Frequently Asked Questions: General Financial Planning & Creative Wealth
1. What is financial planning and why is it important?
Financial planning is the process of managing your money to achieve your life goals. It involves setting financial objectives, evaluating your current financial situation, developing strategies to reach your goals, and regularly reviewing and adjusting your plan. It's crucial because it provides a roadmap for your financial future, helps you make informed decisions, manages risks, and ultimately gives you peace of mind.
2. What makes Creative Wealth Management Services different from other financial advisors?
At Creative Wealth, we offer a **'single window' comprehensive solution** for all your financial needs. Unlike advisors who focus on a single product, we provide integrated services spanning investments, insurance, tax planning, and more. Our **10 years of industry experience**, a team of **certified professionals**, and a client-centric approach led by Mr. Jitender Kumar Mehta and Mrs. Mona Mehta ensure personalized, ethical, and reliable guidance tailored to your unique goals. We prioritize building long-term relationships based on trust and transparency.
3. Who can benefit from Creative Wealth's services?
Our services are designed to benefit a diverse clientele, including **Professionals, High Net-worth Individuals (HNIs), and retail investors**. Whether you are just starting your investment journey, looking to diversify a substantial portfolio, planning for retirement, securing your family's future, or optimizing your taxes, we have tailored solutions for everyone. Our aim is to help individuals at any life stage achieve their financial aspirations.
4. What types of financial goals can Creative Wealth help me achieve?
We assist clients with a wide array of financial goals, including but not limited to:
- Retirement Planning: Building a sufficient corpus for a comfortable post-work life.
- Child's Education & Marriage: Saving and investing for future significant expenses.
- Wealth Creation: Growing your assets strategically over the long term.
- Tax Optimization: Minimizing tax liabilities through smart investments.
- Risk Management: Protecting your assets and family through suitable insurance.
- Home Ownership: Planning and saving for your dream home.
5. How does Creative Wealth ensure my financial plan is personalized?
Our personalization process begins with an in-depth understanding of your current financial situation, income, expenses, existing investments, liabilities, risk tolerance, and most importantly, your short-term and long-term financial goals. We then leverage our expertise and comprehensive service portfolio to craft a customized plan that aligns precisely with your individual needs and aspirations, ensuring it evolves with your life changes.
6. Are your advisors certified and experienced?
Absolutely. Our business is headed by **Mr. Jitender Kumar Mehta (B.Com, PGDBA-Finance)** and **Mrs. Mona Mehta (B.Com, PGDBA-Marketing Gold Medalist)**, both with extensive experience. Our team comprises experienced professionals from Investment, Insurance, Marketing, Finance, and IT backgrounds. They are certified by leading regulatory bodies such as **IRDA, NCFM, AMFI, NSE, BSE, and MCX**, ensuring you receive expert and compliant advice.
7. What is the process for becoming a client of Creative Wealth?
The process is simple and client-friendly:
- Initial Consultation: Contact us via phone or email to schedule a free initial consultation.
- Needs Analysis: We'll discuss your current financial situation, goals, and risk profile in detail.
- Proposal Presentation: Based on our analysis, we'll present a tailored financial plan and recommended solutions.
- Implementation: Once approved, we assist you in implementing the plan, handling all necessary documentation.
- Ongoing Review & Support: We provide continuous monitoring, regular reviews, and adjustments to your plan as needed.
8. How do you ensure the security and confidentiality of my financial data?
We adhere to the highest standards of data security and confidentiality. All client information is stored securely, and strict protocols are in place to protect your privacy. Our robust IT infrastructure with secure systems and unlimited internet facility ensures data integrity and confidentiality. We are committed to maintaining the trust you place in us with your sensitive financial information.
9. Can I manage my financial plan completely online with Creative Wealth?
While we leverage technology for efficient operations and communication, we believe in a balanced approach. We provide a blend of digital convenience and personalized human interaction. You can initiate contact, share documents, and receive updates online. However, we do not offer a direct client login portal, ensuring that all significant discussions and planning involve direct consultation with your dedicated financial planner for truly personalized advice.
10. Where is Creative Wealth Management Services located?
Our office is conveniently located at: **GF-24, Plot No-2, Kirti Deep Building, DDA Complex, Nangal Raya, New Delhi- 110046**. You can also reach us by phone at 011-28525157, 011-32507550, or Mobile/Whatsapp at +919350141726, or email us at jitender.mehta@gmail.com. We look forward to assisting you.
Frequently Asked Questions: Life Insurance
1. What is Life Insurance and why do I need it?
Life Insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money (the benefit) upon the death of an insured person. You need it primarily to provide financial security for your dependents in your absence, ensuring they can maintain their lifestyle, cover outstanding debts, and meet future financial goals like education or marriage expenses.
2. What are the main types of Life Insurance plans available?
The main types of life insurance plans are:
- Term Life Insurance: Provides coverage for a specific period (term). It pays a death benefit if the insured dies during that term. It's generally the most affordable option.
- Whole Life Insurance: Provides coverage for your entire life, as long as premiums are paid. It also has a cash value component that grows over time and can be borrowed against.
- Unit-Linked Insurance Plans (ULIPs): A combination of insurance and investment. A portion of your premium goes towards life cover, and the rest is invested in funds chosen by you.
- Endowment Plans: Similar to ULIPs, these are savings-oriented plans that offer both life cover and a lump sum payout on maturity or death.
3. How much life insurance coverage do I need?
The ideal life insurance coverage depends on several factors: your current income, financial liabilities (loans, mortgages), number of dependents, their future financial needs (education, marriage), inflation, and your desired lifestyle for your family in your absence. A common guideline is 10-15 times your annual income, but a personalized assessment by a financial planner like us can provide a more accurate figure.
4. What is the difference between a nominee and a beneficiary?
In life insurance, the **nominee** is the person designated by the policyholder to receive the claim amount in case of the policyholder's death. They act as a trustee. The **beneficiary**, on the other hand, is the ultimate recipient of the funds. Often, the nominee and beneficiary are the same person. However, if the nominee is a minor, a legal guardian acts on their behalf until they become an adult, at which point the minor becomes the beneficiary.
5. Can I get tax benefits on Life Insurance premiums?
Yes, premiums paid for life insurance policies are eligible for tax deductions under **Section 80C of the Income Tax Act, 1961**, up to a limit (currently ₹1.5 Lakhs in a financial year). The maturity benefit or death benefit received from a life insurance policy is also generally exempt from tax under **Section 10(10D)**, subject to certain conditions.
