’s my monthly roundup of the best interest rates on cash for June 2020, roughly sorted from shortest to longest maturities. I track these rates because I keep 12 months of expenses as a cash cushion and also invest in longer-term CDs (often at lesser-known credit unions) when they yield more than bonds. Check out my Ultimate Rate-Chaser Calculator to see how much extra interest you’d earn by moving money between accounts. Rates listed are available to everyone nationwide. Rates checked as of 6/2/2020.
High-yield savings accounts
While the huge megabanks make huge profits while paying you 0.01% APY, it’s easy to open a new “piggy-back” savings account and simply move some funds over from your existing checking account. The interest rates on savings accounts can drop at any time, so I list the top rates as well as competitive rates from banks with a history of competitive rates. Some banks will bait you with a temporary top rate and then lower the rates in the hopes that you are too lazy to leave.
- Patriot Bank has the top rate at the moment at 1.75% APY, guaranteed until 7/31/20. I wouldn’t count on anything after that, as nearly every place else is below that with most likely headed back to the ~1% APY range. There are several other established high-yield savings accounts at above 1% APY for now.
Short-term guaranteed rates (1 year and under)
A common question is what to do with a big pile of cash that you’re waiting to deploy shortly (just sold your house, just sold your business, legal settlement, inheritance). My usual advice is to keep things simple and take your time. If not a savings account, then put it in a flexible short-term CD under the FDIC limits until you have a plan.
- No Penalty CDs offer a fixed interest rate that can never go down, but you can still take out your money (once) without any fees if you want to use it elsewhere. Marcus has a 7-month No Penalty CD at 1.20% APY with a $500 minimum deposit. Ally Bank has a 11-month No Penalty CD at 1.20% APY with a $25,000 minimum deposit. CIT Bank has a 11-month No Penalty CD at 1.15% APY with a $1,000 minimum deposit. You may wish to open multiple CDs in smaller increments for more flexibility.
- Lafayette Federal Credit Union has a 12-month CD at 1.61% APY ($500 min). Early withdrawal penalty is 180 days of interest. Anyone can join via partner organization for one-time $10 fee. Note that you will have to park $50 in a share savings account while a member.
Money market mutual funds + Ultra-short bond ETFs
If you like to keep cash in a brokerage account, beware that many brokers pay out very little interest on their default cash sweep funds (and keep the difference for themselves). The following money market and ultra-short bond funds are NOT FDIC-insured and thus come with a possibility of principal loss, but may be a good option if you have idle cash and cheap/free commissions.
- Vanguard Prime Money Market Fund currently pays an 0.32% SEC yield. The default sweep option is the Vanguard Federal Money Market Fund which has an SEC yield of 0.20%. You can manually move the money over to Prime if you meet the $3,000 minimum investment.
- Vanguard Ultra-Short-Term Bond Fund currently pays 1.61% SEC yield ($3,000 min) and 1.71% SEC Yield ($50,000 min). The average duration is ~1 year, so there is more interest rate risk.
- The PIMCO Enhanced Short Maturity Active Bond ETF (MINT) has a 1.87% SEC yield and the iShares Short Maturity Bond ETF (NEAR) has a 1.83% SEC yield while holding a portfolio of investment-grade bonds with an average duration of ~6 months. Note that there was a slight drop in net asset value during the recent market stress.
Treasury Bills and Ultra-short Treasury ETFs
Another option is to buy individual Treasury bills which come in a variety of maturities from 4-weeks to 52-weeks. You can also invest in ETFs that hold a rotating basket of short-term Treasury Bills for you, while charging a small management fee for doing so. T-bill interest is exempt from state and local income taxes. Right now, this section probably isn’t very interesting as T-Bills are yielding close to zero!
- You can build your own T-Bill ladder at TreasuryDirect.gov or via a brokerage account with a bond desk like Vanguard and Fidelity. Here are the current Treasury Bill rates. As of 6/2/2020, a new 4-week T-Bill had the equivalent of 0.12% annualized interest and a 52-week T-Bill had the equivalent of 0.17% annualized interest.
- The Goldman Sachs Access Treasury 0-1 Year ETF (GBIL) has a 0.57% SEC yield and the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has a -.04% (!) SEC yield. GBIL appears to have a slightly longer average maturity than BIL. Expect that GBIL yield to drop significantly as it is updated.
US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. There are annual purchase limits. If you redeem them within 5 years there is a penalty of the last 3 months of interest.
- “I Bonds” bought between May 2020 and October 2020 will earn a 1.06% rate for the first six months. The rate of the subsequent 6-month period will be based on inflation again. More info here.
- In mid-October 2020, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.
Prepaid Cards with Attached Savings Accounts
A small subset of prepaid debit cards have an “attached” FDIC-insured savings account with exceptionally high interest rates. The negatives are that balances are capped, and there are many fees that you must be careful to avoid (lest they eat up your interest). Some folks don’t mind the extra work and attention required, while others do. There is a long list of previous offers that have already disappeared with little notice. I don’t personally recommend nor use any of these anymore.
- The only notable card left in this category is Mango Money at 6% APY on up to $2,500, but there are many hoops to jump through. Requirements include $1,500+ in “signature” purchases and a minimum balance of $25.00 at the end of the month.
Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with unique risks. You have to jump through certain hoops, and if you make a mistake you won’t earn any interest for that month. Some folks don’t mind the extra work and attention required, while others do. Rates can also drop to near-zero quickly, leaving a “bait-and-switch” feeling. I don’t use any of these anymore.
