Quote:
Originally Posted by thefreak 
And by the way: You are going to pay 60 EMI's every month. The EMI paid in pre month EMI's are lesser than the EMI's paid in the post month EMI's. That accounts for some of the difference.
For example on a loan of 11 lakhs @ 10.75% pre month EMI scheme would get you an EMI of 23,568 and post month EMI would get you an EMI of 23,779. Net payment in starting month EMI would be 1,414,116.81 and in ending month EMI it would be 1,426, 784.94 (inclusive of all payments). The difference between the schemes is not as much as people make it out to be.
An ending month EMI of 23,779 dicounted at 6% (risk free rate of return) will give you
23,660 starting month EMI.
Discount rate = 8% (PPF return) and the ending month EMI becomes equivalent to 23621 starting month EMI.
Discount rate = 12% (something would return this much too  ) and ending month EMI becomes equivalent to 23,543 starting month EMI.
PS: I can tweak the numbers to show you which scheme is better and give you convincing reasons too. The question is which one do you want to be better ?
PPS: And dont start looking at things from the banks perspective. Look at it from your perspective. |
this is all financial jugglery that these banks do. they want to confuse the customer like cell companies are doing. what ever plan one chooses he finally ends up paying certain minimum amount to cell companies in all plans.
as you said there is huge component of interest in first EMI in pre EMI scheme. it is fine. can you elaborate how interest is accrued on day one itself? how was interest calculated and for what period? deducting approximately 9854/= rupees on day one as interest is nothing but plain cheating( as per your example 11 lakhs @10.75% per year, the interest per month) but actually they are giving a loan of 1100000-23568=1076432, collecting 9854 as interest on first day. isn't it cheating?
SBI does not charge pre EMI at all. you might have gone through an agent at dealer who quoted this. all the agents get commission from private banks where as PSU banks does not have the flexibility to offer discounts. in case of SBI all car loans are not approved at the bank branch at all. they send to one central regional office/ main branch( this is what by bank guy told me in bangalore) which sanctions it. SBI calculates interest on daily reducing balance method not even monthly reducing method