Loans
Thursday, October 8th, 2009People nowadays tend to buy everything possible, by getting a loan. Buying something with a loan is not a bad idea, if you can pay it back. But, if you fail then there is a large interest waiting for you. Before you get into any debt, there are a few things to study.
Cheap loans
With inflation at an all-time low, interest rates are falling. So it is a good time to take a home loan or an educational loan. Home and educational loans tend to be the cheapest and most beneficial to the borrower. Both seem to be a good investment, in the long run. A flat bought for Rs 1 lakh, some 30 years back, is worth Rs 60 lakh today. So there is no reason why similar value appreciation shouldn’t happen over the long term to a Rs 60 lakh flat you buy today. There could be no better investment than spending for higher education, and it is sure higher education will help you earn more. Both home and student loans carry tax rebates on the interest you pay, so the loans get even cheaper. For home loans, if you have taken floating interest then it is sure you will benefit, as home loan interests have come down.
Costly loans
Purchases made using credit cards can attract the highest interest rates (over 40% yearly, when compounded), if you are not able to repay on time. Repaying only the “minimum amount” each month, too, makes it costlier, because you will pay the 40% interest on any credit card purchase you make after that, until all dues are cleared. Personal loans are also costly as they carry an interest amount of around 22%.
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