Know about ESOPs

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• Know about ESOPs!
• Prevent credit card fraud!
• Car insurance decoded!

Know about ESOPs! Posted: 25 Dec 2011 06:40 PM PST It depends upon the company’s management to decide who gets how many options. But as a general guide, people in higher management are offered more options. Sometimes people in special projects which brought the company more profits are offered more options. Suzlon, as discussed earlier has given equal number of options to all its employees. The CEOs and key managers in companies like L&T, ICICI Bank, HCL Tech, Biocon, Dr.Reddy’s Laboratory, HDFC Bank, Dabur, etc have huge assets in their portfolios because of their stock options. ESOPs (Employee Stock Option Plans) were hottest during the ‘dot com’ boom years among software and internet based services companies. They are picking up now after many years. The difference is that now-a-days even manufacturing and banking companies are offering ESOPs to their employees. What are ESOPs? ESOPs, which give employees a stake in the ownership of the company, are provided by the company to employees to boost their motivation and loyalty. ESOPs give an employee the right to buy the company’s shares during a predetermined time period and at a predetermined price (strike price). Generally the strike price of the shares are offered to the employees at par or at a discount to the prevailing market prices. ESOPs are structured in such a way that the option to buy the shares at a discount can be exercised only after a certain period of time, which is known as the vesting period. So for example, an employee may be able to exercise his right over his shares after a vesting period of one year. In some instances, he may be allowed claim to a certain percentage of shares, known as the vesting percentage after one year and the rest over the next few years. Can a Non-Listed Company give ESOPs? Yes, even a non-listed company can give ESOPs. In fact, ESOPs in innovative, fast growing, unlisted companies were the reason many professionals made their millions in the Silicon Valley in USA. This trend however is yet to pick up in India. When does one pay to get the shares? Generally, in practice, there is no need to make a payment when ESOPs are allocated to the employee. Recent case as example Last week Suzlon, had announced an ESOP covering almost 90% of its employees to celebrate its 15th anniversary.  Here, options of 1500 shares are allocated equally to all its eligible employees. The price at which the shares are offered (strike price) is at Rs.72.70/- per share compared to the current market price of about Rs.73/- per share. The vesting date is the day the employee gets the right to own the share at the strike price. In case of Suzlon, they get the first ownership of 500 shares after one year (vesting date) and 500 more every year for 2 more years. The actual date on which the employee wants to reap the benefits of his shares is the exercise date. In the case of Suzlon this can be upto 31st march 2014. What happens when there is an increase or decrease in the market price? Here, the whole point of the option is that the employee reaps the profit of any increase in the market value of the shares on the chosen exercise date and if the market value is not significant or is lesser than the strike price, he can choose not to exercise his right, which then is the crux of the ESOP. Can I transfer the right for the ESOP to somebody else? No, this is not allowed. The ESOP is provided to an employee as a benefit for his/her specialized skill / contribution to the company. This cannot be transferred to anybody. However after the shares are bought by the employee he/she is free to trade/ transfer/ gift the shares to anybody as per his/her wish. How many options am I eligible for? It depends upon the company’s management to decide who gets how many options. But as a general guide, people in higher management are offered more options. Sometimes people in special projects which brought the company more profits are offered more options. Suzlon, as discussed earlier has given equal number of options to all its employees. The CEOs and key managers in companies like L&T, ICICI Bank, HCL Tech, Biocon, Dr.Reddy’s Laboratory, HDFC Bank, Dabur, etc have huge assets in their portfolios because of their stock options. How are ESOPs taxed? The stocks bought using an ESOP are taxed as fringe benefit when bought. The value to be taxed will be the difference in value between the actual value at which shares are bought and the market value of the shares. They are taxed as normal shares are taxed at the time of selling. The usual rules related to capital gains tax will apply, now. Post the implementation of the New Direct Tax Code, the proceeds of the sale will be added to income and taxed accordingly. The calculations related to the taxation are beyond the scope of this primer and will be discussed in a separate article. Will employees get special benefits in an IPO? Yes, generally employees are given some special considerations during an IPO (Initial Public Offering). An Employee Stock Purchase Plan (ESPP) is the preferential allotment of shares most at preferential prices to employees when a company comes out with an IPO. Typically in India, shares are offered at about 5% discount to the final offer price to the general public. As employees the additional benefit can be that some portion of the shares offered may be preferentially allotted to them. So there is a higher chance for an employee to get he shares allotted to him/her. This is definitely an advantage for employees.

