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What is Credit Card Settlement & How Does It Work?

Have you heard of the term ‘settlement of credit cards’? This is an option you can rely on when you do not have the funds to pay your credit card bill in full due to the loss of a job or a financial emergency.

It involves coming to an agreement with your credit card company where you pay less than the outstanding balance to settle your credit card debt. While it can be helpful in some ways, it can also decrease your credit score, which makes it challenging for you to get access to credit in the future. Opt for it only when you really need to.

Read on to learn what is credit card settlement, the processes to follow and more.

What is Credit Card Settlement?

Credit card settlement does not mean that you clear your dues in full. Instead, it implies that you as the cardholder pay only a small part of your outstanding balance to the issuer.

Here are the reasons why you may write a settlement letter for a credit card:

If you don’t settle your credit card debt, your CIBIL score will continue to fall
The issuer may initiate legal proceedings against you if you fail to inform them about why you have defaulted on repayment and request a settlement
You may not be able to apply for another credit facility until you settle your previous credit card debt

Also Read: Benefits of Using a credit card

Process of Credit Card Settlement

Here is the credit card settlement process you will need to follow to settle your dues:

Step 1: Contact your credit card issuer or a debt settlement agency
Step 2: Write a settlement letter for a credit card stating the reason why you are unable to repay the dues (if you have filed for bankruptcy, mention that as a reason)
Step 3: If you can repay the loan in the future, mention in the letter that you wish to explore an alternative repayment approach (express your willingness to pay a lump-sum amount if you can pay it now)
Step 4: Wait for your credit card issuer to reply

Note that the credit card companies may or may not accept your settlement request.

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How Credit Card Settlement Affects Credit Scores

The settlement of credit cards negatively impacts your credit score, but not as much as not repaying your dues. In India, the credit card settlement process is quite strict. Your credit report will reflect the settlement for the next 7 years. However, your credit score will bounce back gradually when you repay your other debts responsibly.

Alternatives to Credit Card Settlement

If you can’t pay the bill in full, opting for settlement of credit cards may be the right option. However, there are some other options you can try to clear your current debt without a significant impact on your credit score:

Credit Card Balance Transfer

By choosing the balance transfer facility, you can transfer your outstanding balance from the existing card, which has a higher interest rate, to another credit card having a lower annual percentage rate (APR). This will help lower your interest rates and ensure you can repay the dues with some financial planning and prioritisation.

Debt Consolidation with Personal Loan

A personal loan has a much lower interest rate compared to the credit card APR. Hence, you can get this loan to clear your credit card dues and significantly reduce the borrowing cost. Your repayment will also be in EMIs, which can help ease the financial strain caused by a huge credit card debt.

While credit cards have a higher range of interest rates, a personal loan offers funds much more affordably. Hence, you can consider availing of a quick and hassle-free Fibe Instant Personal Loan of up to ₹5 lakhs to clear your dues. These loans come with an easy repayment schedule, which can extend up to 36 months.

Alternatively, you can opt for the Fibe Axis Bank Credit Card to enjoy added security and up to 3% cashback on your transactions. Download the Fibe App or log in to our website to apply online and enjoy a simple application process.

FAQs on Credit Card Settlement

Is credit card settlement good or bad?

Whether opting settlement of credit cards is suitable for you depends on your financial situation. Credit card settlement may be a good option if you find clearing your dues difficult. However, settlement can negatively impact your credit score. Hence, weigh its pros and cons and the alternatives before going for credit card settlement.

What is the effect of the settlement on credit cards?

Once you opt for the credit card settlement, the issuer terms your credit card account as a default.

Can I get a credit card after settlement?

While you can’t use the same credit card after settlement, you can apply for a new one once your credit score bounces back.

Does CIBIL improve after settlement?

Once you apply for credit card settlement, your CIBIL score takes a hit. However, you can bring it back up by following good credit practices. Note that it will take some time for your score to bounce back.

Access to airport lounges with Credit Cards Everything you need to know

Long security lines, crowded waiting areas and delayed flights can make your travel experience stressful. Credit cards that offer complimentary access to airport lounges provide an escape from this hustle and bustle.

Airport lounges offer you a relaxing place with comfortable seating, complimentary WiFi, and food & beverages. You can access this facility not only on travel credit cards but also on many other premium variants.

To know more about the credit cards with lounge access and how you can make the most of this facility, read on.

What are Lounge Access Credit Cards?

Access to an airport lounge is quite costly and available only to first-class and business-class travellers. However, you can also get access to airport lounges with specific credit cards. Here are some of the notable features of these credit cards:

They usually provide complimentary or discounted access to airport lounges
These credit cards allow you to benefit from comfortable waiting areas and other amenities at these lounges
Some lounge access credit cards offer air miles or other reward points, which you can use for other benefits, like discounts and offers

How to Get Access to Airport Lounges with a Credit Card?

