Friday, June 18, 2010

Precaution steps for Home Loan

Home Loans are available by nationalized and private banks more easily than before .EMI on the home loans reduce than before and the loan refund time frame increase than before.
But this one is not only beneficial from point of view of debtors but also from the point of view of banks as banks get high-income.
As the interest rate reduce in the market therefore banks concentrate more on capital return than the interest rate return.
From the debtor point of view also get the benefits of the low EMI and long period to return debt which reduce the burden on the debtor.

There are some precaution need to measure before apply for the home loans from any banks.
1. Terms and Conditions: The whole terms and condition need to check before apply for the home loan.
Check that If there is any hidden charge on the loan.

2.Check the lowest interest rate : Check the lowest interest rate available in the market normally the interest rate are more or less fix, but its differ from bank to bank .As the 1% change is also a big matter .

3. EMI Amount: Emi generally charged 40% of the net disposal income as per the rule. As the future is uncertain it’s better to reduce the EMI 15% of the disposable income ,and save the certain amount as reserve.

4. Future Plan: People generally increase their EMI amount for the future as they think there total income increases in future .It’s true that after 5 years the total income of anyone more than the present income ,but on the same time there expenditure also increases with the time ,so its better t to keep the EMI in the same formate than to increases in future.

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Monday, June 7, 2010

Dollar becomes world currency and the large part of the foreign trade made in us dollar.

US dollar come into existence in the world market after the world war 2 .After the second world war most of industrial countries of Europe and Asia suffered a lot .Only the US industries has get the advantage of the huge demands of industrial goods between the second world war and after the second world war .US dollar is not become the world currency due this reason only.
Petroleum was playing the crucial role to get this advantage to the dollar.
USA is the highest energy consumer in the world after the Second World War and the 60% of the total consumption comes from import. It’s the US strategy which convinces the OPEC cartel to sell their petroleum in US dollar. Other countries need to sell their goods or sell their gold to get the dollar on the other hand US don’t need to sell their goods or to sell the gold.
US has to spent a lot to maintain the Army bases in the different part of the world ,spent a large portion of their GDP in the war ,but still the dollar value continue raising in the world there is some reason behind these .Petroleum play the main role and second one that all the OPEC countries are again deposited in the US or invest to purchase the US bonds ,these help a lot to get the US dollar a strong position in the world market.
US dollar close competitor is Euro .Euro comes in the world market after 1990.Euro is provide the new weapon to the European countries to fight against the US dollar supremacy in the world market .
US war against terror and Iraq, Iran and Middle East and Afghanistan war reduce the US influence in the Arabic countries and they are think to change their old pattern to invest in the US security market. It’s true that Euro work as competitor to the US dollar but still the US dollar is only currency used for petroleum trading.
So in near future there is very little chance that Euro get superiority over the US dollar in the Global market.

Thursday, June 3, 2010

Basic criteria for valuing a financial institution

Financial Institution main business raise money from the public and lend this in the market ,Interest on the lending is the prime source of earning and the interest on deposited is the main expenditure .Now the whole ability of the management governed how the institute collect money from general public at low rate .
Basic criteria a financial analyst follow for valuing a financial institution as summed up by the CRAMEL model. In this model factors like Capital Adequacy Ratio, Resource raising ability, the quality of assets, the quality of the management, earning quality and leverage are analyzed and conclusion reached.
1.Capital Adequacy ratio: capital consist of assets, again assets divided in high risky and low risky. Risk of the assets increases with the risk of the assets.The ratio of the risk weighted assets of an Financial Institution referred to as Capital Assets Ratio.
2.Resource Raising Ability: Ability of the financial institution measures by their ability of raising fund from market at economic rate, and the fund raiser at short span of time.
3.Assets quality : when the financial institution lend their fund on that time they need to measure the riskiness of the assets .They need to check the credit worthiness of the institution where the fund invested also need to check how the fund used by the lending company and where the investment made by the lending institution.
4.Management Quality: Constitution of the Board of Director. Further the competence, technical expertise and objective of the senior management team, the management system like ALM management, portfolio and risk management and mechanism of the internal audit are also consider.
5.Earning Quality: Financial institution main source of income is the interest on the lending amount. Financial institution need to check that change in the interest rate has any affect on the income of the institution.
6.Liquidity : Liquidity of the Financial Institution effect on the business of the financial institution, keeping this in view its average borrowing tenure is always exceed the average tenure of the investment.
Under this category one may look at debt equity ratio, the interest coverage ratio, the borrowing profile and tenure of the investment.