6. What happens if I stop paying premiums?
If you stop paying premiums, the consequences vary based on the type of policy and how long you've paid:
- Term Plans: The policy will typically lapse, and coverage will cease. You won't receive any payout.
- Whole Life/Endowment/ULIPs: These plans usually have a grace period. If premiums aren't paid within that, the policy might become 'paid-up' (reduced sum assured) or lapse. For ULIPs, charges may be deducted from the fund value until it's exhausted, leading to policy termination. It's crucial to understand the implications before stopping premiums.
7. What is a Rider in Life Insurance?
A **rider** is an add-on benefit that can be purchased along with your basic life insurance policy for an additional premium. Riders enhance the coverage of your policy to include specific risks. Common riders include:
- Accidental Death Benefit Rider: Pays an additional sum if death occurs due to an accident.
- Critical Illness Rider: Provides a lump sum upon diagnosis of a specified critical illness.
- Waiver of Premium Rider: Waives future premiums if the insured becomes permanently disabled.
8. How does inflation affect my life insurance coverage?
Inflation erodes the purchasing power of money over time. A sum assured that seems adequate today might be insufficient to cover future expenses due to rising costs. It's important to **periodically review your life insurance coverage** and consider increasing it or opting for plans that have built-in inflation adjustment features to ensure your family's financial security isn't compromised in the future.
9. Can I surrender my life insurance policy?
Yes, you can surrender most life insurance policies after a certain lock-in period (e.g., typically 2-3 years for traditional plans). When you surrender, you receive a **surrender value**, which is usually less than the total premiums paid, especially in the initial years. It's generally not advisable to surrender a policy unless absolutely necessary, as it can lead to financial loss and loss of coverage. Our advisors can help you evaluate alternatives before making such a decision.
10. How can Creative Wealth help me with Life Insurance?
As authorized partners with **LIC Of India**, we offer expert guidance in choosing the right life insurance policy that aligns with your financial goals and family's needs. We help you:
- Assess your coverage requirements.
- Compare various plans (Term, Whole Life, ULIPs, Endowment) from different providers.
- Understand policy terms, conditions, and riders.
- Assist with documentation and the application process.
- Provide ongoing support for policy servicing and claims assistance.
Frequently Asked Questions: General Insurance
1. What is General Insurance and how is it different from Life Insurance?
General Insurance provides financial protection against various risks other than death, covering loss or damage to assets, health, travel, and more. It typically offers short-term coverage (usually one year). **Life Insurance**, on the other hand, specifically covers the risk of death, providing a payout to beneficiaries upon the insured's demise, and often has a longer or whole-life tenure. While life insurance protects your family's future income, general insurance protects your present assets and well-being.
2. What are the common types of General Insurance policies?
Common types of General Insurance policies include:
- Health Insurance: Covers medical expenses, hospitalization, and sometimes pre/post-hospitalization costs.
- Motor Insurance: Mandatory for vehicles, covering damages to your vehicle, third-party liability, and personal accident cover.
- Home Insurance: Protects your house and its contents against perils like fire, theft, natural disasters.
- Travel Insurance: Covers risks during travel, such as medical emergencies abroad, lost baggage, flight delays/cancellations.
- Personal Accident Insurance: Provides compensation in case of accidental death or disability.
- Commercial/Business Insurance: Covers various risks faced by businesses, like property damage, liability, etc.
3. Why is Health Insurance important, and what should I look for?
Health Insurance is crucial due to rising medical costs, ensuring you and your family have access to quality healthcare without financial strain. When choosing, look for:
- Sum Insured: Adequate coverage for potential medical emergencies.
- Network Hospitals: A wide network of cashless hospitals.
- Coverage Details: Inclusions (e.g., pre/post-hospitalization, OPD, maternity) and exclusions.
- Waiting Periods: For pre-existing diseases, specific illnesses, and maternity.
- No Claim Bonus (NCB): Benefits for not making claims.
- Renewability: Lifetime renewability is ideal.
4. Is Motor Insurance mandatory in India? What are its components?
Yes, as per the Motor Vehicles Act, 1988, it is **mandatory** to have at least a **Third-Party Liability (TPL) insurance policy** for every vehicle plying on Indian roads. The components typically include:
- Third-Party Liability: Covers damages, injury, or death caused to a third party or their property by your vehicle.
- Own Damage (OD) Cover: Covers damages to your own vehicle due to accidents, theft, fire, natural calamities (part of a Comprehensive Policy).
- Personal Accident Cover: Mandatory cover for the owner-driver against accidental death or permanent disability.
5. What is 'No Claim Bonus' (NCB) in General Insurance?
The **No Claim Bonus (NCB)** is a discount offered by general insurance companies (especially in motor and sometimes health insurance) to policyholders who haven't made any claims during the preceding policy year. It's a reward for being a careful driver or having a claim-free year. NCB accumulates year after year (up to a certain percentage) and can significantly reduce your premium upon renewal. It is also typically transferable if you switch insurers or buy a new vehicle.
6. Can I get tax benefits on General Insurance premiums?
Yes, certain types of general insurance premiums offer tax benefits. Primarily, **Health Insurance premiums** are eligible for deduction under **Section 80D of the Income Tax Act, 1961**. This includes premiums paid for self, spouse, dependent children, and parents. Other general insurance premiums like motor, home, or travel insurance generally do not offer direct tax benefits under Section 80C or 80D.
7. What is the process for making a claim in General Insurance?
The general claim process involves:
- Intimate the Insurer: Inform your insurance company immediately after the incident (accident, theft, health issue).
- Provide Details: Share all necessary information about the incident and policy details.
- Documentation: Submit required documents (e.g., police FIR for theft/major accidents, medical reports for health claims, repair estimates).
- Survey/Assessment: For property damage, the insurer may appoint a surveyor. For health, cashless facility at network hospitals or reimbursement claim.
- Claim Settlement: Once verified, the claim amount is settled as per policy terms.
8. What is 'deductible' or 'excess' in an insurance policy?
A **deductible** (also known as 'excess' in some policies) is the amount of money you, as the policyholder, must pay out-of-pocket before your insurance company starts paying for the covered losses. For example, if you have a health insurance policy with a ₹5,000 deductible, and your hospital bill is ₹50,000, you will pay the first ₹5,000, and the insurer will cover the remaining ₹45,000 (subject to policy limits). Higher deductibles usually result in lower premiums.