- Consumers Credit Union Free Rewards Checking (my review) still offers up to 4.09% APY on balances up to $10,000 if you make $500+ in ACH deposits, 12 debit card “signature” purchases, and spend $1,000 on their credit card each month. The Bank of Denver has a Free Kasasa Cash Checking offering 3% APY on balances up to $25,000 if you make 12 debit card “signature” purchases and at least 1 ACH credit or debit transaction per statement cycle. If you meet those qualifications, you can also link a savings account that pays 2% APY on up to $50k. Thanks to reader Bill for the tip. Find a locally-restricted rewards checking account at DepositAccounts.
Certificates of deposit (greater than 1 year)
CDs offer higher rates, but come with an early withdrawal penalty. By finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider building a CD ladder of different maturity lengths (ex. 1/2/3/4/5-years) such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account. When one CD matures, use that money to buy another 5-year CD to keep the ladder going. Some CDs also offer “add-ons” where you can deposit more funds if rates drop.
- Lafayette Federal Credit Union has a 5-year certificate at 2.02% APY ($500 min). Beware that the early withdrawal penalty is 600 days of interest! Anyone can join via partner organization for one-time $10 fee. Note that you will have to park $50 in a share savings account while a member.
- Pen Air Federal Credit Union has a 5-year certificate now at 1.85% APY ($500 minimum). Early withdrawal penalty is 180 days of interest. Their other terms are competitive (relatively), if you want build a CD ladder. Anyone can join this credit union via partner organization ($3 one-time fee).
- You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. You may need an account to see the rates. These “brokered CDs” offer FDIC insurance and easy laddering, but they don’t come with predictable early withdrawal penalties. Vanguard has a 5-year at 1.05% APY right now. Be wary of higher rates from callable CDs listed by Fidelity.
I’d use these with caution due to increased interest rate risk, but I still track them to see the rest of the current yield curve.
- Willing to lock up your money for 10 years? You can buy long-term certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance, but they don’t come with predictable early withdrawal penalties. Watch out for higher rates from callable CDs from Fidelity.
- How about two decades? Series EE Savings Bonds are not indexed to inflation, but they have a unique guarantee that the value will double in value in 20 years, which equals a guaranteed return of 3.5% a year. However, if you don’t hold for that long, you’ll be stuck with the normal rate which is quite low (currently a sad 0.10% rate). I view this as a huge early withdrawal penalty. But if holding for 20 years isn’t an issue, it can also serve as a hedge against prolonged deflation during that time. As of 6/2/2020, the 20-year Treasury Bond rate was 1.24%.
All rates were checked as of 6/2/2020.
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Housing Loan Terminology Decoded
If you are in the market, looking out for a home loan, you may be having a hard time understanding the complicated home loan terms—especially if you are new in the market. To help you make an informed decision with a clear mindset, here are some of the key terminologies associated with a home loan.
1. Partial Disbursement
This refers to the case when the loan amount is released by the lender in stages. Such a case occurs when the property for which the loan is availed is under construction. [Read Also: Home Construction Loan]
2. Full Disbursement
This refers to the case when the loan provider disburses the full loan amount at one go.
3. Equated Monthly Installment (EMI)
This is the amount to be paid by the borrower every month, towards repayment of the availed home loan. EMI amount is the combination of principal amount and the applicable rate of interest.
In case partial disbursement of a loan, only monthly interest payments are made on the amount disbursed, before the actual EMIs begin. Such a payment is called Pre-EMI. [Check Also: Home loan EMI Calculator]
It is the difference between the maximum loan amount offered by the lender and the actual market value of the property. In other words, Margin may also be understood as the down payment to be made by the borrower.
6. Balance Transfer/Refinance
It is a special facility offered to existing home loan borrowers, who wish to move their home loan account to a new lender and pay off the outstanding amount with the proceeds from a new loan.
Check Also: Home Loan Balance Transfer
7. Prepayment Penalty/Charges
This is the additional amount to be paid by the borrower while making a prepayment. It is important to note that there are no prepayment charges applicable to individual borrowers. However, standard charges, as prescribed by the lender, will be applicable to non-individual borrowers.
8. Loan to value ratio (LTV)
This is the ratio of the maximum loan amount offered by the lender to the actual market value of the property.
9. Credit Score/CIBIL Score
This score represents the evaluation of a borrower’s ability to repay the loan. The score is primarily based on the credit report and other information sourced from various credit bureaus.
10. Pre-Approved Property
Some lending institutions already have a list of pre-approved properties from authentic, trustworthy builders that are legally verified and evaluated on various parameters. Choosing a pre-approved property allows the buyer to stay assured and avoid the hassle of legal and technical evaluation.
11. Offer Letter
Once a loan has been approved/sanctioned, the lending institution releases an offer letter to the borrower, containing loan-related information such as:
- Loan amount
- Rate of interest and its type (fixed/variable)
- EMI amount
- Tenure of the loan
- Details of the scheme
- Terms and conditions of the loan
It is important to note that the loan is disbursed after the completion of documentation and property verification.
12. Amortisation schedule
This refers to a detailed table of recurring loan payments that contains a bifurcation of the principal component and the interest charged in an EMI till the loan is completely repaid.
This is the asset provided by the borrower to the lender as collateral for the availed loan. In most cases, the security required is the equitable mortgage of the property for which the loan is availed.
14. Repayment tenure
This is the time frame under which the borrower has to fully repay the loan.
This occurs in a case when the borrower fails to timely pay the EMI amount. Certain penal interest is levied by the lending institution on subsequent EMIs in case of default.
Keeping the above terminologies in mind will definitely help you better understand the terms and conditions of any lending institution, to make a sound judgement.
The post Housing Loan Terminology Decoded appeared first on Compare & Apply Loans & Credit Cards in India- Paisabazaar.com.
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