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Old 26th December 2008, 19:19   #16
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Guys, which is better?

A loan for 3 years or for 2 years, if I am considering a prepayment (prepayment penalty: 3% of remaining principal loan). Should I even go for a pre-payment?

I too am a freelancer and this ROI has been quoted by DSAs of Kotak and ICICI. The banks themselves have refused, but I guess DSAs have an arrangement with banks. The ICICI DSA has waived off processing charges and stamp charges would be 0.5% of the loan amount. ROI quoted by both is 15.5%
3 Years is better. Dont go for prepayment after 14 months.

The DSA always has arrangemnts with the bank. They absorb the procesing fees partialy if they have bettered the target allocated tot hem. They get paid better if they do out perform.

All the best and enjot your ride.
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Old 26th December 2008, 22:50   #17
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3 Years is better. Dont go for prepayment after 14 months.

The DSA always has arrangemnts with the bank. They absorb the procesing fees partialy if they have bettered the target allocated tot hem. They get paid better if they do out perform.

All the best and enjot your ride.
Thanks buddy! I was just hoping if you could elaborate a bit on your prepayment remark. Do you mean to say, if I decide to go for a prepayment, I should do it before 14 months are up?

Also, I think the prepayment penalty is incurred on principal remaining balance, so isn't it better to go for a 2 year loan? (the EMIs are Rs.12,026 per month for 2 yrs and Rs.8616 per month for 3 yrs)
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Old 27th December 2008, 18:11   #18
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Thanks buddy! I was just hoping if you could elaborate a bit on your prepayment remark. Do you mean to say, if I decide to go for a prepayment, I should do it before 14 months are up?

Also, I think the prepayment penalty is incurred on principal remaining balance, so isn't it better to go for a 2 year loan? (the EMIs are Rs.12,026 per month for 2 yrs and Rs.8616 per month for 3 yrs)
Please go through the attached excel sheet to understand loan amortization better. I have entered an example of a 5 Lakh loan at 12.5 percent and a tenure of 3 years. Please feel free to alter the values and understand the principal outstanding at any point in time.

The reason I told you about the 3 years plan is because your repayment would be lesser. Personally I advocate no prepayment / closure but investment otherwise. Please feel free to take an independent decision.
Attached Files
File Type: xls Amortization Table.xls (136.5 KB, 382 views)
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Old 27th December 2008, 19:47   #19
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Please go through the attached excel sheet to understand loan amortization better. I have entered an example of a 5 Lakh loan at 12.5 percent and a tenure of 3 years. Please feel free to alter the values and understand the principal outstanding at any point in time.

The reason I told you about the 3 years plan is because your repayment would be lesser. Personally I advocate no prepayment / closure but investment otherwise. Please feel free to take an independent decision.
Thanks Kbalii! Appreciate your help.
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Old 3rd January 2009, 12:38   #20
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Do you have an account with any of the PSU banks? In that case a loan might become very easy.

From personal experience I can tell you that a loan from a PSU bank is much more easy to service.
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Old 3rd January 2009, 23:12   #21
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True. you do get a loan in PSU based on BM discretion.
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