9. Can I transfer my No Claim Bonus (NCB) when selling my car and buying a new one?
Yes, the **No Claim Bonus (NCB)** belongs to the policyholder, not the vehicle. When you sell your old car and buy a new one, you can transfer the accumulated NCB from your old policy to your new policy. You will need to get an NCB retention certificate from your previous insurer, which is valid for a certain period (e.g., 3 years), and submit it to the new insurer when buying a policy for your new vehicle.
10. How can Creative Wealth help me choose the right General Insurance?
As authorized agents for leading general insurance companies like **Star Health & Allied Insurance Co. Ltd., Shri Ram General Insurance Co. Ltd., and Oriental Insurance Co. Ltd., and United India Insurance Co. Ltd.**, we provide expert assistance in:
- Assessing your specific risk exposure (health, motor, property, travel).
- Comparing policy features, premiums, and benefits from various insurers.
- Explaining terms like deductibles, waiting periods, and network hospitals.
- Assisting with policy procurement and documentation.
- Providing support during claim intimation and settlement processes.
Frequently Asked Questions: Share Trading (Equity, Commodities, Derivatives)
1. What is Share Trading and how does it work?
Share Trading involves buying and selling shares (equities) of publicly listed companies, as well as other financial instruments like commodities and derivatives, on a stock exchange. The goal is to profit from price fluctuations. When you buy a share, you acquire a small ownership stake in the company. If the company performs well and its value increases, the share price tends to rise, allowing you to sell it at a profit. Trading is executed through a demat account and a trading account, linked to your bank account.
2. What is the difference between Equity, Commodities, and Derivatives trading?
- Equity Trading: Involves buying and selling actual shares of companies (e.g., buying shares of Reliance or TCS). You own a piece of the company.
- Commodities Trading: Deals with buying and selling raw materials or primary agricultural products, such as gold, silver, crude oil, or agricultural produce. These are traded on commodity exchanges (e.g., MCX).
- Derivatives Trading: Involves financial contracts (like Futures and Options) whose value is derived from an underlying asset (e.g., shares, indices, commodities, currencies). You don't own the underlying asset directly, but rather speculate on its price movement. This is typically for more experienced traders due to higher leverage and risk.
3. What are Demat and Trading Accounts, and why do I need them?
To trade in the stock market, you need two primary accounts:
- Demat Account: This account holds your shares and securities in electronic (dematerialized) form, similar to a bank account holding money. It eliminates the need for physical share certificates.
- Trading Account: This account is used to place buy and sell orders on the stock exchange. It acts as an interface between your bank account, Demat account, and the stock exchange.
4. What are the risks involved in Share Trading?
Share trading, especially in derivatives and commodities, involves significant risks:
- Market Risk: Prices can fluctuate rapidly due to economic, political, or company-specific news.
- Liquidity Risk: Some shares may not have enough buyers/sellers, making it difficult to exit positions.
- Leverage Risk (in Derivatives): Using borrowed money can magnify both gains and losses.
- Company-Specific Risk: A company's poor performance can drastically reduce its share price.
- Psychological Risk: Emotions like greed and fear can lead to irrational trading decisions.
5. How can I learn about market analysis before trading?
There are two primary methods of market analysis:
- Fundamental Analysis: Involves evaluating a company's financial health, management, industry, and economic conditions to determine its intrinsic value. This is typically used for long-term investments.
- Technical Analysis: Involves studying past market data, primarily price and volume charts, to identify patterns and predict future price movements. This is often used for short-term trading.
6. What are Futures and Options (F&O) in Derivatives Trading?
Futures and **Options** are types of derivative contracts:
- Futures: An agreement to buy or sell an underlying asset at a predetermined price on a specified date in the future. They are standardized and are mandatory to execute.
- Options: Give the buyer the right, but not the obligation, to buy (Call Option) or sell (Put Option) an underlying asset at a specified price (strike price) on or before a certain date. The seller of the option is obligated to fulfill the contract if the buyer exercises their right.
7. What are the charges involved in Share Trading?
The common charges involved in share trading include:
- Brokerage: Fees charged by your stockbroker for executing trades.
- STT (Securities Transaction Tax): A direct tax levied on every purchase and sale of securities.
- Transaction Charges: Levied by exchanges (NSE, BSE, MCX).
- SEBI Turnover Fees: Charged by SEBI for regulatory purposes.
- Stamp Duty: Varies by state.
- DP Charges: Charged by the Depository Participant for holding shares in your Demat account.
- GST: Applicable on brokerage and transaction charges.
8. How does Creative Wealth help with Share Trading?
As authorized sub-brokers and authorized persons for leading firms like **Alankit Assignments Limited, SPA Capital Limited, Reliance Capital Limited, and Edelweiss Capital Limited**, and being certified by **NSE, BSE, and MCX**, Creative Wealth provides:
- Account Opening: Seamless assistance in opening Demat and Trading accounts.
- Trading Platforms: Access to robust and user-friendly trading platforms.
- Market Insights: Timely research reports, market analysis, and trading recommendations.
- Risk Management: Guidance on managing risk and understanding leverage.
- Expert Support: Dedicated support from experienced professionals to answer your queries and assist with trades.
9. Can I do Intraday Trading and what should I know about it?
Yes, **Intraday Trading** involves buying and selling shares within the same trading day, with the aim of profiting from small price movements. All positions must be squared off before the market closes. Key things to know:
- High Risk: Price volatility makes it highly risky and requires quick decision-making.
- Leverage: Brokers often provide higher leverage for intraday trades, which can magnify both profits and losses.
- Requires Discipline: Strict adherence to stop-loss limits and profit targets is crucial.
- Market Knowledge: A good understanding of technical analysis and market dynamics is essential.
10. What is 'Margin' in Share Trading?
In share trading, **margin** refers to the portion of a purchase price that an investor has to pay for a security, with the remaining portion being borrowed from a broker. It essentially allows you to buy more shares than you could afford outright. While it can magnify profits, it also significantly **magnifies losses**, as you are liable for the full value of the trade, not just your margin amount. Margin trading is common in derivatives and futures, and understanding its implications is crucial for risk management.
