utter rubbish logic... the sooner u get rid of your loans, the more you save... in a span of 10 yrs, even at 9 pc interest...a 25L loan would end up being 38-40L... which is much much more than the amt a person would save with his tax benefits.. Grow up rediff!!
Can someone send this author to elementary school. If fees is issue I can contribute some..Well on serious note 1)Savings on principal is negligible as most people have PF, Insurance etc that adds up close to 1 lakh which is the limit.So even if they manage say 20-30 thousand in principal the saving is max rs 7-8 thousands. 2)Now coming to interest.. When you pay interest of 1.5 lakhs you can save max 40,000 in tax... Say all together 1 2 extreme case tax saving is at the max 50,000. 3)Now calculate how much interest you ahve to pay to the bank to make this saving every year. Interests paid is lost money .Principal atleast you are reducing your balance. 4)If you prepay you dont have to pay interest. Whatever you prepay is deducted from principal and remaing term reduces drastically . 5)To save 50000 you pay the bank 1.5 lakhs as interest does that make sense? If you prepay you dont have to pay interste. thats huge loss to bank thats why these articles. 6)Take a simple excel sheet and calculate. make a even assumption. If you dont pay the interest every month for next 15 years and save that even in low return FD or SIP check what you will get most people ignore this part and doent realize the benefit of prepayment.
Re: Can someone send this author to school !
by Duman on Nov 19, 2010 02:45 PM
Superbly said... Further, we get tax benefit or not, be always without loan.. load steals our sleep
This is a typical fallacy purported by all the finance companies and banks. If a person pays Rs 1,50,000/- as interest he gets max benefit of 30,000/- as tax exepmtion.In actual practice tax benefit comes to about 20,000/- to 25,000/- because some income falls in the lower bracket. Thus you pay 1,50,000/- to bank as interest to save 20,000/- to 30,000/- on account of tax.Thus incurring a net loss of Rs 1,30,000/- to Rs 1,20,000/-. If you can prepay your loan prepay and save capital instead paying interest to bank and losing money.
Re: False logic
by CBRCODER on Nov 19, 2010 11:52 AM
Very true. I would say even if it matters, it's wise to pay to Government of India then to pay banks like ICICI, HDFC etc.
The case Rediff gave is totally FAKE just to spread message it's good to live in debt
