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Personal Finance

Harneet Kaur 14 Followers1m

#personalfinance #financial #credit #stock #business

Credit is the new cash- What should you use?

Today you have the power to buy a brand-new car or a well-furnished new house even if you cannot pay off the entire amount upfront. Thanks to the credit system, gone are those days when you should have pockets full of cash to fulfill your wishes. Credit is the magic wand to grant your wishes. Credit is the new cash that may buy you almost anything. 


Choose Your Credit Option 

Credit here means a system of purchasing products or services without paying the price upfront. You may make the payment in installments or pay in full at a future date. Interest is the fee charged for availing of this facility.

Choose the credit option that best suits you depending upon your income, financial obligations, and urgency. The new credit products or services are customized to ensure your purchase to settlement process is fast, just a click away. Besides the offers, reward points and discounts offered by credit issuers are like a cherry on the cake.


Credit Card 

You may opt for a credit card to make the most of the credit limits sanctioned. Different banks offer credit cards with competing offers, credit limits, and discounts.


Benefits of using credit cards:

        Utilize higher credit limit granted for purchases anywhere and anytime.

        Interest-free period up to 55 days depending upon credit card’s payment due date.

        You get discounts, offers, and cashback

        Collect reward points on your transactions and redeem them in exchange for products or services.

        Free airport lounge access or spa treatment.

        Disciplined paying behavior is rewarded with improved credit scores.


The number of credit cardholders increased from 29 million in March 2017 to 62 million in March 2021 in India post demonetization.



Source - https://www.pwc.in/industries/financial-services/fintech/dp/the-changing-landscape-of-indias-credit-industry.html


Buy Now Pay Later (BNPL)

Buy Now Pay Later is what it sounds like, where you may buy anything now but have the flexibility to make a repayment later. It allows you to purchase any product or service from e-commerce giants like Flipkart and Amazon to a fintech-like policy bazaar without paying a single penny upfront. 


Benefits of BNPL:

        The credit limit granted is relatively lower than credit cards

        Lesser formalities as compared to other credit systems.

        Lesser interest-free days are offered, ranging from 15 to a maximum of 45 days.

        Lower late payment interest charges.

        Increase your credit score if dues are paid on time.


BNPL has already captured 3% of the market share in the online e-commerce payments segment, and the number could go up to 9% by 2024. As per estimates, India’s BNPL market will rocket to $45-50 billion by 2026 from $3-3.5 billion in 2021.


Estimated Monthly Instalments (EMI’s)

EMIs are a form of credit granted by banks or financial institutions to help spread the total cost burden over a specified period. When you want to buy a car or a new house, you agree to convert your loan burden into monthly EMI. You may possess the asset and start using it from day one. 


Benefits of EMI’s:

        You may get a loan amount as high as five times your annual salary. However, the loan amount sanctioned depends upon your credit score, financials, and income.

        You may possess the asset you purchased immediately, so a dream of a new car or new house does not need a waiting period.

        Total interest expense depends upon the tenure of the loan. The lower the tenure, the lower the total interest expense to be paid.

        You may get tax exemptions when you purchase certain assets like a new house.

        If you pay your dues on time, your credit score may improve.


The credit EMI segment will grow at a CAGR of 21% to become worth INR 205 billion in 2026–27 from INR 84 billion in 2020–21 in India. 



Choosing between cash or credit can be tricky, yet in today’s time, credit options offered are so user-friendly that cash transactions have taken a backseat. Besides, consuming any product or service without paying upfront makes credit options a popular choice amongst people. So, what is your favorite credit option?


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The changing landscape of India’s credit industry



Stephen Dsouza 23 Followers1m

Step towards financial freedom

#personalfinance #investments

Useful quick rules in Personal Finance

Some basic rules in Personal Finance

1. 50-30-20 ratio

As a rule of thumb, you should allocate your budget as follows:   50% - "needs," 30% - "wants," and 20% - Investments.  

2.  1-week spending rule

The 7-Day Rule is a method for avoiding impulsive purchasing. In this, you allow yourself a seven-day "cooling-off time" before making purchases. After 7 Days you can decide whether you still want that item or not and purchase accordingly.

3.  Rule of 72

Do you want to double your money and want to know when your money will double? The simple formula is to divide 72 by the current rate of return to find the time it needs to double your money. By doing so you can predict when your money will double. For example, if your current mutual fund return is 12%, then it will take 6 years (72/12) to double your money. You can use 72 divided by the number of years to get the rate of returns required from a financial instrument to double your investment.

4. 3X emergency fund rule

The 3x emergency fund rule is that one should always have three times of their monthly income set aside for emergencies. It will be helpful in case of emergencies, such as job loss, sudden travel or medical emergency, etc.

5. 100 Minus age rule

There is one thumb rule in investments. Never invest all your money in one asset type. Be it crypto or the stock market or debt.  So you might be wondering how much money one should allocate to stocks or debt assets. You can use the 100 minus age thumb rule to find how much money to put in debt and how much in stocks. The percentage of your money that can be invested in equities is calculated by subtracting your age from 100. For example, if you are in your 30's, then 100 - 30 = 70. So 70% of your money can go into equities.
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