Debt Market

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The debt instruments are based on interest and time value of money. Debt market is the financial market where fixed income securities of various types are issued, traded and settled. These securities are issued by Central and State Governments, Government Statutory Bodies, Financial Institutions, Banks, Public Sector Units and Public Ltd. Companies.

TYPES OF INSTRUMENTS

The debt instruments by Central Government are Zero Coupon Bonds, Coupon Bearing Bonds, T- Bills.

The debt instruments by State Government are Coupon Bearing Bonds.

The debt instruments by Government Statutory Body are Government Guaranteed Coupon Bearing Bonds, Debentures.

The debt instruments by Public Sector Units are PSU Bonds, Debentures, Commercial Papers.

The debt instruments by Corporate India are Debentures, Floating Rates Bonds, Zero Coupon Bonds, Commercial Papers, Inter-Corporate Deposits.

The debt instruments by Banks are Debentures, Bonds, Certificates of Deposit.

The debt instruments by Financial Institutions are Bonds, Certificates of Deposits.

WHY INVEST IN DEBT

All the debt instruments are traded on the bourses, in the same manner as equity and keep them at fair market valuations. The G-Sec market is the largest component of Indian Debt Market in terms of market capitalization, outstanding securities and trading volume. Their valuations move in tandem with the pulse of the economy. Thus, chances of being overvalued or vice-versa are non-existent. Besides, security of principal, risk-free return and financial stability are the crucial positives.

CORRELATION WITH LOAN

The G-Sec market plays a vital role in the Indian Economy as it provides the Benchmark for determining the levels of interest rates in the country through the yields on the on the G-sec which are referred to as the risk free return in an economy. GOI 10 years Bond yield is inching up persistently, previous month it has seen a 10 basis points rally thus, driving the borrowing costs skywards. Steeper the Yield-Curve, more is the Interest Rates and thus, Loan Rates. Since, loan is an inseparable part of a financial portfolio, lets discuss its whereabouts under varied categories.

Personal Loans

The Interest Rates for Personal Loans depend on factors such as you are self-employed or salaried, the status of the company working with, salary amount, your credit and payment history, whether existing customer of the bank or not and your negotiating capabilities. The Rates are somewhere between 15-20%, with Processing Fees around 0.5-2% and Prepayment Charges at 2-4%. Good deals are provided by:

1) Citibank

2) ING Vysya Bank

3) Kotak Mahindra Bank

Gold Loans

Gold Loans are getting priority against personal and other mortgage loans. The processing time is maximum of 24 hours, mostly loan is received within few hours. The rates are quite reasonable, between 10-12%, if the loan amount does not exceed 50% of the market valuation of the jewelry. The interest rate shoots up if the loan amount surpasses 80% of the jewelry valuation, it can go up to 15-18%. You are supposed to pay only the interest installment every month while the principal loan amount has to be paid lump sum at the end of the tenure. Fastest and best providers are:

1) Muthoot Finance Ltd.

2) HSBC

3) Manappuram Finance Ltd.

Education Loans

Education loans are easily available from various banks and financial institutions for the students to pursue higher educations. Tenure can be within 1-7 years and margin percentage is 5%. The rate of interest ranges from 12-18%, depending upon the bank or financial institution, the loan amount, collateral and guarantor provided. It takes about one week processing time after you have provided all the required documents in accordance with the bank. There is 0.5 % concession for girl students by most of the banks. Keeping loan rates in purview the best ones are:

1) HSBC Bank

2) Andhra Bank

3) Bank Of India

Vehicle Loans

Vehicle loans are the most easily procurable ones. The interest rates are between 12-18% depending upon the tenure and whether the car is new or used. Processing fees are fixed amounts varying between Rs.2500-5000.

The tenure spans from 1-5 years. Decent ones are:

1) ICICI Bank Ltd.

2) HDFC Bank

3) Axis Bank

Home Loans

There are umpteen alternatives available for Home Loans, but still striking a good deal is important because of the heavy loan amount involved for a long span of time. Interest Rates are around 10.25- 11.25% depending on the amount, tenure and scheme chosen i.e. proportion of fixed and floating interest rates. Processing fees is around 0.5% of the loan amount up to Rs.1 crore and no prepayment charges applied.

1) ICICI Bank Ltd.

2) SBI

3) HDFC

Business Loans

Business loans are required as the Seed Capital, for Working Capital needs and for Expansionary Plans. The necessity of financial assistance may vary from being micro to macro in amount. Over here, availability of loan and its interest rate is highly dependant on your market credibility and relationship with the lending institution or bank.

1) HSBC

2) SIDBI

3) IDBI Bank Ltd.

Please give heed to the below mentioned facts before going for any loan:

Keep Loan as your Last Resort, Not your First Choice.

· Finance maximum proportion of your monetary needs through your own means, go for minimum amount of loan.

Postpone your expenses, if possible, till you are capable of buying on your own.

Always keep in mind that gains from no stable means of investment can surpass the loss through even best of schemes.

Do compare the schemes and read the terms and conditions minutely before going for one.

Be prepared for the consequences if you default, by wildest chance.

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