How many of us consider a loan as a debt? It surely gives us the much needed massive currency in one go. You want a car, you can see one in your car porch the next day if you have the required credit score. Vehicle loans are available with zero down payment and the duration of loan can be as long as five years. This means you can own a car with zero investment to start with and by the time it reaches five years, your salary would have reached a different level.
Yes, a loan is a lifeline, but if we scrutinize and dissect the payment scheme, we will be shocked to see the amount we pay as interest. I paid more than one-fourth of the principal amount in five years. Consider a housing loan next. Understand the eligibility and find the house, you can shift to the new residence within weeks. And, what about the repayment? At the end of, say twenty years, you will be repaying double the principal amount as interest itself.
These two examples may be enough to say that loan is a debt, you are paying proportionally more money in return for borrowing the sum. Exactly for this reason, my husband was a complete hater of loans. He is a government servant, and receives his salary like counted and baked hotcakes, at the beginning of every month.
I had to fight hard to make him convince how easily he can get a loan and how necessary it was for us to avail the vehicle loan to own a car independently. He was, at the same time, trying hard to convince me that loan is a debt, and it would mean to cut off on our lifestyle. Finally, he gave in knowing he had no chance against a strong-willed wife.
Counting money and now for a different purpose
The first few months were very difficult, with the loan EMI being cut every 5th of the month, which was almost half the salary. The rest of the month went in calculated expenses and counting the balance. After a year, it became a habit and the income went on a hike.
Then we took the intelligent decision, to divert the extra money towards loan repayment. While availing a loan, you should opt for a lender who doesn't charge you for early repayment or put conditioned amount as installments. Our's offered free early repayment and whatever extra money we paid, it straight went as the principal, reducing the number of EMI's.
The loan cutting became unnoticed until we thought of buying a property, again with a property loan. Here the principal required was more than ten times that of the vehicle loan. We were eligible for it but wrenched in the thought of an empty bank account within the first few days itself every month. Also, this would mean that we would not be able to spare any additional amount for any accidental big expenses.
We kept the EMI cutting date towards the end of the month and made it sure that the amount remains in our account till then. This way, we were able to maintain a steady balance throughout the months and plan our monthly expenditures in advance.
Soon, an expected, but a huge expenditure reached us. The marriage of my husband's sister meant spending lakhs of currencies. With two loans, one income and high in self-respect, we had no other choice, but to look for any short-term finances.
We bumped into short-term unsecured loans, which charge heavy interests but have quick disbursements and small tenures. Everything went smoothly, we were able to repay this small loan (high in interest) using the arrears my husband got, which numbered to multiple times in a year.
With the help of a tax consultant who brought into our notice that every month, one-third of my husband's salary was going to income tax department, we decided to avail a home loan high enough to cover the tax slab and considerably reduce the tax percentage.
Now, the money we save through IT returns is being used to repay the loan principal, and we expect to close the loan earlier than the tenure. We still count our balance, to relish in the slowly increasing savings and the decreasing loan tenures.