Frequently Asked Questions: Mutual Funds
1. What is a Mutual Fund and how does it work?
A **Mutual Fund** is a professionally managed investment fund that pools money from multiple investors to invest in securities like stocks, bonds, money market instruments, and other assets. The fund manager (or Asset Management Company - AMC) makes investment decisions on behalf of the investors. Each investor owns units of the fund, and the value of these units fluctuates with the performance of the underlying investments. It's an ideal way for retail investors to gain diversified exposure to various asset classes.
2. What are the main types of Mutual Funds?
Mutual Funds are broadly categorized based on their underlying investments and objectives:
- Equity Funds: Invest primarily in stocks, offering potential for high returns but also higher risk.
- Debt Funds: Invest in fixed-income securities like bonds and government securities, offering relatively stable returns with lower risk.
- Hybrid/Balanced Funds: Invest in a mix of both equity and debt, aiming for a balance between growth and stability.
- Solution-Oriented Funds: Designed for specific financial goals like retirement or children's education.
- Other Types: Include Index Funds, Exchange Traded Funds (ETFs), Fund of Funds, International Funds, etc.
3. What is NAV and how is it calculated?
NAV stands for Net Asset Value. It is the per-unit price of a mutual fund scheme. NAV is calculated by dividing the total value of the fund's assets (minus its liabilities) by the total number of outstanding units.
NAV = (Total Assets - Total Liabilities) / Total Number of Units Outstanding
NAV is declared at the end of each business day, and it's the price at which you buy or sell units of a mutual fund.
4. What is SIP (Systematic Investment Plan) and its benefits?
A **Systematic Investment Plan (SIP)** is a method of investing a fixed amount regularly (e.g., monthly or quarterly) into a mutual fund scheme. Benefits include:
- Rupee Cost Averaging: You buy more units when prices are low and fewer when prices are high, averaging out your purchase cost over time.
- Disciplined Investing: Encourages regular savings and investing, fostering financial discipline.
- Power of Compounding: Your investments grow over time, and returns also generate returns, significantly boosting wealth.
- Affordability: You can start investing with small amounts, making it accessible to everyone.
5. Are Mutual Funds safe? What are the associated risks?
Mutual Funds are generally considered a relatively safer investment avenue than direct stock market investing due to diversification and professional management. However, they are **not risk-free**. The value of your investment is subject to market fluctuations. Risks include:
- Market Risk: The value of the underlying securities can fall due to economic, political, or company-specific factors.
- Interest Rate Risk (for Debt Funds): Changes in interest rates can affect bond prices.
- Credit Risk (for Debt Funds): Risk of default by the issuer of the bonds.
- Liquidity Risk: Difficulty in selling certain underlying assets quickly.
6. How are Mutual Funds taxed in India?
The taxation of Mutual Funds in India depends on the type of fund (equity-oriented or debt-oriented) and the holding period (short-term or long-term capital gains).
- Equity Funds:
- Short-term Capital Gains (STCG - held for less than 1 year): Taxed at 15%.
- Long-term Capital Gains (LTCG - held for more than 1 year): Exempt up to ₹1 Lakh per financial year; above ₹1 Lakh, taxed at 10% without indexation.
- Debt Funds:
- Short-term Capital Gains (STCG - held for less than 3 years): Added to your income and taxed as per your income tax slab.
- Long-term Capital Gains (LTCG - held for more than 3 years): Taxed at 20% with indexation benefit.
7. What are Expense Ratio and Exit Load?
- Expense Ratio: This is the annual percentage of your investment that goes towards covering the mutual fund's operating expenses, including fund management fees, administrative costs, and marketing expenses. It is deducted from the fund's assets and directly impacts your returns. A lower expense ratio generally means higher returns for you.
- Exit Load: This is a fee charged by the mutual fund house when you redeem or switch your units before a specified period (e.g., 1 year). It's a percentage of the redemption value and is designed to discourage short-term investing. If you hold your investment beyond the specified period, no exit load is charged.
8. Can I switch between different Mutual Fund schemes?
Yes, you can switch your investment from one mutual fund scheme to another, or even from one fund house to another. This involves redeeming units from the first scheme and investing the proceeds into the second. Be mindful of potential **exit loads** on the redeemed fund and **tax implications** (capital gains tax) that might arise from the redemption. Our AMFI-certified advisors can help you analyze if a switch is beneficial for your portfolio.
9. How does Creative Wealth help me with Mutual Fund investments?
As authorized business associates with leading entities like **Prudent Corporate Advisory Services Limited** and certified by **AMFI**, Creative Wealth offers comprehensive mutual fund services:
- Goal-Based Planning: Aligning mutual fund investments with your financial goals (retirement, child's education, etc.).
- Risk Profiling: Helping you understand your risk appetite to recommend suitable funds.
- Fund Selection: Recommending best-performing funds across various categories and AMCs.
- SIP/Lumpsum Advice: Guiding on the most appropriate investment method for your needs.
- Portfolio Review: Regular monitoring and rebalancing of your mutual fund portfolio.
- Seamless Execution: Assistance with all documentation and online transaction processes.
10. What is 'Direct Plan' vs. 'Regular Plan' in Mutual Funds?
- Regular Plan: Involves an intermediary (like Creative Wealth) through whom you invest. It includes a small commission paid to the distributor from the fund's expense ratio.
- Direct Plan: You invest directly with the Asset Management Company (AMC) without any intermediary. The expense ratio is lower in direct plans as no distribution commission is involved.
Frequently Asked Questions: Tax Savings Bonds & Fixed Deposits
1. What are Tax Saving Bonds and how do they work?
Tax Saving Bonds (also known as Tax Saving Infrastructure Bonds or Section 80CCF Bonds, though their availability varies by government notification) are debt instruments issued by specific public sector undertakings or financial institutions. The key feature is that investments made in these bonds typically qualify for tax deductions under specific sections of the Income Tax Act (historically, Section 80CCF or 80C, depending on the bond type and year of issuance). They offer a fixed interest rate and a specified lock-in period, providing a dual benefit of wealth preservation and tax savings.
2. What is a Fixed Deposit (FD) and what are its advantages?
A **Fixed Deposit (FD)** is a financial instrument provided by banks and Non-Banking Financial Companies (NBFCs) that offers investors a higher interest rate than a regular savings account, in exchange for locking up their funds for a fixed period. Key advantages include:
- Guaranteed Returns: The interest rate is fixed at the time of deposit and does not change with market fluctuations.
