This is good news for the consumers who want buy their dream car. Nowadays buying a car become necessary in our life and all the banks offer auto loans for buying a car. In the last year, the growth of the car loans is less than 1 percent, it shows that the price is playing the vital role in the purchasing decision. Most of the sales are done through the bank loans. To stimulate the car loans growth, banks are planning to reduce the interest rates atleast by 0.25 basis points.

The slowdown has started from the Diwali season. Even for the festival, there was a decline in the sales growth. This reduction in the price would definitely trigger the growth and will help the consumers to buy cars in lesser home loans rates. In my earlier articles, I have explained about better way for financing your car and the car insurance details. Please read the following articles to know more about this related subject:

• What you should know about car insurance?
• How to finance buying a new car?
• Mystery of petrol price hike

If you have any questions about the car insurance or car loans, please write in the comments section. If you are interested in receiving the future articles, please subscribe here.

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Buying a car becomes necessary in the young generation of India. In the last decade, car means the symbol of luxury and extra expenses for a family. The more preference given to buying a house as the necessary to run a life. The perception of people have changed over years, now most of them feel that owning a car is necessary for the life and it takes preference over buying a house. But, how they are financing the purchase of a car is not well prepared by them. However, car becomes necessary, it is not an assets for you in the future. It is depreciable asset and can not consider under the investment category. Lets discuss on what is the ideal financial plan to buy a car. If you like this article, please subscribe to our future articles here.

• What you should know about Car Insurance?
• Mystery of Petrol Price Hike
• Why the Oil price crisis in India?
• Books : Tax Planning

Cost of Car

Once you have decided to buy a new car, lets finalize the budget for buying a car. The idea for the budget is depends on the financial status of the buyer. Then start identifying the make and model of the car in the show rooms. Note that the budget and actual cost of the car may differ because it is difficult to estimate the exact price of the car without talking to the car dealers. So, prepared for the minor difference in the budget. Another important point is that, if you are buying the car in loan, don’t go for the higher end models with higher budget, you will have to pay the higher EMI in the future.

Cash or Loan

If you have decided the budget for the car, next plan should be how to finance your car?. It is always recommended to buy the car using the cash if you have it in the savings. Don’t have it in mind that car should be bought in loan. You go for loan only when you don’t have the cash in hand. As I have already pointed out, car is depreciable asset.

Prepare for the downpayment

If you don’t have the cash, then only option to buy the car is through car loans. Most of the banks offer car loans up to the 85% value of the car. The remaining amount has to be put as the down payment by the buyer. You have to plan for saving the money for down payment. If you have the surplus cash, put all the money in the down payment and reduce the loan amount. It will significantly reduce the loan duration. If you are paying for the long duration, the outgo of the interest payment would be very high. In the normal scenario, banks would offer the car loan in the period ranging from 4 years to 7 years.  Not more than that.

Don’t take the personal loans

It is the biggest mistake done by many of us, taking the personal loans or using the credit card for financing the car. If you have it in your mind, don’t buy a car now. The interest rates for personal loans and credit cards are very high.

Plan for other expenses

I have noted that, many of us while buying a car, they are not keeping in mind that there are lot of expenses associated with maintaining a car. One of the recurring expenses is buying an insurance. If you buy a car worth Rs. 10 lacs, the first year insurance premium would be approx. Rs. 30000. It is not a small amount to ignore. Apart from the insurance, there are lot of expenses for servicing the car. think about all the expenses before buying a car.

I hope this article would have provided some basic idea about planning to buy a car. If you have interesting experience with you care loans or anything, please post it in the comments section. If you like the article, subscribe to our future articles here.

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If you are a home buyer in the last couple of years and paying the EMI amount, you would have noticed that the interest rates gone up several times and the EMI burden would have increased. At the time of buying the house, the interest rates are cheap and bought the house with low EMI, but now the situation is different. If you are a non-financial background and don’t have knowledge on basics of finance, then you are puzzling to find the reason for the interest rates increase.

The intention of this article is to explain the readers in very simple words, the reason for the frequent interest rate hikes and what are the changes in the market impact the interest rates. After reading this article, you would have some basic idea on the interest rates.