Long layovers during travel can be dreadful. However, credit cards with complimentary access to airport lounges can come to your rescue. While these cards work in different ways, you can generally enjoy this facility by following these steps:

Step 1: Check your credit card issuer’s website to locate the partner airport lounge
Step 2: Visit the lounge and go to the check-in desk to get access
Step 3: Present your boarding pass and credit card for verification
Step 4: Once your verification is complete, the staff member will grant you access to airport lounges with a credit card

How to Check Airport Lounge Access on a Credit Card?

The issuers typically provide the details of the credit card, including the perks, rewards, and other benefits that you can enjoy on their website. Follow these simple steps to check whether your card offers complimentary visits to the airport lounge:

Step 1: Visit the official website of the card issuer
Step 2: Navigate to the credit card section and select your credit card
Step 3: Read through the features and benefits on your credit card to find out if it offers complimentary access to airport lounges

Benefits of Airport Lounge Access with Credit Cards

Thanks to credit cards, airport lounges are no longer exclusive to jet-setting elites. These are some of the advantages you can enjoy:

Depending on the issuer’s terms, lounge access is available for free or at a discounted rate with specific credit cards
You can enjoy various amenities, such as free access to a relaxing and comfortable waiting area, food, beverages, WiFi, etc.
Some credit cards also offer air miles, which you can use to enjoy discounts on flight tickets

Factors to Consider When Choosing Cards with Airport Lounge Access

Complimentary visits to airport lounges are a coveted travel perk on credit cards. However, their benefits can vary depending on the issuer’s policies. When selecting a credit card offering complementary and discounted access to the airport lounge, consider these points:

Assess the type of airport and lounges where you can get access with a credit card
Check the number of complimentary visits that the credit card entitles you to
Evaluate if the card offers lounge access to international and domestic airports or only to domestic airports and choose one based on where you travel frequently
Check whether the card provides complimentary access to lounges or at a discounted rate
Look for additional travel-related perks and other benefits, such as discounts on shopping, entertainment, etc.

To enjoy 4 complimentary visits to domestic airport lounges coupled with a wide range of discounts and offers, get the Fibe Axis Bank Credit Card. Apart from visiting the airport lounge for free once every quarter, enjoy a cashback of up to 3% on every transaction and exciting discounts on dining. Download the Fibe App or log in to our website to apply for this card to enjoy these offers and discounts now!

FAQs on Credit Cards with Complimentary Airport Lounge Access

Is airport lounge access free with a credit card?

Yes, you can enjoy complimentary visits to airport lounges with certain credit cards. Check the credit card terms and conditions to know how many visits you can get with your credit card.

What is card eligibility for airport lounge access?

Credit cards with lounge access have varied eligibility criteria. For instance, here are the basic requirements you have to fulfil to be eligible to get the Fibe Axis Bank Credit Card:

You must be a resident or non-resident Indian
You must be a resident Indian between 18 and 70 years of age

Can my wife use my credit card for lounge access?

No, the person named on the card is the one who is allowed to use the credit card lounge access facility.

How many times can we use airport lounge access?

The number of times you can enjoy credit card lounge access depends on the card you have. For instance, you get 4 complimentary domestic airport lounge access visits with the Fibe Axis Bank Credit Card.

What is complimentary domestic airport lounge access?

This refers to a feature of certain credit cards that only offer complimentary visits to domestic airport lounges.

Can I use another person’s credit card for airport lounge access?

No, you cannot access this benefit if your name is not printed on the card.

Getting your first Credit Card? Important points to know

Getting your first credit card is rewarding but can also be challenging. As someone who’s new to credit, you may not have an ideal credit score or history. This makes financial institutions hesitate when it comes to approving your application.

After all, a strong credit history and score reflect creditworthiness, whereas its absence implies a high risk of non-payment. So, how do you get a credit card with no credit history? Thankfully, today, having no credit history does not mean you can’t get a credit card.

There are several tips you can rely on to get your first card and safely build your creditworthiness. Read on for more.

Tips to get your first Credit Card

Here are some tips you can try to get credit cards for beginners:

Get a supplementary credit card

A supplementary credit card is dispatched when a primary cardholder puts in the request for it. Any primary cardholder can request a supplementary card for their family members and make them authorised users.

With this authorisation, you can use the credit card and share its benefits with the primary cardholder. Generally, supplementary cards are issued without any hassles when the primary cardholder has good creditworthiness.

Also Read: Benefits of Using Credit Card

Apply for a secured credit card

Another option is getting a secured credit card by putting up your assets, generally, a fixed deposit, as security. This works the same as a secured loan and your credit limit depends on the value of your FD or asset. Issuers offer these cards to individuals who don’t have a credit history and want to build a positive one.

Avail of a card against a savings account

Top banks in India also offer existing customers credit cards against their savings accounts. This way, you leverage your savings account to get your first credit card when you don’t have a credit history. However, this depends on the bank and you must maintain a minimum balance to qualify.

Choose a prepaid credit card

Getting advance cash can be difficult if you don’t have a credit history. Therefore, many financial institutions offer prepaid credit cards. In these types of credit cards, you can preload an amount and make purchases with those funds.

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Things to consider before getting your first card

Here are the most important points to keep in mind when getting your first credit card.