- Safety: Considered one of the safest investment options, especially with scheduled banks, which are covered by deposit insurance up to a certain limit.
- Liquidity: While funds are locked in, premature withdrawal options (with a penalty) are often available.
- Flexibility: Choice of tenure and interest payout frequency (monthly, quarterly, annually, or cumulative).
3. Are Fixed Deposits eligible for tax benefits under Section 80C?
Yes, specifically **Tax Saver Fixed Deposits** are eligible for tax deductions under **Section 80C of the Income Tax Act, 1961**. However, these FDs come with a mandatory lock-in period of 5 years, during which you cannot withdraw the funds prematurely. The maximum deduction allowed under Section 80C for these and other eligible investments is currently ₹1.5 Lakhs in a financial year. Regular FDs without the 5-year lock-in do not offer 80C benefits.
4. What is the difference between cumulative and non-cumulative FDs?
- Cumulative FDs: In these FDs, the interest earned is reinvested back into the principal amount. This means you don't receive periodic interest payouts; instead, the interest compounds, and you receive the entire principal along with the accumulated interest at maturity. This option is good for long-term wealth accumulation.
- Non-Cumulative FDs: In these FDs, the interest earned is paid out to you at regular intervals (monthly, quarterly, half-yearly, or annually), as per your choice. The principal amount remains invested and is returned at maturity. This option is suitable for individuals who need a regular income stream from their investments.
5. What are the tax implications on interest earned from Fixed Deposits?
Interest earned on Fixed Deposits is fully taxable. It is added to your 'Income from other sources' and taxed as per your applicable income tax slab rates. If the interest income from an FD exceeds a certain threshold (currently ₹40,000 for general citizens and ₹50,000 for senior citizens in a financial year), banks deduct **TDS (Tax Deducted at Source)** at 10%. If you do not provide your PAN, TDS will be deducted at 20%. You can submit Form 15G/15H to avoid TDS if your total income is below the taxable limit.
6. Can I break my Fixed Deposit prematurely?
Most banks and NBFCs allow premature withdrawal of Fixed Deposits. However, if you break your FD before its maturity date, you may incur a penalty. This penalty is typically a reduction of 0.5% to 1% from the interest rate applicable for the period the FD was held. Some FDs (like Tax Saver FDs with a 5-year lock-in) might not allow premature withdrawal at all, or only under very specific, rare circumstances.
7. What is FD laddering and how can it benefit me?
FD laddering is an investment strategy where you divide a large sum of money into multiple fixed deposits with varying maturity dates (e.g., instead of one ₹5 Lakh FD for 5 years, you open five ₹1 Lakh FDs maturing in 1, 2, 3, 4, and 5 years respectively). As each FD matures, you can either renew it for a longer term at the prevailing interest rate or use the funds. This strategy offers:
- Liquidity: Ensures regular access to a portion of your funds.
- Interest Rate Risk Management: Reduces the risk of locking in all your money at a low-interest rate, allowing you to benefit from rising rates.
8. How does Creative Wealth help with Fixed Deposits and Tax Savings Bonds?
Creative Wealth assists you in optimizing your fixed-income portfolio by:
- Comparing Rates: Providing information on the best FD rates from various banks and NBFCs.
- Tax Planning: Guiding you on eligible Tax Saver FDs and bonds that fit your Section 80C requirements.
- Tenure & Payout Advice: Helping you choose the optimal tenure and interest payout frequency (cumulative vs. non-cumulative) based on your income needs.
- Diversification: Suggesting how FDs fit into your overall portfolio for stability.
- Documentation: Assisting with the necessary paperwork for opening FDs and investing in bonds.
9. Are there any alternatives to FDs for safe, fixed-income investments?
Yes, while FDs are popular, other options for safe, fixed-income investments include:
- Post Office Schemes: Such as Post Office Monthly Income Scheme (POMIS), National Savings Certificates (NSC), Kisan Vikas Patra (KVP), Public Provident Fund (PPF), etc., often government-backed.
- Debt Mutual Funds: Offer diversification and professional management, though subject to market risk and interest rate fluctuations.
- Government Bonds: Issued by central or state governments, generally considered very safe.
- Non-Convertible Debentures (NCDs): Issued by companies, offering fixed interest rates, but involve credit risk of the issuing company.
10. What factors should I consider before investing in a Fixed Deposit or Tax Saving Bond?
Before investing, consider:
- Interest Rate: Compare rates across different institutions.
- Tenure: Match the lock-in period with your liquidity needs.
- Tax Implications: Understand how interest will be taxed and if it offers 80C benefits.
- Liquidity: Assess penalties for premature withdrawals.
- Safety & Credit Rating: Especially for company FDs or bonds, check the creditworthiness of the issuer. For bank FDs, deposit insurance (DICGC) coverage.
- Inflation: Consider if the returns will outpace inflation over the long term, especially for long-tenure deposits.
Frequently Asked Questions: Post Office Schemes & Pension Schemes (NPS)
1. What are Post Office Schemes and why are they popular?
Post Office Schemes are various small savings instruments offered by India Post. They are popular for their **government backing**, which makes them extremely safe, offering guaranteed returns and often significant tax benefits. These schemes cater to a wide range of financial goals, from regular income to long-term savings and retirement planning, making them accessible and reliable investment options for millions.
2. What are some common Post Office Schemes I can invest in?
Some of the most popular Post Office Schemes include:
- Public Provident Fund (PPF): A long-term savings cum tax-saving scheme, with a 15-year tenure.
- National Savings Certificates (NSC): Fixed-income investment with a 5-year maturity, offering tax benefits under Section 80C.
- Kisan Vikas Patra (KVP): A single payment instrument that doubles the invested amount in a specified period.
- Post Office Monthly Income Scheme (POMIS): Provides a regular monthly income for a fixed tenure.
- Senior Citizen's Savings Scheme (SCSS): Designed for senior citizens, offering high interest rates and regular income.
- Sukanya Samriddhi Yojana (SSY): A government-backed savings scheme for the girl child.
3. What is the National Pension System (NPS) by PFRDA?
The **National Pension System (NPS)** is a voluntary, long-term, market-linked retirement savings scheme regulated by the **Pension Fund Regulatory and Development Authority (PFRDA)**. It is designed to enable subscribers to make systematic contributions during their working life to build a retirement corpus. Upon retirement (normally at age 60), a portion of the corpus can be withdrawn as a lump sum, and the remaining must be used to purchase an annuity (regular pension income).
