Mudra Loan – The Essential Facts You Should Know Before Applying

Small business owners need funds to keep their businesses afloat and to generate an income to support their livelihood. Recognising this need, the Prime Minister Narendra Modi-led Government of India has taken measures to ensure that such business owners can get the necessary funds without having to take on high-interest, high-value debts. The Pradhan Mantri Mudra loan is a scheme devised to help upcoming entrepreneurs as well as small business owners avail the funds needed to keep their business afloat. Here are a few essential facts you need to know about this scheme. 

The loan is classified into three categories

Applicants who wish to avail the Mudra bank loan can apply for it under three main categories – the Shishu category, the Kishor category and the Tarun category. Under the Shishu (infant) category, micro and small business owners, looking to start a business, can avail loans of up to ₹50,000. Applicants who fall under the Kishor (adolescent) category can avail loans of ₹50,000 to ₹500,000 and should already have established their business. Finally, applicants falling under the Tarun (mature) group can avail loans of up to ₹1,000,000, to expand the established business.

Applicants can avail this loan at low-interest rates and repay it within flexible tenures

What makes the Mudra loan scheme an attractive scheme for small business owners is that, that banks levy an incredibly low-interest rate on the loans. Public sector banks like Bank of Baroda and Bank of India respectively, are offering these loans at low-interest rates of 8.40% and 8.35%, respectively. Also, applicants can repay the loan in tenures of 3 to 5 years, based upon the lender chosen by them. Some banks also offer top-up loans under the Mudra scheme, wherein borrowers can extend the repayment tenures to 7 years. 

The Government serves as the guarantor

Since the Mudra loan Yojana is the brainchild of the Government of India, the entity serves as the guarantor. This way, the bank does not have to lose its investment. If the borrower is unable to repay the EMIs, the government bears the responsibility for the losses endured by the bank. If an applicant is unable to repay the loan, the government compensates it on the applicant’s behalf, enabling the bank to recover its investment.

Entrepreneurs from different fields and varied categories may avail a loan

To ensure that entrepreneurs from all sections of the society can benefit from the Mudra loan scheme, the Government has defined various categories under which small business owners can avail the loan. The notable categories under which applicants can avail this loan are:

Community 

Personal service

Social activities 

Purchasing transport vehicles

Food products and production

Traders

Shopkeepers

Textile products and production

Non-farming-based agriculture and allied activities like purchasing tractors, machinery and essential equipment’s. 

The applicant needs to check the category under which they are eligible for the loan and then apply. Note that while you can avail loans under the allied agricultural activities, the Mudra loan does not offer finance for purchasing agriculture-specific products likes seeds, fertilisers, pesticides, and so on.

Final word: For any business to run smoothly, it needs continuous cash flow. If a small business owner is unable to run the business or make payroll, he may have to shut his business, and with it, a long-nurtured dream. Thankfully, the Pradhan Mantri Mudra loan provides a sense of assurance to such business owners that they can avail the necessary funding to keep their business afloat.

What is a home loan eligibility calculator?

A home loan is a loan product provided by financial institutions to the customers when they need financial aid for buying a home. In a home loan, the financial institution will give the customer an amount for carrying out the process of purchasing a home. These home loans are provided at a specific rate of interest. Then the customer will have to repay the loan amount every month to the financial institution through EMIs (equated monthly instalments). The home in question will be taken as security by the financial institution. A home loan is an efficient product designed to help customers with finances. 

Before any customer goes ahead with applying for a home loan, it is advised they check home loan eligibility. What is home loan eligibility? Financial institutions have some essential criteria’s that customers should fulfil to be eligible for a home loan. The eligibility criteria may differ from different financial institutions. It is always better to check eligibility before applying for the home loan. If a customer does not meet the specific eligibility criteria’s for a home loan, it can lead to home loan rejection and can also affect the individual’s credit report. Thus, it is always better to ensure home loan eligibility before applying for a home loan. 

