6 smart things to know about co-signing a loan

  • MIB
  • Category: Loan

1. A co-signer takes the liability for a loan, in case it defaults, without even being a co-borrower.

2. A co-borrower is a co-owner, shares the loan proceeds, undertakes to pay the EMIs and gets the benefit of any tax deductions, if applicable.

3. The co-signer requires to pay up in the event of a default. The co-signing compromise is to built on the trust that the borrower would make the payments.

4. Both the co-signer and the co-borrower are liable for the loan. If the borrower cannot incur to repay, the co-signer will be held accountable.

5. A co-signer takes the risk of the loan without any benefit of the ownership or the right to the asset.

6 . A default will emulate on the co-signerâ??s CIBIL credit score. It is not available to discard the co-signerâ??s name from the loan when it is still due.

Debt may predict if money will make you happy!

Money may buy you happiness, however how much debt you have got also plays an important role in predicting whether you may be glad, a new study has found. There have been a number of researches going on whether and how the income makes people glad in life, however few studies have examined that whether debt can detract from happiness, as per an assistant professor.

We decided that wearing student loan debt is nearly as important as the income in the predicting financial fear and lifestyles delight.

The importance of the surveys are from the Gallup-Purdue Index, which gives a measure of how the university graduates are doing on 5 key importance of properly-being: cause, social, physical, economic and network.

The assistant professor is also the member of the committee classifying the effects of the ongoing survey.

An internet college alumni sample of 2,781 individuals from the other country was used in the survey.

On common, these individuals who have graduated from the college in the year 2008 and were paying student loans for as a minimum of 7 years.

In addition to the demographic statistics, the relationships between the average family profits, pupil loan amount, life pride and economic fear.

We always emulate on the application on how lots income you can earn, therefore the reality is you cannot satisfy what you will earn in the post-college.

There are lots in the information about the reducing, balancing or coping with the university pupil debt, and this look at reveals the weight it is able to implement one's life for the long term.

The destiny studies will require to study about the other assets of debt as well as the role of the top debt as against to the dreadful debt, the numerous kinds of debt, as a loan, scholar loans or credit cards.

As per the assistant professor, how pupil loans are labelled for the long-time period would be interesting. For example, to what the extent is it regarded as an investment and does that change among careers?

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Loans and income tax benefits available

  • MIB
  • Category: Loan

Income Tax completely explains the essential of borrowing for all. At some point of time in our life, we all must have borrowed it can be friendly borrowings from friends and relatives or it is a home loan from any financial institution. The tax benefits are available in respect of such loans.

Deduction for home loans

Under the section 24(b) of the Income Tax Act allows you a deduction for the interest on any money borrowed to purchase, construct, or repair or reconstruction of a property. The interest can be claimed either for residential and commercial property. For the income tax purpose, the processing fee or prepayment charges paid are also treated as the interest, hence, can be claimed. The interest can be claimed for any money borrowed from banks or from friends and relatives, as long as you are able to prove the actual purpose of the money borrowed is for the stated purposes.

The amount of deduction for the interest which can be claimed will depend on the property whether it has been let out or is used for own residence. For a self-occupied property, the deduction is restricted to Rs. 2 lacs only whereas for a let-out property, you can claim full interest. If you have more than one self- occupied houses, you have to select one house as self-occupied and the other house/s is treated as let-out. In such case, you have to provide notional rent for taxation on such property and also claim back the entire interest payable in respect of such house treated as let out. So in order to maximise your tax benefits, it is better to treat the property on which the interest is lower as self-occupied in case of the payable on any or all of the property is more than Rs. 2 lakhs in such cases.

For an under construction property, the interest can be claimed only from the year when the construction of the property is completed and possession has been taken. Therefore, the interest paid during the period previous to the year of taking the possession, the aggregate of such interest can be claimed in 5 equal instalments beginning from the year of completion of the construction. In case of a self-occupied house property the limitation is Rs. 2 lakhs. Therefore, in case you sell the property before the completing of 5 years after taking possession, you will lose the claim for remaining year.

Under the section 80C, an individual and an HUF is allowed to claim a deduction up to Rs 1.5 lakh towards the principal repayment of a home loan which has been taken for a purchases or construction of a residential house. This deduction is available with other qualified items like Life Insurance Premium, NSCs, EPF, ELSS and stamp duty and registration charges etc.       

This deduction can only be claimed for the repayment of home loan which has been taken from the stated entity like banks, Housing Finance Companies. Etc.

Please note that in case you sell the house, accomplished with a home loan, within 5 years from the end of the year in which the custody of the house was taken, all the deductions allowed in the earlier years must be withdrawn and will be treated as the income of the year of the sale of the property.

Deductions in respect of education loans

The income tax laws allow you to claim the entire amount of interest paid during the year on the educational loan taken for the purpose of higher education. The law allows you only to claim the interest on the educational loan and no deduction for the repayment of the principal amount is allowable. The deduction is available on the basis of actual payment of the interest. Therefore if you pay the interest for earlier years in a single year then you will get the deduction in respect of all the actual interest paid irrespective of the year to which the interest relates.

The deduction for the interest can only be claimed for a maximum of 8 successive years which began from the year in which you paid your first interest. In case you have opted for a moratorium during the education period, the 8 year period must start later. Therefore, if your loan tenure exceeds 8 years then you cannot claim the deductions beyond the successive period of 8 years. It is therefore better that you must plan to repay the educational loan within 8 years.

The deduction can only be claimed for the educational loan taken for ensuing any Government recognised course after Senior Secondary Examination or HSC. Even part- time course or a diploma course must also be eligible for the purpose of claiming the interest deduction if the institution is imparting such course which is recognised.

An individual is only given the benefit which is available. If the loan has been taken for the study of yourself, your spouse, child or any other person whom you are a guardian then you can claim the deduction. Therefore, this deduction is not available for education loan taken for your siblings.

It is better to claim the benefit of interest for such loan in their income tax returns that have fallen in the higher tax slab. The parents can take the benefit of interest deduction only if the interest is agreed to be paid during the endurance of the education. In case the person for whom the loan is taken falls in higher tax slab then he can pay the interest and claim it in his income tax returns while being filed. Therefore it is better to take an education loan in the joint names of parent where the student has the flexibility for claiming back the interest.

For certifying, the education loan must have been taken either from a financial institution or any approved charitable institution. The interest on the loan taken from friends or relatives will not be qualified for this deduction. The first category which covers all the banks includes cooperative banks, one non-banking institution HDFC Ltd. is also approved by the government for this purpose. Another category of institutions which includes charitable institutions and NGOs, from where the educational loans can be taken to qualify for the tax benefit on the interest.

Car Loan

Generally, there are no tax benefits available to a salaried person in respect of any car loan. Therefore in case the vehicle for which the loan is taken is used for the purpose of the business or profession then you can claim the interest in respect of such auto loans as well as the reduction on the motor car to the extent the same is used for the business purpose.

Personal Loan/loan on credit card etc.

The income tax does not allow any kind of tax benefit in respect of any personal loan or loan taken on credit card. Therefore in case the personal loan taken has been used for a purpose like paying for the margin money for your house or for any business asset and if you are able to establish any kind of usage then the interest paid can be claimed depending on the purpose for which the personal loan has been taken and used. Therefore, the benefit for repayment of any kind of personal loan cannot be claimed under the section 80 C as the money borrowed is not for the precise purpose of buying or constructing a house.

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