Prevent credit card fraud! Posted: 25 Dec 2011 06:15 PM PST Whenever you use your card, always ensure that the transaction is completed in front of you and that no details are written down by the merchant. Do not provide photocopies of both sides of the credit card to anyone. The card verification value (CVV) which is required for online transactions is printed on the reverse of the card. Anyone can use the card for online purchases if the information is available with them. Sameer (name changed), is a business man, who has always been prudent with his money. Whenever he used his credit card, he ensured that he would pay his dues back immediately. He also made sure that he never used his credit card for expensive purchases, using cash instead. Imagine his unpleasant surprise, when he got a credit card bill showing that he had used up his entire credit limit. On checking his statement, he saw purchases that he had never made. He went through hell trying to making payments over those purchases. Apparently, Sameer was the victim of credit card fraud. Credit card frauds are on the rise these days. The credit card number, the Card Verification Value (CVV) or the Card Security Code (CSC), date of birth, credit card limit, residential address (stored on your card’s magnetic tape) is all that is needed for someone to misuse your credit card. Being vigilant while using your credit card is the only way of preventing fraud. Here are some tips. Card Verification Value (CVV) or the Card Security Code (CSC) The CSC or CVV number is a security feature for credit or debit card transactions, giving increased protection against credit card fraud. It is not embossed like the card number, and is always a group of numbers printed on the back signature panel of the card. This provides a level of protection to the bank/card holder, in that a corrupt merchant cannot simply capture the magnetic stripe details of a card and use them later for “card not present” purchases over the phone, mail order or Internet. Whenever you use your card, always ensure that the transaction is completed in front of you and that no details are written down by the merchant. Do not provide photocopies of both sides of the credit card to anyone. The card verification value (CVV) which is required for online transactions is printed on the reverse of the card. Anyone can use the card for online purchases if the information is available with them. Using cards online When using your credit cards for making purchases online: Ensure that website is a secure site. This can be done by checking whether the site is secured by a reputable net authentication agency like VeriSign. Do not click on links in email seeking details of your account; they could be phishing emails from fraudsters. Most reputed companies will ask you to visit their website directly. Do not give out your credit card details on unknown or suspicious websites. Stolen Card and Suspicious Transactions The first and foremost thing to do, after you have confirmed that you have lost your wallet or card or have seen suspicious transactions on your credit card statement, is to call up the bank’s 24 hour call centre and deactivate the card or inform the customer service representative about the suspicious transactions. The representative will help you file a complaint in regard to this. In case of lost cards, check if any transactions have been made on the card and if there are any; inform the bank about the ones that are not yours. This has to be done within a particular number of days which varies between 30 and 60 days according to different banks. Some general tips On receipt of a new card ensure that it is in sealed condition and that the seal is not tampered with. Sign on the back of your new card as soon as you receive it. Monitor your account regularly either on the Internet or from call centers. Also subscribe to email and mobile alerts to keep track of card usage. Memorize your card’s PIN number. Destroy and dispose all documents that mention the card number, such as copies of receipts, airline tickets, travel itineraries etc. Personal account information should never be shared with anyone unless payment for the purchase is being done from that account. Another important thing is keeping any useful information such as card number, expiry date, CVV number, and pin number etc. of your cards handy. However, that does not mean that you keep the information in places where it is easily accessible. Protect your card information as you would protect your money. Finally, always stay at least 40% below your credit limit and review your account information either online or through the credit card company’s call center frequently. This will help you identify any suspicious transactions immediately. Credit cards, though an easy way to have access to money without carrying around a lot of cash can become a big liability if not used prudently and carefully. Ensure that you use the card responsibly. Get the best deals on loan offers Home loans Personal loans Car loans Some useful personal finance calculators EMI calculator Loan repayment calculator