Home loan eligibility calculator:

A lot of financial institutions have started providing a useful online instrument called the home loan eligibility calculator. This calculator can help a customer will give a customer an estimate of the loan amount which they can avail. Before applying for the loan, if a customer knows their eligibility for the amount, it will increase their chance of loan approval. The calculator also provides results instantly on their income basis and their repayment capacity that is calculated using details like monthly expenses, age, and different other factors But, before approving a loan request, a financial institution also considers other factors as well, such as financial position, credit score etc. 

When an individual opens the home loan eligibility calculator, they will be asked to enter specific details regarding the loan, such as loan amount, home loan interest rate, monthly income, existing monthly repayments and loan tenure. After this step, the calculator will apply a formula that will determine whether the applicant is eligible for the credit or not. 

It is better to use a home loan eligibility calculator before applying for a home loan. Since if an applicant does not meet the eligibility criteria, the application may be rejected and also affect the applicant’s credit profile, which may cause a problem in any future requests with the financial institution. 

One of the things that an applicant must do is to check their credit score before applying. Keep an eye out for errors so that CIBIL can rectify them. A good CIBIL score improves an applicant’s chance at loan approval. Researching the different financial institutions can also help with understanding their terms of eligibility regarding the loan.

Types of NPS Scheme and How to Open an NPS Account Both Offline & Online

The National Pension Scheme NPS is a Central Government backed social security scheme intended to benefit employees from the public, private, and unorganized sector. Initially, the NPS scheme details to focus government employees, but after 2009, the account was open to all sections of the society. Under the NPS investment, the depositor is entitled to make a monthly contribution until he reaches the age of 60 years. So that once he retires, he withdraws a part of the contribution as a lump sum amount. And the other half of the amount can be used to invest in securities that offer him a regular income. 

Types of NPS account

NPS investment comes with two kinds – Tier-l and Tier-ll accounts. Let's have a look in detail about Tier l and Tier-ll accounts. 

Tier-l account 

• Tier l account is a mandatory account, which is meant for retirees. 
• There are restrictions to withdraw from Tier-l account before and after retirement. 
• Before attaining 60 years of age, you can only withdraw 20% of the contribution while the rest 80 per cent must be necessarily used for buying securities that generate regular income. 
• After reaching 60 years, you can only withdraw close to 60 per cent, and the rest 40 per cent again has to be used for buying the annuity from approved life insurers. 
• Tier 1 account is divided into three insurance plans like – SBI pension funds private ltd, UTI retirement solutions ltd, and LIC pension ltd. 
• You get tax exemption up to INR 2 lakh under Section 80C and 80CCD of the Income Tax Act.
• The minimum contribution is INR 500 or 1000 per annum.
• There is no limit for maximum contribution. 

Tier –ll Account

• Tier-ll is a voluntary NPS investment where the withdrawals are permitted. 
• It is necessary to maintain a minimum balance of INR 2,000 at the end of a financial year.
• The investment of tier ll account is made on a mix of securities like equity, government funds, FDs, corporate bonds, and liquid funds like real estate, property, etc.
• The minimum contribution is INR 250 per annum
• The maximum contribution doesn’t have any limit.

How to open NPS Account Online

The online process of opening an NPS account is simple and easy. Make sure you have linked your mobile number and Aadhaar card with the bank and PAN card. Following are the steps to follow:

• Go to the official website of NPS – enps.nsdl.com
• Click on the registration and choose the option –‘Register with Aadhaar’.
• Enter your Aadhaar number and click on ‘Generate OTP.’
• An OTP will now be sent to your registered mobile number. 
• Enter the OTP, which will then redirect you to the page where you need to enter the details. This includes personal information, bank details, and nominee details. 
• Once the individual submits the required data with proofs withstanding the documents, another OTP will be sent to the registered mobile number 
• Enter the OTP and make payment. 

How to open NPS account offline

To open an NPS account offline, the depositor has to go to the PoP (Point of Presence). It could be a bank too. 

• Collect a subscriber form from your nearest PoP
• Submit all the KYC documents.
• Once you make the initial payment, the PoP will send you a PRAN (Permanent Retirement Account Number). 
• This number and password will help you operate your NPS account.

For registering an NPS account with a PoP, you will have to pay a registration fee of INR 125 or below.