Know the types of credit cards available

Evaluate different cards, such as cashback, travel, co-branded, secured or prepaid credit cards to choose one based on your needs. Doing this ensures that you can make the most of your card, enjoying perks and saving more.

Know how grace period works

This is the duration between your purchases and the due date for your credit card bill. It generally goes up to 45 days and the issuer does not charge any interest during this period.

Opt for a lower card limit

Starting with a lower credit limit minimises your risk of overspending and ensures that you can pay the bill on time. It also helps you learn how to use a credit card the first time and manage repayment on time. This will help you build a good credit score and get affordable loans in the future.

Check the fees and charges

Being aware of the interest rates and other charges associated with the credit card is important. Credit cards come with various fees and charges like annual fees, joining fees, cash advance fees, balance transfer fees, etc.

With this information, you can choose the right terms for your first credit card and get the maximum benefits. This is important to avoid any unnecessary financial burden.

In addition to the above, you must also ensure that you choose the most secure card and take the right measures for added safety. Doing this will help protect your finances from fraud. For all these features and benefits, you can rely on the Fibe Axis Bank Credit Card.

As India’s first numberless credit card, this card enables you to add another level of security to your finances. Moreover, it gives you several benefits, such as up to 3% cashback on your spending, zero annual and joining fees and seamless UPI transactions. Download the Fibe App or register on our website to apply for it now!

FAQs on Getting Your First Credit Card

How can a person get a credit card for the first time?

To choose from the best credit cards for beginners, research and compare the available options. Then, check the eligibility criteria set by the institution and apply if you meet the requirements.

Is it easy to get the first credit card?

Getting a credit card without any credit history can be difficult since issuers need a good CIBIL score of 750 or above. However, you can get a secured credit card or an add-on credit card with ease.

How to get the first credit card with no history?

You can apply for an add-on credit card if you don’t have a credit history. You can also get a credit card against your FD or savings account, depending on the issuer.

Can I get a credit card without a salary?

Yes, you can get a secured credit card against your fixed deposit account. You can also apply for an add-on credit card if a family member is the primary cardholder.

Can I get a credit card on my first salary?

This depends on the issuers, as generally, they require salary statements of 3 months or so to evaluate your creditworthiness. You can check these details on your preferred issuer’s official website.

Travelling with a Credit Card? Important Tips To know

Travelling with a credit card can be a great move as it allows you to pay safely and enjoy a range of cost-saving benefits. These include racking up rewards points on all transactions, redeeming them for flight tickets and hotel bookings, enjoying discounts at dining/retail partners and more.

By using your credit card efficiently and optimally, you can make the most of these benefits and perks. So, read on to learn what is a travel card, tips on how to use it while travelling, and more.

What are travel Credit Cards and how do they work?

Travel credit cards have specific benefits for people who travel frequently. These cards allow you to earn rewards, which you can redeem for a variety of products and services and enjoy exclusive discounts on travel-related expenses too.

For instance, you can redeem points as air miles to book flight tickets. Furthermore, you can enjoy discounts on hotel stays, cab bookings and more. In addition to that, travelling with a credit card enables you to enjoy the following benefits:

Makes every transaction rewarding with accelerated reward points
Helps you enjoy exclusive benefits when you stay or fly with partners
Keeps the forex costs low with lower forex fees
Ensures added security with complimentary or affordable travel insurance plans
Lowers risk of theft by eliminating the need to carry substantial cash while travelling

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Tips on how to travel with Credit Card

Travel credit cards offer umpteen benefits but you cannot enjoy them to the fullest if you don’t know how to use the card. So, remember these tips when you plan on travelling with a credit card:

Inform the issuer about your travel, especially when going abroad, to avoid fraud alerts or payments being declined
Check your travel benefits and how to redeem them beforehand
Keep a tab on your spending as you will need to repay your bill in the next cycle
Evaluate partner benefits and make necessary arrangements to redeem them
Get the required insurance to keep yourself and your finances protected
Use RFID wallets to add another layer of security
Monitor your ATM transactions to keep the associated costs manageable
Research which cards are widely accepted to ensure seamless access to funds

How to choose the right Credit Card for travelling?

When selecting a travel credit card, you must compare the top options based on your travel needs and finances. Here are some points to remember when selecting a credit card for travelling:

Choose a credit card that offers maximum reward points for international transactions, if flying overseas
Opt for a card that offers maximum number of complementary visits to domestic and international lounges
Select a card that offers travel insurance
Consider a co-branded travel card for specific partner benefits
Look out for sign-up and welcome bonuses
Compare the annual fees, interest rates, ATM fees and other charges
Check your eligibility before applying

Keeping these tips in mind, you can easily get the best credit card for travelling and enjoy your trips. Ensure that you use the right security measures while travelling with a credit card.

One way to do that is by choosing secure credit cards like the Fibe Axis Bank Credit Card. This is India’s first numberless credit card, which helps keep your card details safe and is linked to your UPI ID. You can also earn up to 3% cashback on your transactions.

