Loans-- Burden or Booster...

Loans.. Loans.. Home loans, Personal Loans, Vehicle loans.. even Marriage Loans and Loans for Dowry as well these days... So why the loan system has come into light so much that everyone is able to use it.. so we will see whether it is a Burden or Booster for your career or to make your dreams come true..

So,, here we go..

Before we start.. let me tell you some facts..

Never a bank will advertise on Loans and the interest rate or the benefits for farmers even though India is majorly Agricultural Country..

Never a bank will call a farmer and ask him if he is satisfied with the services even though his transactions are more than any average person in other white collar professions.

Never a bank will send a representative to the farmer house to collect the documents or to give them the documents..

So all the benefits are for us because.. we are clever and are able to operate the mouse.. don't take your hand away.. that's ok.. I will tell you how we can be benefited from these schemes..

According to any of our parents (who are not in family business), taking a loan is a sin. A bigger sin than having an extra marital affair. So this post is strictly for youngsters as my parents will kill me if I say that I need to take loan to upgrade my car to a SUV.

Let us see the common terminology used:

Home loans, Vehicle Loans, Personal Loans.. you all know.. What is the Floating and Fixed Interest rate and how does it influence the EMI (Equated Monthly Installment or Every Month Installment as these days calculations are done on Reducing rate). So a fixed rate is the rate of interest which is fixed at the time of the loan agreement. This percentage will be decided by the bank and the bank should follow the RBI(Reserve Bank of India) guidelines in determining these rates. The fixed rate varies from bank to bank around 5-7%.

Here comes the most profitable part for banks.. FLOATING Rates.. they say it is beneficial for customers.. but let me tell you.. this is purely for making us more comfortable and to tempt us to take loans and on the top of all.. they know that we cannot predict the future or market trends as they do.. so it is a win-win situation for both customer and banks..

So why two rates???

Floating rate will be changing according to the market conditions.. and also competition among the banks will sometimes comes for the benefit of the customers. The rate keeps floating on the basis of market condition and this is again governed by the RBI guidelines (which a common man will never understand and so stick to the numbers given by the banks). Fixed rates will be 5-7% more than the Floating rates at any given time. That gives the margin for the banks.

The clever bankers will advice you to go for Fixed in case of vehicle loans and personal loans as the amount is small and it will not influence the bankers on a large extent.. But Home Loans will mostly be floating as the principal (Actual Loan Amount) is more.

So now our post: Burden or Booster..

According to me the person who doesn't take in this generation and try to live the life is a fool.. one of the study shows that, its the Americans who enjoy most of their life rather than we in east(Indians, Chinese and Japanese). It seems we do lot of hard work and save money in international banks.. where Americans take credit from the same banks at higher interest rates and live a luxurious life and die one day.. and loan is a loan for the bank.. Famous bank which almost went bankrupted when this recession started.. see how many companies in India have tie-up with them for their employees salary accounts..

So take a loan considering your repayment capability and live your life.. Don't take the burden.. You just need to spend sometime calculating the EMI.. these days lotof tools are available online which will help you in that as well. And you can manage your finances anytime. Today, when people talk about recession everywhere, see how many companies are launching their new model cars into markets.. Just imagine how many Small salaries people are able to bu at least 1BHK in a city like Mumbai.. all this is possible only because of these Loans..

Important thing is that, when you are taking a loan, you should never see the net amount you are paying unless the principal amount is very less Eg.. a Personal loan of 65000, may be after interest will be 1,00,000 which is a big difference.. but a car of 10,00,000 will be 12, 00,000 which will look ok because you are getting the car to enjoy at least.

So some people think that taking a loan is burden.. but i honestly feel that it is an opportunity given to you to grab the riches of life.. but be on your toes always.. you have a heap on your back.. so as you are enjoying your car or your dream hose.. please make sure that funds are there in your account for the EMI to swallow it or to feel the consequences.... No.. No.. don't think about them... Banks are not sweet to kick you out of your house.. they feel at home always.. and you will be sent out anytime.. so.. better take a CALCULATIVE RISK as the theory says...

Important points to note when taking a Loan:

1. Clear discussion about the Interest percentage.

2. Collect the monthly breakup signed and stamped from the bank.

3. Take a note of the ECS cheque numbers that you give them.

4. Verify the person who comes to your house for document collection.

5. Verify for any hidden costs and any insurance add ups that are added to the agreement.

6. Clearly read the stamp papers that you sign.

7. Keep a copy of the stamp papers and the house agreement, other papers that you gonna submit to bank as when you apply for takeover loan in different bank, you need copy of documents for verification.

8. Finally.. Just think once again.. IS IT A BURDEN OR A BOOSTER FOR YOU...


As always.. Comments are appreciated.. And healthy Discussion Threads.. are always encouraging..