Car insurance decoded! Posted: 25 Dec 2011 05:40 PM PST Photo credits : team dalog Third party Car insurance policy covers only the inter-alia accountability of the vehicle owner for loss or damage to life or property of the third parties. Whereas comprehensive Car insurance policy covers in addition to third party accountability, loss or damage to the vehicle itself by way of accident, theft, etc. and specified dangers All of us having motor vehicles have to go through the yearly ritual of buying Insurance on our car; Motor insurance as the market calls it. This article tries to demystify the jargon and processes involved in General Insurance. The basic jargon: Insured - Owner of the private car Insurer - The Insurance Company Under the provision of motor vehicles act all vehicles running in the public should have car insurance policy. The car insurance policy can be either Third party or Comprehensive insurance policy. Third party Car insurance policy covers only the inter-alia accountability of the vehicle owner for loss or damage to life or property of the third parties. Whereas comprehensive Car insurance policy covers in addition to third party accountability, loss or damage to the vehicle itself by way of accident, theft, etc. and specified dangers Motor Insurance Policy Covers Section 1. Loss of or damage to the vehicle insured The company will reimburse the insured against the loss or damage to the vehicle insured for the following by fire, explosion, self ignition or lightning by burglary, housebreaking or theft by riot & strike by earthquake by flood, typhoon, hurricane, storm, tempest, inundation, cyclone by accidental external means by malicious act by terrorist activity whilst in transit by road, rail, inland-waterway, lift, elevator or air by land slide, rockslide Cost of protection to the nearest car repair service- Rs 1500 Vehicle Valuation The car is neither to be insured for reinstatement value nor for depreciated value. It is to be insured for second-hand value in the local market for a similar type of car for a similar model. In the event of loss, the liability of insurance company is the maximum compared to the market value or the amount of insurance whichever is less. Factors determining premium of a car cubic capacity Year of car Geographical Location Value of car proposed Various extensions opted for What does company pay in case of claim for comprehensive cover? In case of an accident, the insurance company pays for cost of damaged parts which are to be replaced and the labor cost to repair the vehicle. Will I be eligible for complete reimbursement? No, it is all subject to a deduction or depreciation at the rates mentioned below in respect of parts replaced 1 For all rubber/nylon/plastic parts 50% 2 For fiber glass components 30% 3 For all parts made of glass Nil For all other parts depreciation will be as below Age of the vehicle % of Depreciation Below 6 months Nil 6 - 12 months 5% 1 - 2 Years 10% 2 - 3 Years 15% 3 - 4 Years 25% 4 - 5 Years 35% 5 - 10 Years 40% Exceeding 10 Years 50% The insurance company will not be liable to make any payment in respect of Consequential loss, depreciation, wear and tear, mechanical or electrical breakdown, failures or breakages Damage to tyre and tubes unless the vehicle is damaged at the same time, in which case the liability of the company shall be limited to 50% of the cost of replacement Any accidental loss or damage suffered whist the insured or any person  driving the vehicle under the influence of intoxicating liquor or drugs Section II - Liability to third parties Death of or bodily injury to any person including occupants carried in the vehicle (provided the occupants are not carried for hire or reward) Damage to the property other than property belonging to the insured Section III - Personal Accident Cover for Owner Diver Due to bodily injury/death sustained by the owner-driver of the vehicle by violent accidental external and visible means which independent of any other cause shall within six calendar months of such injury results in Sl. No Nature of injury Scale of Compensation 1 Death 100% 2 Loss of two limbs or sight of two eyes or one limb & sight of one eye 100% 3 Loss of one limb or sight of one eye 50% 4 Permanent total disablement from injuries other than named above 100% Apart from the above covers the private car insurance policy can include the following endorsements at discounts and payment of additional premium Discount for membership of recognized automobile associations Installation of anti-theft device Personal accident cover to the insured or any named person other than paid driver or cleaner Personal accident to unnamed passenger other than insured and the paid driver and cleaner Personal accident cover to paid drivers Deductibles It means the minimum amount which cannot be claimed Compulsory deductible – Rs. 500 for each and every claim Voluntary deductible – The client whilst taking a policy can decide on voluntary deductibles through which the insured may avail a discount on the premium Legal liability to employees of the insured other than paid driver who may be traveling or driving in the employers car The sample insurance policy detailed above is the traditional insurance policy still operated in India. Few insurance companies like Cholamandalam, TATA AIG have launched new motor insurance policies which cover even depreciation, loss of driving license, daily allowance whilst at the garage. Keep reading this column to know more.