This credit card also comes with four complementary visits to domestic airport lounges in a year, enabling you to travel comfortably. Download the Fibe App or register on our website to apply for it now!

FAQs on Travelling on Credit Card

Is it good to use a credit card when travelling?

Yes, most issuers offer exclusive rewards and benefits to travel credit cardholders. It can also be safer than using cash, as you can block your card in case of loss or theft.

Who can get a travel credit card?

Here are a few general eligibility criteria for travel credit cards:

You must be an Indian citizen
You must be between 21 and 65 years
You must be salaried employee with minimum in-hand salary of ₹15,000 in non-metro cities and ₹18,000 in metro cities
You must have a good credit score

Can you use a credit card to pay for travel expenses?

Yes, you can pay for all your travel-related expenses, such as:

Booking flight tickets
Booking your stay
Dining
Entertainment

Can I book flight tickets with a credit card?

Absolutely! You can use a credit card for flight bookings. You can also use your air miles to get discounts.

Which is better, a travel credit card or debit card?

A credit card gives you better financial freedom than a debit card. This is because your credit card has a pre-determined limit, which isn’t linked to your bank account, like a debit card. Moreover, if you’re making payments abroad, a credit card becomes a better option as it has a low forex mark-up fee.

How to buy electronics on EMI with Credit Cards? Important points

Want to make the most of seasonal offers on electronics, gadgets and electronics? Well, by using credit cards, you can avoid making lump sum payments and convert your bill into affordable EMIs. Simply put, buying products on EMI gives you the benefit of buying now and paying in instalments.

This way, you can buy big-ticket items such as smart televisions, washing machines, refrigerators, air conditioners and more without depleting your savings. By learning how to make purchases on EMI using your credit card, you can enhance your shopping experience.

Read on to learn how to buy electronics on EMI with a credit card, the type of EMI options you can get and more.

How do Credit Card EMIs work?

The credit card EMI facility is very easy to use. For instance, if you want to buy electronics on EMI using your credit card, you can choose the EMI option at the time of payment. However, this is also available for eligible products. You will also have to choose a suitable tenure for your EMIs.

However, note that the issuer may levy an interest for the same. The interest rate depends on your card, issuer and bill amount. To calculate the EMI, your entire transaction amount plus the interest amount will be considered. Then, the total will be divided into equal instalments spread throughout your chosen tenure.

Remember that in some cases, the products you choose to buy on credit card EMIs may be eligible for no-cost EMIs. Here, the issuer will not charge any interest and only the transaction amount will be divided into equal instalments.

For instance, let’s assume you buy ₹50,000 worth of electronics on EMI and can choose the no-cost EMI option. Now, the amount will be divided as per a tenure of your choice. If you choose 10 months, the EMI may be ₹5,000. Generally, choosing the no-cost EMI option is beneficial as there are no additional costs above your bill amount.

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How to buy products on EMI with Credit Cards?

With the credit card EMI facility, you can grab exciting offers on electronics and other products without any hassles! Opting for the EMI option is as simple as paying with your credit card. Here are the steps to buy products on EMI with credit cards:

Choose a product of your choice
Check if the product and your card are eligible for EMI payments
Proceed to payment and choose the EMI option
Make a down payment, if needed, and choose a suitable tenure
Authorise the transaction to complete the payment

Upon successful authorisation, your transaction will be complete. You can check the EMI plan and other details by logging into your credit card account via net banking or using the issuer’s mobile app.

Alternatively, you can also convert your entire credit card bill into EMIs. This way, you can pay your entire credit card bill with easy monthly instalments and repay on time. You can do this by contacting the issuer’s customer support team or through your credit card account.

Factors to consider when shopping on EMI with a Credit Card

While there are many benefits of the EMI option, here are some points you must keep in mind.

Before buying the products using the credit card EMI option, make sure that your issuer provides an EMI facility on your card.
Often, issuers charge a small processing fee to convert your purchases into instalments. Knowing these charges is important as they add to your overall costs.
Keep in mind that shopping for any products on EMI will reduce your credit limit for the entire transaction amount and not just the EMI amount.
Check the interest rate offered by your issuer for the EMI option.
Choose the tenure wisely and opt for prepayment to save on interest.

Considering these factors, you can decide if shopping for electronics on EMI suits you. To enjoy other money-saving benefits, get the Fibe Axis Bank Credit Card. With it, you can get up to 3% cashback on transactions, making every payment more rewarding.

A significant benefit of this card is that you can link it with your UPI ID for convenient and safe payments. Moreover, it has zero joining and annual fees. To apply for this credit card, download the Fibe Instant Loan App or register on our website.

FAQs on Buying electronics on EMI using a Credit Card

How can I get an EMI facility for electronics shopping?

With a credit card EMI option, you can easily convert all your gadget shopping bills into affordable instalments spread across a comfortable tenure.

Can I buy electronic appliances on EMI with a credit card?

Yes, you can convert the cost of electronic appliances into EMIs at the time of purchase. You can also convert your credit card bill into EMIs. Both can attract interest, so make sure you choose a cost-effective option.

