By Chaitali Dutta
* In a bridge loan, do I have to show the end-use of the funds? What are the factors that I should keep in mind?
A bridge loan is used by the owner of a property who would like to sell the existing property and buy another real estate. There are times when the sale of the existing property takes time and you do not have the funds to pay the margin money for the new property. In such a situation, banks/FIs offer a loan (maximum period of 1 or 2 years only) to bridge this cash-flow mismatch. Hence the term. You have to offer a collateral security for this loan. The usage of money from the bridge loan is for specific use; i.e., to buy another property. If you want to fund other activities, then a loan against property would be better. Bridge loans are more expensive than a loan against property or a home loan. The bank/FI will not specifically ask for the end-use proof of the bridge loan funds.
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* We are planning a vacation abroad. What is the best option to get a loan of `10 lakh for the trip? I intend to pay the loan within two years?
Ideally, a loan is best utilised when the funds are used to create an asset which is termed ‘leverage’. Consumption needs like holidays may be planned in a way to self-fund them. However, in certain cases, there may be a mismatch of inflows which may force you to spend future income. To keep the interest cost minimal, availing a loan against an asset you own, which is not needed in the next 2-3 years would be ideal in your case. The asset-based loan would carry a lower cost than zero collateral loans like personal loans. You may choose from an overdraft against shares, mutual funds, fixed deposits, or a life policy (other than a term cover).
* After clearing my housing loan, should I check with CIBIL if the amount paid is reflected on its website? Do I have to take small-ticket loans to keep my CIBIL record intact?
After repayment of the loan, please give it 3-4 months to get reflected in your CIBIL report. There is no need to avail of a small-ticket loan to keep your CIBIL score. A gap in availing of any loan does not pull down your score. If you use a credit card and pay off the monthly bills in time, that itself will create a good record.
* I will retire after two years. However, my wife still has 10 years of service left. We want to buy a flat by taking a loan of 40% of the cost of the flat. Should my wife be the primary borrower and I remain the secondary borrower?
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—S R Arvind
Yes, you may avail of the home loan with your wife as a primary holder. In the property too, her name must come first. Maximum loan tenure would be 10 years. The loan amount may be restricted to only her eligibility though. The lender may factor in your post-retirement income like a pension, to increase loan eligibility. The EMI should come to an amount that your household finds easy to repay.
The writer is personal finance wellness expert and founder of AZUKE Finance. Send your queries to fepersonalfinance @guest