As we look forward to an amazing year ahead, this can be a great time to revisit and reflect on your procurement portfolio. Here is a simple 7-point checklist… Check 1: Do you have an emergency fund to tide you through emergencies? The recent covid crisis is a good reminder of the importance of an emergency fund. Salary cuts, Job losses, Medical Expenses, etc can come out of nowhere. Make sure you maintain at least 6-12 months of your Monthly Expenses Safe Debt Fund or Fixed Deposit Check 2: Is your current asset allocation mix in line with your original plan? Given the recent equity market rally, there is a good chance that your equity allocation is much higher than your original planned asset allocation. If your equity allocation exceeds your original asset allocation by more than 5%, it’s a good time to book some profits and realign them back to the original allocation. For Eg: Assume you have a long-term asset allocation of 70% Equity:30% Debt. Right now say if the asset allocation has drifted to 77% Equity:23% Debt, this is a good time to sell some equities (i.e 7% of Total Portfolio) and shift to debt. This will bring back the allocation to the original intended 70% Equity:30% Debt allocation.
There are so many instances where we are bombarded by messages promoting ‘easy and pre-approved loans.’ While one is compelled to think of these loans as simple, a lot of grunt work happens in the background. The traditional process of proposing a loan to a potential borrower has several stages of due diligence that have to be mandatorily completed by lenders and customers. Lenders must do so to ensure appropriate underwriting can be done. Especially when the ticket size of a loan is large, the number of checks and references increases to ensure the borrower’s creditworthiness and whether they will be able to repay the money without defaulting. One of the critical checks put in place by banks to help do this is credit underwriting. In the simplest terms, credit underwriting can be understood as a process wherein the lending party assesses the borrower’s creditworthiness. This helps them make the important call of granting or not granting a loan to the borrower. As for the lender, the loan underwriting process ensures that the quality of their loan book is top-notch, and the amount of risk in granting the said loan is minimal. Irrespective of the nature of the loan, credit underwriting is an indispensable part of loan processing. It includes mandatory check-boxes that need to be ticked off, which helps the lenders understand the risk. Some factors used by lenders to do this include Credit score: A good credit score indicates that the borrower has a history of timely loan repayments. Debts and liabilities: Lenders ensure that you save enough money after considering your current debts and liabilities to pay your loans without defaulting. Income: Mandatorily, you need to have proof of stable and adequate income. Collateral: Most conventional lenders will ask for collateral equal to or higher in value than the loan the borrower seeks.