Margin money: Why is this term important
What's the story
Margin money is an important concept for Indian loan applicants, especially for those applying for personal loans. It refers to the amount of money you need to set aside as collateral/security against the loan. Knowing margin money can help you make better financial decisions and improve your chances of getting a loan. Here are five important things every Indian loan applicant should know about margin money.
#1
Understanding margin money
Margin money is basically the portion of the loan amount that you need to contribute from your own funds. It reduces the lender's risk by ensuring that you have a stake in the transaction. The higher the margin money, the lower the lender's risk, which can lead to better loan terms and interest rates.
#2
Impact on loan approval
The amount of margin money you can provide directly affects your loan approval chances. Lenders are more likely to approve loans with higher margins as it reduces their risk. Knowing how much margin money you can afford helps in getting your application approved quickly.
#3
Influence on interest rates
The interest rate on a loan is also affected by the amount of margin money you provide. A higher margin means lower risk for lenders, resulting in lower interest rates on your loan. This can help you save a lot over the life of the loan.
#4
Types of assets accepted as margin
Different lenders accept different types of assets as margin money. Commonly accepted assets include fixed deposits, property, or other investments. Knowing which assets are accepted helps you choose the best option for providing collateral against your loan.
#5
Calculating total cost of borrowing
When calculating total borrowing costs, don't forget that higher margins can also mean lower interest rates and lesser overall costs. By factoring in all these elements, borrowers can make informed decisions that align with their financial goals and capabilities.