Category Archives: Debt Management

Prepay home loan or invest? – don’t get into the stupid math!

Share Button
Recently a dear friend took his family out for a special treat. The occasion? No birthdays, no anniversaries. He was celebrating the joy of being debt free!  He closed his home loan of Rs.45 lakhs in just about 5 years. Savings, bonus as well as gratuity & leave encashment earned in between switching jobs – everything went into repayment of loan. He looked happy, in control and confident as if there were endless possibilities what he could do with his surplus money which he didn’t owe to the bank anymore.

Assess the risks, not just the benefits in continuing home loan at a lower rate

Share Button
Few weeks back, I had covered an article on home loan titled ‘Prepay your home loan in small chunks and reduce your liability’.
Conventional wisdom states that one should pay off home loan as fast as possible and become debt-free. But I have come across a section of people who find it beneficial to continue their home loans! Such financial decision is guided by the following logic:

Prepay home loan in small chunks and reduce your liability:

Share Button
Ever wondered how much interest you end up paying on your home loan throughout the entire tenure. If you never pondered about this figure, it will come as a big shocker for you. Since the interest on home loan is compounded monthly, you will end up paying an amount which is near equivalent to the loan amount or most probably even higher than that. Say, for instance, you have taken a home loan of Rs.50 lakh at 10 per cent interest for a period of 20 years. The cumulative interest that is chargeable on this loan is a huge Rs.65.8 lakh. A home loan is the biggest liability an individual takes on in his lifetime and spends a major part of his working life to repay it.

Risk planning before borrowing a home loan:

Share Button
Borrowing a home loan is one of the important financial decisions in an individual’s life. Managing financial resources after taking a home loan could be as taxing as hunting for a value-for-money property. The obvious risks involved in taking up a home loan liability include sale of house by bank in the event of the borrower’s death or loan default, rise in interest rates, decrease in repayment capacity due to loss of job or other unforeseen factors. Proper risk planning will enable a home loan borrower to take care of the EMI payments and also to manage other financial goals. This includes:

Home loan rates continue to soar, what should you do OR not do?

Share Button
Home loans have turned expensive with the Reserve Bank of India (RBI) hiking borrowing rates 11 times in the last 16 months. The RBI appears resolute in continuing to implement such strict monetary measures to tame inflation in the future. Home loan customers are in a quandary as their equated monthly instalments (EMIs) are soaring and are further expected to make a deeper dent in their pockets. Should I switch to fixed rate loan or should I transfer the balance loan to a new bank are the common questions crisscrossing many heads. Prospective home loan seekers are wondering whether they should opt for fixed or floating rate loans. Let us address these issues one by one.

Are credit cards all that bad?

Share Button
Let me clarify at the beginning of this post that I am not some telemarketer or a bank employee who is trying to sell you credit cards.While the use of plastic money has gained popularity in India, there is a general perception that they are bad and should be avoided. Credit cards could pose a threat to your long term financial security if used irresponsibly. And, if used prudently, you could reap a lot of benefits without piling up unnecessary debt. These perks are: