Skip to main content

Flat Interest Rate or Monthly Interest Rate Loans

Best SIP Funds Online 


You often get calls offering you loans at attractive interests. Some offer you a flat rate of 8 percent for three years and some offer 1.5 percent monthly interest rate. During the festive season in particular, some of us end up overusing our credit cards and such calls seem to provide an escape route. Compared to the 3 percent per month payable on credit cards, these deals may sound like music to the ears. But choosing the right deal is the real issue. Let's look into the details.


The old wisdom asks us to opt for a like-to-like comparison. All deals must be assessed in the light of effective rate of interest per year. Most home loan offers are expressed this way. So you are not asking the banker for something unheard of. Here is how it works.

Monthly interest rate offers

When you hear the monthly rate of interest you tend to get attracted to it. The biggest hook here is the comparison with the rate of interest payable on credit card. If you have accumulated a good balance on your plastic, then your point of reference is steep 3 percent rate of interest per month. However, do not fall into that mental trap. Do not be a victim of anchoring bias, as they call it in behavioural finance.

When you are out in the market to borrow you need not pay the highest rate of interest. The caller, though, may want to quickly close the sell by offering a 'small' 1.5 percent rate per month –or half of the 3 percent you would otherwise pay. Do not jump the gun.


The deal offered by the credit card issuing company need not be the best option. Ask for the interest rate to be expressed in the effective rate of interest per year. Rate of interest of 1.5 percent per month amounts to 19.56 percent per year. Personal loans are nowadays available at as low as 12 percent.


If you are employed with a blue chip company and have a good credit score then there is a fair chance that you will get better deal in the market. You can also look at a top-up loan just in case the amount is too big and you already have a home loan running.

Flat interest rate offers

The salesperson typically emphasises on the rate of interest but does not speak much about the method. The flat rate mechanism does not consider charging less interest as the outstanding principal falls over a period of time the way monthly reducing method does. This leads to higher interest payment and higher effective rate of interest for flat rate loans.


For the beginners, the monthly rest or monthly reducing interest method calculates interest on the outstanding loan each month. As you start repaying, the principal outstanding keeps falling and so does the interest. Flat rate, however, charges the same amount of interest throughout the tenure of the loan irrespective of the loan outstanding.


When a flat interest deal is offered, the individual eager to close the deal typically compares the rate on offer with the going rate in the market. If the rate on offer is lower than the going rate in the market then there is a tendency to accept the deal. But a reality check will make many decide against it. For example, 8 percent flat rate of interest offered for three years works out to 14.55 percent overall.

Other costs

Getting effective interest rates will only partly solve your problem. You will have to think about other factors such as prepayment charges and processing fee.


Processing fee is charged as a percentage of the loan availed. The more important information is – this fee can be negotiated. If you have a credit score in excess of 800 or have a long term relationship with the bank, you can ask the bank to waive the processing fee entirely or reduce it.


Prepayment charges are a heavy toll, especially if you are planning to repay the loan much before the due date. Some banks do not allow any prepayment in the first six months of the loan. Prepayment otherwise attract charges to the extent of 3-6 percent. These too can be negotiated.


If you are considering a loan just because you are facing a short term cash crunch, then you should be equally focused on these charges as much as the rate of interest. If you are looking for a credit line for just a month or two, simply opt for a balance transfer to another credit card

SIPs are when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

For further information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Popular posts from this blog

SBI Magnum Tax Gain Scheme 1993 Applcation Form

    https://sites.google.com/site/mutualfundapplications/tax-saving-mutual-funds-elss     Investment Details Basics Min Investment (Rs) 500 Subsequent Investment (Rs) 500 Min Withdrawal (Rs) -- Min Balance -- Pricing Method Forward Purchase Cut-off Time (hrs) 15 Redemption Cut-off Time (hrs) 15 Redemption Time (days) -- Lock-in 1095 days Cheque Writing -- Systematic Investment Plan SIP Yes Initial Investment (Rs) -- Additional Investment (Rs) 500 No of Cheques 12 Note Monthly investment of Rs 1000 for 6 months and quarterly investment of Rs 1500 for 4 quarters.

Birla Sun Life Tax Plan Online

Invest Birla Sun Life Tax Plan Online   An Open-ended Equity Linked Savings Scheme (ELSS) with the objective to achieve long-term growth of capital along with income tax relief for investment.   After a bad patch from 2008 to 2010, Birla Sun Life Tax Plan has made a big comeback in the last five years, with a particularly good run since 2014. The fund's rankings, which had slipped to two stars in 2011-12, recovered sharply to three-four stars in the last three years. The fund has delivered a particularly large outperformance over its benchmark and peers in the last couple of years. The fund's investment strategy focuses on a diversified and high-quality portfolio, with parameters such as capital ratios and balance-sheet strength used to judge quality. It uses a combination of top-down and bottom-up approaches to take sector/stock positions. The fund avoids highly leveraged plays. Staying more or less fully invested at all times, the fund parks roughly half of its portfoli

Should you Roll Over 1 year Fixed Maturity Plans?

The period between January and March typically sees an uptick in the launch of fixed maturity plans, or FMPs. Not this year. Instead, fund houses are busy rolling over or extending the tenure of their one- year FMPs launched last year to three years. Investors in one- year FMPs have a choice. Either redeem units or roll over to three years. If you exit now, your gains will be added to your income and taxed in line with your individual slab rate of 10, 20 or 30 per cent. If you stay invested for two more years, you pay 20 per cent tax with indexation benefit. Yields have softened in the past few months on expectations of a rate cut. If the central bank continues its soft monetary stance, yields are likely to fall further. In such a scenario, it makes sense for investors, particularly those in the 30 per cent tax bracket, to roll over their investments and lock in at a higher yield now. In a surprise move, the Reserve Bank of India cut repo rate by 25 basis

Mutual Fund Review: IDFC Premier Equity Fund

  IDFC Premier Equity Fund, which falls under the presumed high risk group of mid- and small-cap schemes, can rely on astute and timely equity picks. These make it less vulnerable to fluctuations compared with others in the category   IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes.    While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows. Thus, while an investor can always take the systematic investment plan ( SIP ) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for l

IDFC Premier Equity Fund dividend

  IDFC Mutual Fund   has announced dividend under the dividend option of   IDFC Premier Equity Fund Direct-D . The quantum of dividend shall be   R 4.3464 per unit.   The record date has been fixed as May 06, 2015. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot]
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now