The option of Equated Monthly Installments have attracted many a men. Nowadays there is option available to purchase almost anything under the sun and pay the amount in EMIs. This has increased the buyer capacity as now even a person who can afford some 50,000 bugs can easily go for any item that is going to cost him up to 3,00,000 bugs.
Lets take a very simple example:
Suppose we want to buy a car that is priced at 2,90,000 approx. Now if i give some 60,000 as down payment and go for car loan at a rate of 12% p.a. then the balance value comes to 5000 per month approx for five years. To make things even more lubricating i make the down payment through my credit card and convert the transaction into EMIs as well. This leaves me paying almost nothing at the point of initial purchase. So i am delighted but when i get to see the reality i end up paying some 3,70,000 for the entire transaction. But looking at it with the perspective that you get to own an item immediately while you keep on paying for the next 5 years is very attractive.
Problem occurs when a person gets too much involved in this EMI web and something like a market crash or recession happens. Now that person is faced with the challenging problem of paying these EMIs in time and how to manage it. Let me give you an example: One of my friends who was working as a Tech. Lead in a leading MNC with earnings amounting to 75K per month. He was married and a proud father of a 2 year old daughter. He had purchased a house in Ghaziabad [EMI: 38,000] and a beautiful car [EMI: 5600]. At the time of recession last year end, he faced a salary cut and his net income was reduced to some 40,000 rupees per month. Now the problem that he faced must be pretty clear to all of you. He had a fixed expense of Rs. 43,600 per month and add to that the cost of living of a family in Ghaziabad.
The reason i took this topic up was to address all of the people out there who are very fond of EMI and to tell them that this is a wonderful offer and is very helpful when you are in need but at the same time it is very tempting and people are often attracted to it. This is an option provided for the general people to support them fulfil their dreams. It is my humble request that please do not use it unless you really feel the need of it. I am in no sense against the EMI option but one should exercise it wisely. The rising prices of the Real Estate makes it almost impossible to purchase a house without availing the Home Loan option. But luxuries can be avoided. If you remember we had a Bollywood movie by the name of Ta Ra Rum Pum in which similar subject was showcased where when Saif loses his job he loses almost everything and finally ends up without a place to live in.
The EMI option no doubt has brought a spark amongst the buyers, it is a very good option but should be used wisely and only when there is no other option. This should never be used as the first option. This has definitely brought many things within the reach of a middleman which were otherwise a dream for them but nothing comes easy and one has to pay a good price for everything.
Lets take a very simple example:
Suppose we want to buy a car that is priced at 2,90,000 approx. Now if i give some 60,000 as down payment and go for car loan at a rate of 12% p.a. then the balance value comes to 5000 per month approx for five years. To make things even more lubricating i make the down payment through my credit card and convert the transaction into EMIs as well. This leaves me paying almost nothing at the point of initial purchase. So i am delighted but when i get to see the reality i end up paying some 3,70,000 for the entire transaction. But looking at it with the perspective that you get to own an item immediately while you keep on paying for the next 5 years is very attractive.
Problem occurs when a person gets too much involved in this EMI web and something like a market crash or recession happens. Now that person is faced with the challenging problem of paying these EMIs in time and how to manage it. Let me give you an example: One of my friends who was working as a Tech. Lead in a leading MNC with earnings amounting to 75K per month. He was married and a proud father of a 2 year old daughter. He had purchased a house in Ghaziabad [EMI: 38,000] and a beautiful car [EMI: 5600]. At the time of recession last year end, he faced a salary cut and his net income was reduced to some 40,000 rupees per month. Now the problem that he faced must be pretty clear to all of you. He had a fixed expense of Rs. 43,600 per month and add to that the cost of living of a family in Ghaziabad.
The reason i took this topic up was to address all of the people out there who are very fond of EMI and to tell them that this is a wonderful offer and is very helpful when you are in need but at the same time it is very tempting and people are often attracted to it. This is an option provided for the general people to support them fulfil their dreams. It is my humble request that please do not use it unless you really feel the need of it. I am in no sense against the EMI option but one should exercise it wisely. The rising prices of the Real Estate makes it almost impossible to purchase a house without availing the Home Loan option. But luxuries can be avoided. If you remember we had a Bollywood movie by the name of Ta Ra Rum Pum in which similar subject was showcased where when Saif loses his job he loses almost everything and finally ends up without a place to live in.
The EMI option no doubt has brought a spark amongst the buyers, it is a very good option but should be used wisely and only when there is no other option. This should never be used as the first option. This has definitely brought many things within the reach of a middleman which were otherwise a dream for them but nothing comes easy and one has to pay a good price for everything.
Really a meaningful blog...
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