Are Amortised Loans a better option? Things you should know

Amortised loans are one of the many repayment options offered by lenders. When you opt for a loan, one of the most important factors to consider is the EMI. It includes a portion of your interest and principal, which you need to repay on a fixed date every month.

Any form of credit, where your EMI amount stays fixed for the entire tenure, is known as an amortised loan. Here, lenders create a fixed repayment schedule with equal repayments.

Read on to know what is an amortised loan, its working process, how it differs from other options and more.

What is an Amortised Loan?

An amortised loan, meaning a loan with a repayment structure where the monthly repayment amount includes both interest and principal components, is quite common.

Here, you initially pay off the interest expenses. After this, you repay the principal amount by the end of the tenure, which makes the outstanding loan amount zero.

Personal loans, education loans and auto loans are a few examples of amortised loans. However, credit cards and mortgage loans are unamortised loans.

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How Does Amortisation Work?

To understand the meaning of an amortised loan better, you need to know how it works. Firstly, the lender creates an amortisation schedule using principal, tenure, interest rates and other loan details.

This helps the borrower visualise how their EMIs get distributed across the tenure when they pay their dues. Simply put, the interest amortisation of a loan will help you calculate the monthly EMI with ease.

This type of loan repayment plan aims to clear most of the interest component initially. So, the interest amount makes up most of the EMI with the principal component low. As time passes, the principal component of an amortized loan increases. This way, both these loan components share an inverse relationship across the loan tenure.

How do Amortised Loans Differ from Other Credit Options?

In contrast to amortised payment plans, there are two other credit repayment options.

Balloon Loans

These are short-term loans, where only a portion of the principal loan amount is paid through EMIs, while the outstanding amount is paid in entirety at the end of tenure.

Revolving Loans

A credit card is a type of revolving debt where the borrower can use the credit within the sanctioned limit and pay the amount back without interest or with interest based on due dates. However, there is no fixed EMI amount and the borrower can withdraw more credit (within the limit) as and when required.

How to Calculate an Amortisation Schedule?

Here are the steps to calculate the amortisation of a loan:

Step 1: Collect all the details, such as principal amount, tenure and interest rate
Step 2: Calculate the EMI amount and monthly interest rate
Step 3: Calculate the interest on the principal for the first EMI using the monthly interest rate
Step 4: Calculate the second month’s interest using the outstanding principal from the first month
Step 5: Follow the trend to create an amortisation schedule

Calculating such loan terms manually can be a tedious and time-consuming task. Therefore, using an online amortisation calculator is a better option.

What are the Benefits of Amortisation?

Here are a few of the pros of this kind of loan and repayment structure:

Reduces the risk exposure of the lender
Helps the borrower manage EMIs with a fixed repayment schedule
Enables the borrower to visualise the loan terms and compare the best loan offer

Keeping these facts in mind, you can opt for an amortised loan over other repayment plans to avoid the burden of paying in a lump sum. If you need an easy financing solution, taking a Fibe Instant Personal Loan is a wise option. With Fibe, you can get a loan of up to ₹5 lakhs without much hassle. Download our Personal Loan App or register on our website to apply now.

FAQs on Amortised Loan

What are the types of amortised loans?

Amortised loans follow a certain payment structure and may include education loans, car loans, personal loans, etc.

What is amortised vs fixed loan?

An amortised loan requires payment in regular monthly EMIs, where the first few payments are directed towards paying the interest charges. The amount you pay towards the interest component decreases as you make each payment in an amortised loan. In a fixed loan, your interest rate, thus, your interest amount, remains fixed throughout the loan tenure.

What does 5% amortisation mean?

Amortisation refers to the spread of capital expenses over a fixed period. In a loan, 5% amortisation refers to 5% p.a. interest on the principal loan amount.

How is amortisation calculated?

For all loans, interest amortisation calculation can be done using this formula:

Net Prepayments Amount = Principal × [(1+i) n−1i×(1+i) n].

Here, i is the interest rate charges and n is the tenure. You can also use online amortisation calculators for quick and easy calculations.

Loan Underwriting: Know what it means, its types and standard rules

A loan underwriting is an important part of the loan process. It helps lenders get a clear picture of the creditworthiness of borrowers and their repayment ability. With the help of credit underwriting, lenders also determine the loan amount as well as other loan terms, including interest rate and tenure for an applicant.

Typically, lenders request various documents and details to initiate the process. Thankfully, technological advancements in the financial sector have helped automate this entire process. Read on to learn what is underwriting, its types and more.

What is Loan Underwriting?

Underwriting is a process through which lenders evaluate your creditworthiness when you apply for a loan. By approving loans to individuals or businesses with a high probability of repayment, this process helps decrease credit risk for lenders. This way, lenders are able to set benchmarks for the loan amount and the premium (interest rate) they should charge for the associated risk.

Different Types of Loan Underwriting Processes

Here are various types of loan underwriting processes you must be aware of.