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Smart Ways to Manage Your Money

	Smart ways to manage your money! Myths about pre approved loans! All About LTA! More Recent Articles Search BankBazaar: Personal Loan, Home Loan Guide Smart ways to manage your money! You never know what’s in store for you! For instance, we cannot control outside events like recession. No matter what you do, it is going to affect all of us in some way or other. However some simple tips like optimum asset allocation, debt reduction, keeping emergency cash will help you tide over the rough times, without much damage. Check your expenses and adhere to your budget People tend to forget that good times don’t last forever. If you spend lavishly during good times and continue the trend without adapting to changes in circumstances, very soon you will land in financial trouble. Hence to ensure you lead a consistent lifestyle, always draw out a budget and ensure you stick to it religiously. E.g. if you have allocated Rs 500 per month towards your entertainment expenses, don’t spend a rupee more than Rs. 500. It will not only help you handle your finances better but will develop your willpower by delaying instant gratification. Don’t rely on future income Depending on future income in order to spend today, is one of the biggest mistakes we make. This has been evident during a job crisis, where youth racked up a huge credit card debt and took heavy loans. But when the salary cuts and job losses occurred, they were unable to pay off their debt. E.g. if your monthly income is Rs. 20,000 always ensure you spend well within  Rs. 20,000 as pay cut or job loss may land you in trouble. Reduce your debt Got a bonus? Then pay off any loans that you have taken. If you have multiple loans, first pay off the loans with the highest interest rate, then the one with second highest rate and so on. E.g. if you have a credit card debt, personal loan and home loan, first clear off the credit card debt, then personal loan and finally home loan. For this you will have to plan out your debts and then go on following it systematically and steadily. It will not only save you money but will also give you mental peace. Opt for strategic asset allocation Though experts have consistently stated the importance of asset allocation, many investors tend to overlook this fact and invest only in the hottest asset. But remember market conditions do change and what is hot today may be out in the cold later on for a long time. So ensure you divide your portfolio amongst stocks, bonds, gold and real estate to get the maximum returns from your portfolio. Though your portfolio may under perform for some time, it will end up protecting you when the things get rough. Keep emergency cash You never know when a crisis can strike your family. Death, disease or job loss can end up upsetting your investments. You might be forced to sell your investments though they have not been given you any profits. Hence it is advisable to keep at least 3-6 months of your household expenses aside as emergency cash. Sort out Your Finances Agreed, keeping tabs on and handling your finances closely, may not sound like an interesting job, but it is a necessity. However you can reduce the boredom by putting a system in place. Once it is done, you can spend a few hours a month on this job. E.g. on Sunday, you can spend 1-2 hours to find out how your investments are performing, reading up any news concerning them or talking with your financial planner about the performance of your investments. Plan in advance One of the reasons many people land in financial mess is that they don’t plan their finances ahead. So it is imperative to plan your finances properly. Find out your current position, where you intend to go and set up a feasible plan to achieve your objectives. Unforeseeable events may occur and make you stray away from your plan for a short time, but ensure you get back on track at the earliest. Always remain focused and keep a watch on your progress. E.g. you are saving to buy a home and have started investing for the same. But 6 months after you started investing, you lose your job. If that happens, stop your investment, get a new job and again restart your investment. Invest systematically and gradually The biggest problem is that most people don’t bother saving till it is quite late. So they don’t have any money to fall back on in case of emergency. Hence it is essential to start small, but regularly and then increase the amounts later on. E.g. you can start a SIP, in which a particular sum is debited from your bank account and invested in a mutual fund. Or you can open a recurring deposit, which acts like a SIP, initiated by the bank. All this will occur automatically, so you have no excuse not to save. Be in charge of your investments The markets have crashed, the realty is down in dumps. What do you do? Sell off? Wrong. Unfortunately, this is what most investors do. In this situation, it is advisable to hold on to your portfolio as selling will just end up causing you financial loss. Instead increase your emergency cash reserves and periodically review your asset allocation of your portfolio. Set a realistic outlook The days of stocks giving a return of over 40% are over. While it is possible some of them may give you those types of returns, it is setting yourself up for disappointment if you keep your outlook very high. Instead keep a practical outlook of earning 12-15% returns from your investments.   • Email to a friend • Article Search • View comments • Track comments • Myths about pre approved loans! A pre approved personal/home/car loan is usually offered by banks to people who have a clean track record of loan repayment history, like in my case. You get it even if you had pre closed your earlier loan amount. Some banks pre approve a loan to its own customers even if they had not taken a loan at all based on certain conditions like the cash inflow and transactions in their salary accounts or the repayment track in case of credit card holders. However, in both cases pre approved loan offers often come with a time limit to accept them. Rahul recently got a pre-approved loan. He shares his experience with us. ” Last week I got a call from my bank informing me that I have been pre approved a personal loan for Rs 2, 00,000! What?! Only recently I had successfully paid off a personal loan for 2 years! And this pre-approved loan will be at a lower rate of interest and will be disbursed within the next 48 hours. And all I required was resubmit some documents. Perfect and simple! Or is it? I am sure I am not alone here. Most of us out there at some point had similar calls from your banks! But should we jump when such an offer is made to us? Or is there anything else that we need to check before taking it up? I decided to find out. I rang up my financial consultant and he said that there are several points to be considered before taking up a pre-approved loan. What is a pre approved loan, eligibility and types of pre approved loans A pre approved personal/home/car loan is usually offered by banks to people who have a clean track record of loan repayment history, like in my case. You get it even if you had pre closed your earlier loan amount. Some banks pre approve a loan to its own customers even if they had not taken a loan at all based on certain conditions like the cash inflow and transactions in their salary accounts or the repayment track in case of credit card holders. However, in both cases pre approved loan offers often come with a time limit to accept them. There are two types of pre approved loans: unsecured and secured. Unsecured pre approved loans comprises of mainly personal loans and credit cards while the secured ones are the car loans, and even home loans. So what you need to know if you get a pre approved loan offer from your bank? Do you need it? First ask yourself if you really need the loan at all. There are times when people take the loan just because it was offered to them when in reality there was no necessity. Avoid a loan if you do not have a really pressing situation ahead of you! Remember, every loan pre approved or not comes with a cost. And at the end of the day it is you who will have to bear it. Why a pre approved loan is good! Generally, the time taken for processing of pre approved loans is much less thus reducing the risks of you missing out on the chances of getting that new car or your dream house. In-principle approvals for home loans from banks are a boon to people who have not identified a property yet. This will let the customer know how much the bank will give him and search for a property accordingly. Decide the right loan amount for you! If you decide to take up the pre approved loan the next thing to decide the exact loan amount you would need. Usually, the banks decide the pre approved loan amount based on your previous loan repayment records or your account balance, transactions and credit card transactions. And here you are in a better negotiating position. Having said that it becomes all the more important for you to decide on the loan amount based only on your requirements and not simply for the reason it is being offered to you. Check the interest rates! In the case of pre approved loans the interest rates will be slightly lesser than the rate of interest offered to other customers like in my case. My bank offered me an interest rate that was 2% less than what was offered to other customers. However, this alone does not qualify for taking up the loan. There could be other banks out there that offer the same loan amount for a cheaper 16-18%. So it is important to check the loan offers from other banks before signing on the dotted lines. It is also important to clarify with the bank about the nature of the interest, particularly for home loans, whether it is fixed or floating. You would still need the documents anyway! Often, the conditions for a pre-approved loan are more or less the same for a loan you may approach your bank for. Even for pre approved loans banks might require some documents except in the case of some in house bank customers and require the prior checks in case of home and car loans. Sometimes even a small discrepancy in the documents could be enough reason to cancel the pre approved loan. So the next time you get a mail from banks about a pre approved loan remember to look for the above details. After all, it is your money!”   • Email to a friend • Article Search • View comments • Track comments • All About LTA! Leave Travel Allowance (LTA) is granted by the employers to the employees as part of the remuneration to provide for travel expenses incurred during the year. Leave Travel Allowance also covers such expenses of the spouse, children as well as dependent parents and siblings. However, there is a restriction. The allowance is restricted to two children born on or after October 1, 1998. There is no restriction on the number of children born before this date. Expenses that Leave Travel Allowance covers Leave Travel Allowance (LTA) only covers travel expenses incurred on travelling with your family within the country; i.e. exemption can only be claimed if it is within the country under Section 10(5) of the Income Tax Act. Some other expenses which cannot be included are expenses on hotel rooms, sightseeing, food, etc. Another condition is that you must make sure to opt for the shortest possible route, only then can you claim expenses. There is also a restriction on the fare component. Tax exemption can only be claimed for economy class air fare, first class AC rail fare or first/deluxe class bus fare. However in the absence of public transport, you can hire a taxi or rent a car and claim for expenses equivalent to first class AC rail fare. Can the entire amount be claimed as an exemption? Yes, provided that the entire amount has been spent according to the tax rules specified under LTA laws. Can you claim Leave Travel Allowance every year? While you can claim LTA every year for which you will be taxed, LTA exemption can only be claimed twice in a block of four calendar years. Does claiming LTA in alternate years mean that the two year entitlement gets added together? It does. If you are entitled to an LTA of Rs.10,000 per year and do not utilize it for the the first year it is carried forward to the next year. In the second year you can claim the entire amount (Rs.20,000) as tax exempt provided you spend it according to the specification in LTA tax laws as detailed above. Carry over concession for Leave Travel Allowance Leave Travel Allowance (LTA) comes with a carry forward feature. You can carry forward your Leave Travel Allowance in the situation that it has not been used. It can be brought forward and claimed in the first year of the next block. No travel proof required for Leave Travel Allowance (LTA) Supreme Court announces that there is no need to submit proof of travel in order to claim Leave Travel Allowance. Employers while assessing the travel allowance claims, do not need to collect proof of travel to submit to the tax authorities. Though it is not mandatory for employers to demand proof, they still have the right to demand documentary proof depending on its policy. The announcement by the Supreme Court has only moved the responsibility from the employer to the employee, the assessing officer can still ask for the employee to provide details of travel. Can both spouses claim Leave Travel Allowance? If the husband and wife are benefiting from Leave Travel Allowance benefit in their respective offices, then they both have the option of claiming Leave Travel Allowance exemption from their employers. They can also get the benefit of four journeys in just one block. There is no need to make sure that they do not travel twice in the same year. Also, as long as they adhere to the definition of family members, it does not matter whether they choose to take the same family members or different ones. Family in this case consists of spouse, children, siblings and parents who are dependent on you. In the case of kids who are born on or after October 1, 1998, the exemption will be restricted to only two surviving children. The only exception for this is if after the birth of the first child, the second conception results in multiple births (twins or triplets). If both spouses travel together, can they both claim Leave Travel Allowance simultaneously? No, both spouses cannot claim Leave Travel Allowance simultaneously. Leave Travel Allowance cannot be claimed twice for the same journey.   • Email to a friend • Article Search • View comments • Track comments • More Recent Articles Are you `loan eligible' ? Savings rate – Impact on you! How is poverty calculated?! Use your credit card right! Manage your credit card!

