When you have options to reduce term or EMI , I think better to opt for reduce EMI that will actually increase your further prepayment capacity ,,, faster rate of loan repayment. Correct me If i'm wrong.
Re: Pre payment
by Kamal Kaushik on Dec 16, 2013 05:06 PM
Reducing term is always better than reducing EMI. Longer term simply mean you have to pay interest longer. Shorter term itself means you are prepaying every month.
"...It may seem tempting to borrow at a lower rate to close the loan with a higher rate, but you are only getting into a vicious debt trap, avoid this to the maximum extent..." -- Why ?? We save money on interest
Now days ppl are tend to go on debt in marriages too . dowry , status , pleasing friends or relatives end up in debt in marriags too...wat happines do we get after being in debt for a marriage..be wise ..wisdom rules
... the FED made $9 trillions by giving over-night loans to banks and the banks that took the loan made profit - so who lost here ? The consumer. FED gave @2.00 interest rate and banks lent it @7.00 rate, so banks made money and FED made money. So, the lesson is - DO NOT take money in high interest rates for unnecessary items.
maintain balance between investment and liabilities...it is not necessary to kill savings and prepay....properly invested savings may outgrow liabilities over a period of time...to each his own...make your own equation and be flexible to change it if you do not get desired results....ex. in the beginning prepaying home loan makes a lot of sense but when u start paying more principal than interest in you EMi it makes more sense not to prepay...
Either in current scenario or even earlier it is not possible to buy home without loan. Other valid reason is education and medical emergency where loan may be inevitable. To some extend vehicle loan can be justified if it is taken either for a small/midsize hatchback car . Taking loan to buy a high end car is not justified. All other loans like personal loan,vacation loan,Travel loan, Creditcard EMI,Icecream loan , haircut loan etc etc and all fancy products are just traps and everyone should avoid them
The subject line mentioned is the gist of leading a debt-free life. Our elders used to slog and save to give a better life to their children. Also, during those days people were quite satisfied with what they had. Of course, people yearned for things they did not have, but did not go overboard to gain them. But today's story is an anti-thesis. The distinction between requirement, need and want has become a very thin line. I have a 40x60 site on which a single storey house has been built, living with my sibling and mother. Both have families and we made a bit of loan and have cleared them. Over time, I got good jobs (and salaries) and bought a Scorpio. I had a loan on that and that really hurt. I could not make any other good investments bcos of this. I did a tactical mistake, I felt. However, since the ROI was fixed, I was shielded by the sudden increases and now I have zero loans. Meanwhile, I am now investing in a small bit of land in a remote village just to make sure I have something when I grow old. And again, I am making sure that I do not go and buy 10-20 acres of land, bcos I cannot manage nor can afford with the savings I have. Be satisfied with what you have and DO NOT make comparisons, especially lifestyles. If one follows this, I am sure he/she can live peacefully. I am not detering people from being luxurious, but aim for luxury if you can afford it.