4. Who can invest in NPS and what are its key benefits?
Any Indian citizen, resident or non-resident, aged between 18 and 70 years, can open an NPS account. Key benefits include:
- Long-term Wealth Creation: Market-linked returns over a long investment horizon.
- Flexibility: Choice of pension fund managers and asset allocation (Equity, Corporate Bonds, Government Securities, Alternative Assets).
- Tax Benefits: Attractive tax benefits under Sections 80C, 80CCD(1), 80CCD(1B), and 80CCD(2) of the Income Tax Act.
- Portability: Account is portable across jobs and locations.
- Low Cost: One of the lowest-cost investment products.
5. What are the tax benefits associated with NPS?
NPS offers significant tax benefits under the EEE (Exempt-Exempt-Exempt) tax regime:
- Contribution:
- Under Section 80C: Employee's contribution (up to ₹1.5 Lakhs combined with other eligible investments).
- Under Section 80CCD(1B): Additional deduction of up to ₹50,000 (over and above 80C).
- Under Section 80CCD(2): Employer's contribution (for salaried individuals) is tax-deductible up to 10% of basic salary + DA (no monetary limit).
- Accumulation: The growth of your corpus is tax-exempt.
- Withdrawal at Maturity: 60% of the corpus withdrawn as lump sum is tax-exempt; the remaining 40% (used for annuity) is also tax-exempt, though the annuity income later is taxable.
6. How do I choose between 'Active Choice' and 'Auto Choice' in NPS?
NPS offers two broad investment choices:
- Active Choice: You actively decide the percentage of your contribution to be invested in different asset classes (Equity, Corporate Bonds, Government Securities, Alternative Assets), subject to certain caps (e.g., maximum 75% in equity up to age 50, then gradually decreases). This is suitable for investors who understand market dynamics and want more control.
- Auto Choice (Life Cycle Fund): Your investments are automatically allocated across asset classes based on your age. The equity exposure gradually decreases as you get older, moving towards more conservative debt instruments. This is ideal for those who prefer a hands-off approach and systematic risk reduction over time.
7. Can I make partial withdrawals from my NPS account?
Yes, partial withdrawals are allowed from NPS after a lock-in period of 3 years from the date of opening the account. However, these withdrawals are subject to certain conditions:
- Maximum withdrawal amount is 25% of your own contributions.
- Withdrawals are permitted only for specific purposes like higher education or marriage of children, construction/purchase of a house, or treatment of critical illnesses.
- You can make a maximum of three partial withdrawals during the entire tenure of your NPS account.
8. What happens to my NPS account upon retirement (at age 60)?
Upon attaining the age of 60 (or Superannuation), an NPS subscriber has the following options:
- Withdrawal: You can withdraw up to 60% of your accumulated corpus as a tax-exempt lump sum.
- Annuity Purchase: At least 40% of the corpus must be used to purchase an annuity (a regular pension) from an Annuity Service Provider (ASP). The annuity income received thereafter is taxable as per your slab rate.
- Deferment: You can defer your lump sum withdrawal and/or annuity purchase until age 75.
- Continuation: You can continue contributing to NPS until age 75.
9. How does Creative Wealth help with Post Office Schemes and NPS?
Creative Wealth provides comprehensive guidance for both Post Office Schemes and NPS:
- Scheme Selection: Helping you choose the right Post Office Scheme (PPF, NSC, SCSS, etc.) that best fits your savings goals and risk profile.
- NPS Onboarding: Assisting with the entire process of opening an NPS account.
- Investment Choice Guidance: Helping you select between Active Choice or Auto Choice, and appropriate asset allocation within NPS.
- Tax Optimization: Advising on maximizing tax benefits through contributions to these schemes.
- Documentation & Support: Guiding you through the necessary paperwork and providing ongoing support for your investments.
10. What is the difference between NPS and traditional pension plans (like those from LIC)?
- NPS: It's a market-linked, defined contribution scheme. Your final pension corpus depends on the market performance of your chosen funds. It's regulated by PFRDA and known for its low costs and flexibility.
- Traditional Pension Plans (e.g., from LIC): These are typically insurance-based plans. They can be defined benefit (guaranteed returns) or guaranteed payout annuities. They are regulated by IRDAI and often come with higher charges and less flexibility in investment choice.
Frequently Asked Questions: PAN & ITR Services
1. What is a PAN (Permanent Account Number) and why is it important?
A **PAN (Permanent Account Number)** is a unique ten-digit alphanumeric identification number issued by the Income Tax Department of India. It is a crucial document for almost all financial transactions, including opening bank accounts, investing in mutual funds, buying/selling property, and filing income tax returns. It serves as a universal identification key for financial activities, linking all your transactions to the Income Tax Department.
2. Who needs a PAN card?
A PAN card is required by:
- Every person whose total income exceeds the maximum amount not chargeable to income tax.
- Every person carrying on any business or profession whose total sales/turnover/gross receipts are likely to exceed ₹5 Lakhs in any previous year.
- Charitable trusts.
- Individuals who wish to invest in certain financial instruments like mutual funds or stocks.
- Anyone applying for a bank loan or opening certain types of bank accounts.
- Those involved in high-value transactions.
3. What is an ITR (Income Tax Return)?
An **ITR (Income Tax Return)** is a form used by individuals and entities to declare their annual income to the Income Tax Department of India. It specifies the income earned from various sources (salary, business, house property, capital gains, other sources), deductions claimed, and the tax payable or refundable. Filing an ITR is a statutory obligation for eligible taxpayers and serves as proof of income and tax paid.
4. Who is required to file an Income Tax Return (ITR)?
Individuals and entities generally required to file an ITR include:
- Those whose gross total income exceeds the basic exemption limit.
- Those who have foreign assets or income from foreign sources.
- Individuals who want to claim an income tax refund.
- Individuals having income from business or profession.
- Companies and firms, regardless of their income or loss.
- Residents who have a specified high-value transaction (e.g., certain electricity bill payments, foreign travel expenses, high-value bank deposits) even if their income is below the taxable limit.