Manual Underwriting

Manual underwriting includes physical inspection of the documents and collateral. Lenders use this type of underwriting process for complex and large loan applications. In such cases, lenders review your financial documents, income and other information manually.

Lenders may also assess your application manually if you are a first-time loan applicant and do not have a credit history.

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Automated Underwriting

Automated underwriting, as the name suggests, relies on technology to evaluate your loan application. It uses a technology-driven approach that includes Machine Learning, Artificial Intelligence, etc.

It determines your qualification for the loan in minutes by considering information like your income and employment, debt-to-income ratio and quality of the collateral and other details.

Rules and Standard Requirements for the Loan Underwriting Process

Now that you are aware of the loan underwriting meaning, check out the standard requirements and rules for the credit underwriting process.

Income and Employment

Lenders check your income and employment during the underwriting process to evaluate your financial health. They request your salary slips, income tax returns and other financial documents. This gives them an idea of your income and affordability.

They also check your employment details, including your position, company and work experience. With this information, they assess your employment stability before approving your loan.

Credit History

Your credit history, including your credit score, reflects your borrowing behaviour and experience with credit. Thus, the lenders assess your credit report, which typically includes your credit score from a credit bureau.

It includes your active credit accounts, outstanding dues, loan settlements, etc. This report allows them to check your creditworthiness through past repayment behaviour for loans, credit cards and more.

Debt-to-Income Ratio

This is yet another element that lenders assess during the underwriting process. It is the proportion of income you spend on repaying credit. A higher debt-to-income ratio reflects high reliance on credit and gives the impression that timely repayment of a new debt may be difficult for you. So, lenders check it to ensure you can handle repayment on time.

Investment Paperwork

The credit underwriting process also includes an assessment of your investments. Lenders ask for your investment paperwork, including your investment certificate, in case you offer your investment as collateral for the loan.

With the investment documents, they calculate the potential returns that you can get. Along with that, they also consider the maturity date of the investment.

Condition of Collateral

If you apply for a secured loan, you provide collateral as security. Lenders have the legal right to sell your assets to recover their dues if you default on repayment. Therefore, they check the condition and value of your collateral before approving your loan application.

A few examples of collateral include home, gold, car, etc. In the case of property, they check its locality, value, age and overall condition. If you offer gold, lenders assess its purity and the current gold rates.

Credit Appraisal

Once the initial steps of the process conclude, lenders move on to credit appraisal. In this step, they determine the loan amount that you qualify for. They may approve a higher loan amount if you demonstrate a healthy credit history, a stable income and employment and a low debt-to-income ratio. A healthy financial profile can also help you get lower interest rates on your loan.

Keeping in mind the growing challenge of fraud and default, a loan underwriting process offers lenders a way to reduce the risk of non-repayment. This process can take anywhere from a few hours to a few days. To make the process quick, make sure you provide all the vital information and documents.

To benefit from a quick underwriting process and get access to funds with ease, opt for Fibe Instant Personal Loans of up to ₹5 lakhs. At Fibe, you can enjoy a quick sanction, a simple application process and minimal paperwork requirements. Download the Fibe Personal Loan App or register on the website to start your journey.

FAQs on Loan Underwriting

What is loan underwriting?

A loan underwriting refers to the risk evaluation process that financial institutions carry out to assess your creditworthiness and the probability of loan repayment. It helps them reduce credit risk.

Working Capital Demand Loan (WCDL): Know its meaning and benefits

Getting a WCDL, or a working capital demand loan, is a great way to address the day-to-day financial needs of your business. This is a specialised loan to help businesses meet their short-term financial obligations and operational costs. With this loan, you can get the required funding to meet seasonal business demands or tackle unforeseen financial emergencies.

You can address various expenses with this loan, including:

Sales fluctuations
Rental and electricity bills
Payroll expenses
Accounts payables
Raw material procurement

Read on to learn the attractive features and benefits of a WCDL.

Features and Benefits of a Working Capital Demand Loan

This short-term loan offers a range of advantages including:

Quick Disbursal

A significant benefit of these loans is their approval time. Lenders typically approve these loans within a few days. They are a better funding option than traditional loans since the latter takes a long time to process. With quick access to funds, businesses can respond to emergencies on time, adapt speedily and remain competitive.

Competitive Interest Rates

The interest rates for these types of loans are nominal, making them an affordable financing option. Typically, lenders charge interest only on the loan amount that the business utilises. So, businesses do not need to pay interest on the total sanctioned loan amount.

Note that the interest rate also depends on your creditworthiness and the lenders’ policies. The associated costs are also lower, with most lenders requesting a one-time processing fee for the loan.

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Flexible Repayment Schedule

Most lenders offer a range of repayment options on working capital demand loans for convenient repayment. Based on the cash flow and affordability, businesses can opt for a monthly or quarterly EMI plan.

Businesses can also choose to foreclose the loan after the first EMI payment at any time. Lenders typically do not charge any foreclosure fees for these loans.

Easy to Renew

Another attractive feature of this loan is that you can renew it to get more funds. This can be advantageous when the initial loan amount is insufficient to cover business expenses.