What is Repo and Reverse-Repo Interest Rates?

Repo (Repurchase) rate is the rate at which the RBI lends shot-term money to the banks. When the repo rate increases borrowing from RBI becomes more expensive.  Therefore, we can say that in case,  RBI wants to make it more expensive for the banks to borrow money, it increases the repo rate; similarly, if it wants to make it cheaper for banks to borrow money, it reduces the repo rate.

Reverse Repo rate is the rate at which banks park their short-term excess liquidity with the RBI. The RBI uses this tool when it feels there is too much money floating in the banking system.  An increase in the reverse repo rate  means that the RBI will borrow money from the banks at a higher rate  of interest. As a result, banks would prefer to keep their money with the RBI.

How to Control Inflation?

High inflation (What is Inflation?) is the rising concern on Indian Economy. If the inflation is not controlled by the govt. it would derailed the growth of Indian economy and result in recession. In order to contain the inflation, govt. and RBI must take number of precaution measures that would reduce the inflation and save the economy from the high risk.

If you look into the main reason why inflation is high, the products in the market is on high demand because the liquidity (cash available in the market) is more. Customers can easily get the loans and purchase the goods. As we have seen in the above sections, RBI would increase the key rates to reduce the liquidity in the market. When money available in the market is reduced and cost of borrowing the money is expensive, demand will be reduced and seller forced to reduce the prices. This could reduce the inflation.

But, it will not always the correct option to handle the inflation, unfortunately RBI decided to use the rate hikes weapon several times in a year. There are no action from the govt. to prevent the inflation, rather they increase the fuel prices. It is not going to come down unless god forgives this corrupted politicians and gives good monsoon this year;).

Banks to Increase the Interest Rates

I have explained the repo rates and why RBI needs to increase the repo rates. What I have explained is the basic or most common reason why RBI raises the key rates which is resulted in increase in the personal loan interest rates. There could be several other reason to change the key rates by RBI. So, now you got some idea on the rates related to RBI and need for increase in key rates.

Once RBI has increased the rates, now banks left with the less money to lend. If the rates are the same, it could affect their margin(profitability) because the total amount they can lend to the public is reduced. The only way to bring more money into the system is increasing the deposit rates. It will stimulate the people to invest their money to deposits like fixed deposit.

Now, banks got the money from public as the fixed deposit with more interest rates, when they are lending it outside, the interest rates should be higher to get the profit. This is the very basic understand why the interest rates are increased.

Summary

I hope this article would have given the basic understanding on how the interest rates hiked by the banks. It is important to understand if you are borrower from the banks, this knowledge will help you to anticipate any future hikes and try to repay the existing loans sooner. If you have any thoughts, please post it in the comments section.

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Introduction

In this article I will be writing about the different types of loans available in India. I am not going to explain every type in detail, but I will give you brief idea about the loan and when the type of loans can be applied.

Home Loans

Home Loans are given for the property like houses or apartments bought in your name. This type of loans are very common in the salaried employees to buy the house.  The eligible limit for the home loans will be based on the financial strength of the app0licant. Nowadays all the banks are tightening the loan restriction because of economy crisis.

One advantage with the home loans is tax savings. You can read more about the tax benefits on home loans. Also you can read the list of articles on home loans.

Auto Loans

Personal car loans are loans which you obtain in your own name for the purpose of purchasing a car. They cannot be used for other expenses, or for other purchases. They must be spent on a car, which the lender then uses as collateral to secure the loan. They are repaid to the lender monthly, or at some other period agreed upon by both parties. Personal car loans are the responsibility of the individual who signed for the loan, and not their company or business.

Personal Loans

Personal loans are tricky – you never can quite make out whether it is absolutely necessary or if it is just a luxury you will be paying back for the next few years. That new computer, or that credit card outstanding, or the house refurnishing…the need for personal loans is never ending. This site helps to get online cash advance through online application.

Summary

In this article I have written about the different types  loans and the purpose of the loans. It is only the basic details about the loans. In the future articles I will be writing about the specific loan types. Happy Reading!!!

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