5. What documents are required to file an ITR?
The common documents required for filing an ITR include:
- PAN Card
- Aadhaar Card
- Form 16 (for salaried individuals)
- Bank Statements for the financial year
- Investment proofs (e.g., LIC premium receipts, PPF passbook, ELSS statements for Section 80C deductions)
- Interest certificates from banks (for FDs, savings accounts)
- Home loan statements (if applicable)
- Capital gains statements (from mutual funds, stocks)
- Rent receipts (if claiming HRA)
- Details of any other income (e.g., freelance, rental income)
6. What is the due date for filing ITR for individuals?
For most individual taxpayers whose accounts are not subject to audit, the general due date for filing Income Tax Returns is **July 31st** of the assessment year. For example, for the financial year 2024-25, the due date for filing ITR would typically be July 31st, 2025. However, these dates can sometimes be extended by the government, so it's advisable to check the latest notifications from the Income Tax Department.
7. What happens if I miss the ITR filing deadline?
If you miss the ITR filing deadline:
- You may be liable to pay a **late filing fee** (penalty) under Section 234F (e.g., up to ₹5,000 if filed by December 31st, or ₹10,000 thereafter).
- You cannot carry forward certain losses (e.g., capital losses, business losses) to offset future income.
- You may have to pay higher interest on any unpaid tax liability.
- You might miss out on claiming certain deductions.
- Processing of any tax refund will be delayed.
8. Can I revise my Income Tax Return after filing?
Yes, if you discover any omission or wrong statement in the Income Tax Return you have filed, you can file a **revised return** under **Section 139(5)** of the Income Tax Act. A revised return can be filed before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. It's crucial to ensure that the revised return is filed correctly to avoid future discrepancies.
9. What are the benefits of filing ITR, even if my income is below the taxable limit?
Even if your income is below the taxable limit, filing an ITR offers several benefits:
- Proof of Income: Serves as a valid income proof for loan applications, visa applications, etc.
- Claiming Refunds: Essential to claim a refund of any excess TDS (Tax Deducted at Source) deducted.
- Loss Carry Forward: Allows you to carry forward losses (e.g., capital losses) to offset future gains.
- Loan Eligibility: Many banks require ITR copies for loan eligibility assessment.
- Visa Applications: Often a requirement for international travel visa applications.
- Wealth Creation: It's a fundamental step towards organized financial planning and understanding your finances.
10. How can Creative Wealth assist me with PAN & ITR services?
Creative Wealth provides expert assistance to simplify your tax compliance:
- PAN Application/Correction: Guiding you through the process of applying for a new PAN card or making corrections to an existing one.
- ITR Preparation & Filing: Comprehensive support in preparing and filing your Income Tax Return accurately for various income sources.
- Document Checklist: Providing a clear list of required documents for hassle-free filing.
- Tax Planning Advice: Offering insights on how to optimize your taxes through eligible deductions and investments.
- Query Resolution: Answering all your queries related to PAN, ITR, and other tax matters.
Frequently Asked Questions: PAN & ITR Services
1. What is a PAN (Permanent Account Number) and why is it important?
A **PAN (Permanent Account Number)** is a unique ten-digit alphanumeric identification number issued by the Income Tax Department of India. It is a crucial document for almost all financial transactions, including opening bank accounts, investing in mutual funds, buying/selling property, and filing income tax returns. It serves as a universal identification key for financial activities, linking all your transactions to the Income Tax Department.
2. Who needs a PAN card?
A PAN card is required by:
- Every person whose total income exceeds the maximum amount not chargeable to income tax.
- Every person carrying on any business or profession whose total sales/turnover/gross receipts are likely to exceed ₹5 Lakhs in any previous year.
- Charitable trusts.
- Individuals who wish to invest in certain financial instruments like mutual funds or stocks.
- Anyone applying for a bank loan or opening certain types of bank accounts.
- Those involved in high-value transactions.
3. What is an ITR (Income Tax Return)?
An **ITR (Income Tax Return)** is a form used by individuals and entities to declare their annual income to the Income Tax Department of India. It specifies the income earned from various sources (salary, business, house property, capital gains, other sources), deductions claimed, and the tax payable or refundable. Filing an ITR is a statutory obligation for eligible taxpayers and serves as proof of income and tax paid.
4. Who is required to file an Income Tax Return (ITR)?
Individuals and entities generally required to file an ITR include:
- Those whose gross total income exceeds the basic exemption limit.
- Those who have foreign assets or income from foreign sources.
- Individuals who want to claim an income tax refund.
- Individuals having income from business or profession.
- Companies and firms, regardless of their income or loss.
- Residents who have a specified high-value transaction (e.g., certain electricity bill payments, foreign travel expenses, high-value bank deposits) even if their income is below the taxable limit.
5. What documents are required to file an ITR?
The common documents required for filing an ITR include:
- PAN Card
- Aadhaar Card
- Form 16 (for salaried individuals)
- Bank Statements for the financial year
- Investment proofs (e.g., LIC premium receipts, PPF passbook, ELSS statements for Section 80C deductions)
- Interest certificates from banks (for FDs, savings accounts)
- Home loan statements (if applicable)
- Capital gains statements (from mutual funds, stocks)
- Rent receipts (if claiming HRA)
- Details of any other income (e.g., freelance, rental income)
6. What is the due date for filing ITR for individuals?
For most individual taxpayers whose accounts are not subject to audit, the general due date for filing Income Tax Returns is **July 31st** of the assessment year. For example, for the financial year 2024-25, the due date for filing ITR would typically be July 31st, 2025. However, these dates can sometimes be extended by the government, so it's advisable to check the latest notifications from the Income Tax Department.
7. What happens if I miss the ITR filing deadline?
If you miss the ITR filing deadline:
- You may be liable to pay a **late filing fee** (penalty) under Section 234F (e.g., up to ₹5,000 if filed by December 31st, or ₹10,000 thereafter).
- You cannot carry forward certain losses (e.g., capital losses, business losses) to offset future income.
- You may have to pay higher interest on any unpaid tax liability.
- You might miss out on claiming certain deductions.
- Processing of any tax refund will be delayed.
8. Can I revise my Income Tax Return after filing?
Yes, if you discover any omission or wrong statement in the Income Tax Return you have filed, you can file a **revised return** under **Section 139(5)** of the Income Tax Act. A revised return can be filed before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. It's crucial to ensure that the revised return is filed correctly to avoid future discrepancies.
9. What are the benefits of filing ITR, even if my income is below the taxable limit?
Even if your income is below the taxable limit, filing an ITR offers several benefits:
- Proof of Income: Serves as a valid income proof for loan applications, visa applications, etc.