Financial institutions offer loans based on the original agreement, which means that the loan amount, interest rate and repayment duration remain the same. Based on your creditworthiness and relationship with the financial institution, you can negotiate for a higher amount and other favourable loan terms too.

Pre-approved Offers

Financial companies also provide pre-approved offers on these loans. These are often rolled out based on the financial profile and profitability of a business. In case you need quick access to funds, these pre-approved offers can help.

Their processing and disbursal time is quicker since your information is already verified. Also, you can get lower interest rates on these loans based on your repayment ability.

No Requirement of Collateral

Another great benefit of these loans is that they do not need collateral as security. This is because most of the working capital demand loans are unsecured loans. In traditional loans, businesses need to provide assets as collateral, like property documents, machinery or inventory.

Also Read: Different Types of Loans that You Should Know

So, you do not need to risk your assets to get these loans. This feature benefits small businesses and startups to get financial assistance without risking their assets.

Now that you know the working capital demand loan definition, know that this form of credit can fill the gap between the inflow and payouts. Since these loans come with no restriction on end use, you can use them to address any expense related to your business. Also, this loan does not have any negative impact on the company’s equity.

An alternative way to address your financial needs is by getting a personal loan. Fibe offers Instant Personal Loans of up to ₹5 lakhs. You enjoy quick sanction, a simple application process and minimal documentation. Download the Fibe Personal Loan App today and get the funds hassle free.

FAQs on Working Capital Demand Loan

What is a WCDL in working capital?

A Working Capital Demand Loan or WCDL, is a loan that provides financial assistance to address working capital shortfalls and other short-term financial obligations of a company.

What are the features of WCDL?

A few stand-out features of working capital demand loans include quick access to financing, flexible repayment schedules, competitive interest rates and no requirement for collateral, among others.

Why is WCDL required?

Working capital demand loans help companies cover their day-to-day operational expenses, including procurement of raw materials, payroll needs, accounts payables, etc. They are suitable in managing short-term requirements, including temporary gaps or seasonal fluctuations in cash flow.

Is WCDL a term loan?

A WCDL is a term loan with a shorter timeline. This form of credit helps cover the short-term financial obligations of a business.

Credit Derivatives: Know Meaning, Various Types and Benefits

Credit derivatives are a type of financial contract that helps parties minimise their credit risk. Two parties hold these negotiable bilateral contracts privately and trade them over the counter.

In credit derivatives, creditors can transfer the credit risk of a debtor to a third party. In exchange for taking the credit risk, the third party receives a premium. The value of these derivatives relies on the value of the underlying asset.

Read on to learn more about the types of credit derivatives, their benefits and more.

Types of Credit Derivatives

Check out the various types of these contracts.

Unfunded Credit Derivatives

These do not involve fund transfers from one party to another. These types of contracts rely on a promise of payment only when the borrower defaults. Here are further classifications of these funds:

Credit Default Swap (CDS)

Under a CDS, the derivative buyer pays a premium regularly or swaps the spread to the seller. The seller, in exchange, makes the payment as per the specific conditions of the credit derivative in case the underlying borrower defaults.

Credit Swap Options

These are a financial derivative that provides holders with the right, without obligation, to enter into a contract at a specific strike price on a future date. In simple terms, holders have the ability to transfer their credit risk to another party in exchange for a fee.

Total Rate of Return Swap (TRRS)

This instrument allows the exchange of total returns of securities between two parties. In this type of derivative, one party agrees to pay the total returns to the other party. The other party, in exchange, agrees to pay a predetermined fixed or floating interest rate.

The total return includes the price change of the security or portfolio along with the income generated by it.

Benefits of Credit Derivatives

Now that you know the credit derivative meaning and the various types of contracts, check out the associated benefits.

Risk Management

A significant benefit of these financial instruments is that they help manage risk by providing a mechanism to transfer risk. This, in turn, protects participants from exposure to defaults and helps avoid potential losses.

Portfolio Diversification

These instruments also provide investors with a medium to diversify their portfolios. They do so by allowing them to gain exposure to various types of credit assets and manage risk across a wide range of entities and sectors.

Higher Liquidity

Another benefit is that they help enhance market liquidity by offering a mechanism for participants to transfer their credit risk to another party.

Greater Returns

These instruments offer market participants an opportunity to get good returns as well. They help investors invest in assets that have a higher credit risk and offer higher gains. Also, they improve the pricing of assets, which helps in efficient capital allocation.

Now that you know what is a credit derivative, use it smartly to reduce your credit risk. By eliminating it, you can diversify your investment portfolio effectively and benefit from enhanced liquidity.

Another option to bridge monetary gaps is to opt for the Fibe Instant Personal Loans of up to ₹5 lakhs. Apart from a quick sanction, you benefit from minimal paperwork and a simple application process. To start the journey, download the Fibe Personal Loan App or register on the website.

FAQs on Credit Derivatives

What are the most common credit derivatives?

Credit default swaps (CDS) are the most commonly used type of credit derivates.

What are the characteristics of a credit derivative?