 

How to check your Loan eligibitily

Are you `loan eligible’ ? Posted: 19 Dec 2011 04:32 PM PST Home loans are the most easily accessible financial supplement to purchase your dream home. To understand how to enhance your eligibility to apply for a home loan, make a simple self-assessment. Here is how banks do it. Credit Appraisal is the process followed by banks to determine the borrower’s ability to repay his loan as well as his trust worthiness. A prospective borrower has to go thorough the stages of credit appraisal as practiced by different banks. The main factor banks will consider is "proof" that shows that the borrower is capable of repaying the loan on time. For this, they will look into your income documents, personal credit history, current assets and liabilities, education, experience etc. Old generation banks and co-operative banks to a certain extent rely upon existing relationship or the previous experience with a client. A common pattern they follow is the sanctioning of a loan amount which will be a fixed multiple of the annual income. However, the new generation banks strictly follow their parameters. The loan eligibility is usually calculated by applying Fixed Obligations to Income Ratio (FOIR). Most banks restrict FOIR to a maximum 45-50% of monthly income. That means, considering that one needs around 45- 50% of his income for his personal expenses, all fixed obligations including the home loan applied for, should be restricted to a maximum 45-50% of his gross monthly income. The loan amount sanctioned can be calculated as below: Loan Eligibility = Gross monthly income * 45-50% – all other obligations / per lakh EMI (EMI calculated on the basis of applied tenure and rate of interest). For the business class, banks will analyze the financial statements to see how the business has been faring for the past 2-3 years considering the ITRs, Balance Sheets, P & L Accounts (audited and certified). Banks look into your credit history like existing loan repayments, mishandled accounts or delinquent credit cards. This can be checked through a database of past loans and repayments available with the Credit Bureau of India Ltd (CIBIL). You can learn how to access your CIBIL score from the following link http://www.cibil.com/accesscredit.htm. Cross checking of the income with documents like bank statements or initiating credit verifications is also part of the process. LTV is also a factor in eligibility calculation. Banks finance up to 70-80% of the property value as evaluated by the bank's evaluator. For those who have not yet decided on the property, there is an option to sanction an in-principle amount, which helps to know the amount a bank would be able to give out. To increase your loan eligibility the following can be considered: Clubbing income- Income of your spouse also can be considered if applied jointly. Increasing Tenure- When EMIs are high, eligibility will become less. The more the tenure is, less the EMI will be. So, opt for a higher tenure. Usually banks offer a maximum of 20-30 years tenure. Additional Income –Your consistent additional incomes like rental income qualify. Expected rental income from the property purchasing, performance linked pay can be considered to enhance your loan eligibility. Step-up loans- A step-up loan is a loan wherein an individual pays a lower EMI during the initial years and the same is enhanced periodically on conditions put by the banks. This is made on considering the individual's expected future salary hikes. Pre-closure of Existing Loans- Outstanding loans like car loans or personal loans may reduce one's loan eligibility. As per norms, only existing loans with over 12 unpaid instalments are taken into account while computing home loan eligibility. So, Prepaying the existing loans in full or part will help. Employer-Bank relationship- A lesser interest rate will naturally increase your eligibility. Check with the banks if there are any schemes running with your employer. Banks usually categorize companies into A,B,C based on company profiles and run different schemes like special interest rates, processing fee waiver etc. People working in MNCs are benefited out of this usually. Always remember, taking too many loans would restrict your credit worthiness. Also keep your credit score in good shape. Good and steady repayments keep you out of debt traps and will enhance your credit worthiness in future.