- Claiming Refunds: Essential to claim a refund of any excess TDS (Tax Deducted at Source) deducted.
- Loss Carry Forward: Allows you to carry forward losses (e.g., capital losses) to offset future gains.
- Loan Eligibility: Many banks require ITR copies for loan eligibility assessment.
- Visa Applications: Often a requirement for international travel visa applications.
- Wealth Creation: It's a fundamental step towards organized financial planning and understanding your finances.
10. How can Creative Wealth assist me with PAN & ITR services?
Creative Wealth provides expert assistance to simplify your tax compliance:
- PAN Application/Correction: Guiding you through the process of applying for a new PAN card or making corrections to an existing one.
- ITR Preparation & Filing: Comprehensive support in preparing and filing your Income Tax Return accurately for various income sources.
- Document Checklist: Providing a clear list of required documents for hassle-free filing.
- Tax Planning Advice: Offering insights on how to optimize your taxes through eligible deductions and investments.
- Query Resolution: Answering all your queries related to PAN, ITR, and other tax matters.
Frequently Asked Questions: Credit Cards
1. What is a Credit Card and how does it work?
A **credit card** is a payment card issued to users to enable the cardholder to pay a merchant for goods and services based on the cardholder's promise to the card issuer to pay them back. The card issuer grants a line of credit to the cardholder, from which they can borrow money for purchases. You can spend up to your credit limit and then have a billing cycle (usually 30 days) to repay the amount. If you pay the full outstanding balance by the due date, you generally don't incur interest. If not, interest is charged on the unpaid balance.
2. What are the benefits of using a Credit Card responsibly?
Used responsibly, credit cards offer several benefits:
- Building Credit Score: Regular and timely payments build a strong credit history, essential for future loans.
- Convenience & Security: Cashless transactions, safer than carrying large amounts of cash, and protection against fraud.
- Rewards & Benefits: Cashback, reward points, air miles, discounts, and exclusive offers on purchases.
- Emergency Funds: Provides a financial safety net for unexpected expenses.
- Interest-Free Period: Up to 45-50 days of interest-free credit if the full amount is paid by the due date.
3. What is a Credit Score and why is it important for Credit Cards?
A **Credit Score** is a three-digit number that represents your creditworthiness. It's calculated based on your borrowing and repayment history. A higher credit score (typically 750+) indicates a lower risk to lenders. For credit cards, a good score can help you:
- Get approved for new credit cards with higher limits.
- Qualify for premium credit cards with better rewards and benefits.
- Negotiate lower interest rates on loans (home, car, personal) in the future.
4. What are the common charges associated with Credit Cards?
While convenient, credit cards come with various charges:
- Annual Fee: A recurring fee for holding the card (though many cards offer waivers).
- Interest Charges: Applied on outstanding balances if not paid in full by the due date (can be very high, e.g., 2.5-3.5% per month).
- Late Payment Fee: Charged if the minimum due amount is not paid by the due date.
- Cash Advance Fee: Charged for withdrawing cash using your credit card, along with immediate interest.
- Foreign Transaction Fee: For transactions made in foreign currency.
- Over-limit Fee: If you spend more than your credit limit.
- GST: Applicable on most fees and interest charges.
5. What is the minimum due amount on a Credit Card bill?
The **minimum due amount** is the smallest amount you must pay by the due date to keep your credit card account active and avoid late payment charges. It's usually a small percentage (e.g., 5%) of your total outstanding balance, plus any EMIs, overdue amounts, or applicable taxes. While paying only the minimum due avoids late fees, it means the remaining balance carries forward, and high interest charges will be applied, which can quickly lead to debt accumulation. It's always advisable to pay the full outstanding amount.
6. How can I use a Credit Card to improve my credit score?
To improve your credit score using a credit card:
- Pay on time: Always pay your bills by the due date. Payment history is the most important factor.
- Pay in full: Try to pay the entire outstanding balance, not just the minimum due, to avoid interest and show responsible behavior.
- Keep utilization low: Use less than 30% of your credit limit. For example, if your limit is ₹1 Lakh, try to keep your spending below ₹30,000.
- Don't close old accounts: Older accounts show a longer credit history.
- Limit new applications: Avoid applying for multiple credit cards simultaneously.
7. What should I do if my Credit Card is lost or stolen?
If your credit card is lost or stolen, immediately:
- Block the card: Contact your bank's customer service or use their mobile app/internet banking to block the card immediately. This prevents unauthorized transactions.
- File a Police Report: Especially if you suspect theft, file an FIR (First Information Report) with the police. This is crucial for liability protection and may be required by the bank.
- Check statements: Monitor your statements for any suspicious transactions after reporting the loss.
- Apply for a replacement: Request a new card from your bank.
8. Is it advisable to take a cash advance on my Credit Card?
Generally, taking a **cash advance** on a credit card is **not advisable** unless it's an extreme emergency. This is because:
- High Fees: A flat cash advance fee (e.g., 2.5% to 3% of the amount) is charged immediately.
- Immediate Interest: Interest starts accruing from the day of withdrawal; there is no interest-free period for cash advances.
- High Interest Rates: Cash advance interest rates are often higher than purchase interest rates.
9. How can Creative Wealth help me with Credit Cards?
As an authorized associate, specifically with **LIC Cards Services Limited**, Creative Wealth assists you in navigating the credit card landscape by:
- Needs Assessment: Helping you understand if a credit card is right for you and what type of card (rewards, travel, cashback) suits your spending habits.
- Comparison & Selection: Guiding you through various credit card offerings from different banks, comparing their features, fees, interest rates, and benefits.
- Application Assistance: Streamlining the application process, ensuring all documentation is correctly submitted.
- Understanding Terms: Explaining the fine print, fees, interest rates, and responsible usage guidelines.
- Credit Score Guidance: Offering advice on how to build and maintain a healthy credit score using your card.
10. What is 'Credit Utilization Ratio' and why is it important?
Your **Credit Utilization Ratio** (CUR) is the percentage of your total available credit that you are currently using. It's calculated by dividing your total outstanding credit card balance by your total credit limit. For example, if you have a credit limit of ₹1 Lakh and an outstanding balance of ₹30,000, your CUR is 30%.
It is a significant factor in your credit score. Lenders prefer to see a low credit utilization ratio, ideally **below 30%**. A high CUR suggests that you are over-reliant on credit and might be a higher credit risk, which can negatively impact your credit score.