A credit derivative consists of two parties, a creditor and a debtor. These privately held contracts are negotiable and traded over the counter. They help minimise credit risk, providing higher liquidity and better risk management.

What are credit derivative instruments?

A credit derivative relies on underlying instruments, including bonds, loans and debt obligations, among others.

ECS vs NACH: Full Form, Meaning & Key Differences

The importance of understanding the difference between NACH and ECS is growing as the nation moves towards digital payments. Among the many modes of electronic transfers, these are two of the most popular options.
Many companies, banks, financial institutions and merchants use ECS and NACH to receive and make payments. These options also allow automatic deduction from your bank account. While both have similar functions, knowing the difference between NACH and ECS will help you know which one to choose at the right time.
Read on to know NACH ECS meaning, NACH ECS full form, how they work, their differences and more.

What is NACH?

NACH full form is National Automated Clearing House. It is a web-based digital payment system launched by NPCI that helps banks and companies process large volumes of recurring payments quickly. It automates transactions like EMIs, SIPs, salaries, pensions and subsidies. This makes payments much faster and more reliable.

Types of NACH

Here are the two types of NACH:

NACH Credit: This is used when organisations need to send money to many people at once. Like salary credit, dividends or refunds.
NACH Debit: This is used to collect recurring payments from customers. It could be EMIs, insurance premiums, subscriptions and utility bills.

How Does NACH Work?

NACH is a secure and centralised digital payment system introduced by NPCI and used by government entities, financial institutions and many companies. With NACH, you can easily set up automated payments from your net bank account for EMIs, subscriptions, investments, etc.

After verification by the bank, NPCI and the recipient bank account, the payment gets deducted automatically per the set mandate.

What is ECS?

ECS stands for Electronic Clearing Service. It is an older RBI-introduced system that helps banks and companies handle bulk payments such as EMIs, salaries, pensions and insurance premiums. While it is still used, ECS is slowly being phased out. This is because it requires much more paperwork, branch visits and manual processing compared to faster digital systems like NACH.

Types of ECS

ECS also works in two basic forms that cover both outgoing and incoming payments:

ECS Credit: Used when organisations need to send money to many people at once. It could be a salary credit, interest payout or dividend distribution.
ECS Debit: Used when companies need to collect payments automatically. Loan EMIs, utility bills or insurance premiums.

How Does ECS Work?

ECS is a digital payment method that requires manual input to transfer funds between bank accounts. To make a fund transfer using an ECS, the bank or merchant must collect the bank account details of the customer and obtain consent from the bank.

Users can then submit the mandate to the bank and after the bank processes the request, the funds will be transferred through the clearing house.

Difference Between NACH and ECS

Here are some key points of difference to help you decide between NACH vs ECS:

Metrics	ECS	NACH
Geographical Boundaries	Limited to select centres managed by banks and RBI	Nationwide coverage for fund transfers
Transaction Type	Primarily for credit transactions	Supports both credit and debit transactions
Presentation & Settlement	Takes 3–4 days to process	Settled within 1 working day
Activation Time	Activation can take up to 30 days	Activation usually completed within 10 days
Dispute Settlement	No dedicated dispute management system	Provides a structured dispute management system
Reference Number	Does not generate a unique reference	Generates a Unique Mandate Registration Reference Number for easy tracking

ECS Return Charges

ECS return charges apply when an ECS debit request fails. This can happen due to low balance, incorrect account details or a signature mismatch. Banks usually charge ₹200 to ₹750 for each failed ECS transaction. If ECS debits fail repeatedly, it may also reflect poorly on your repayment behaviour.

NACH Return Charges

NACH return charges are applied when a NACH payment cannot be processed. Common reasons like insufficient funds, wrong mandate details or issues with the bank account can cause returns. These charges also range from ₹200 to ₹750, depending on the bank. Multiple NACH failures can also affect your reliability in the eyes of lenders.

In conclusion, ECS and NACH make it easy to complete payments on time and without much hassle. To make your transactions seamless and stress-free, you can also rely on credit cards. The Fibe Axis Bank Credit Card is one such card that offers quick and safe transactions.

With this card, you enjoy a UPI linking facility to make quick and easy transactions. You also get a host of other benefits, such as cashback of up to 3%, tap and pay features and more. Download the Fibe App or register on our website and apply today.

FAQs on Nach and ECS

What are the advantages of NACH over ECS?

NACH has a few advantages over ECS as it is available over a wider banking network in India. Further, NACH is better suited to recurring payments because ECS requires manual processing. Another key advantage of NACH is that its presentation and settlement take just 24 hours, while ECS takes 3-4 days.

What is the difference between ECS and mandate?

ECS refers to Electronic Clearing Service, a mode of making transactions. On the other hand, a mandate is the document you need to furnish to use the ECS facility.

How much are ECS return charges?

ECS return charges are not fixed and differ from one financial institution to another.

Is ECS and NACH the same thing?

They serve the same purpose, but they are not the same. ECS is the older, slower system. NACH is the newer NPCI platform that processes payments faster.