"Most loans from banks these days do not require guarantors. Only in specific situations, usually in education loans, they will require a guarantor, whose net worth is at least good for the loan being given."
By Chaitali Dutta
> For buying consumer durables, some non-banking financial companies (NBFCs) are offering an interest-free loan. Is there any catch in it, especially the processing fees?
The interest due to the NBFC is taken up by the product seller. This is considered under marketing expenses from their side. Check the price of the same product in other channels before signing on the dotted line for the interest-free loan.
> Is there any penalty to prepay an education loan which I took for my son two years ago?
No, there is no penalty for prepayment of an education loan. You may, however, evaluate the benefits of the income tax on the interest you are paying on the loan as well as the option of investing the lump sum amount in an investment suitable to your risk profile- before paying off the loan altogether.
> Is it mandatory to give the name of a guarantor for the loan?
Most loans from banks these days do not require guarantors. Only in specific situations, usually in education loans, they will require a guarantor, whose net worth is at least good for the loan being given. Typically for a home loan, car loan, etc., there is no need for a guarantor.
> Should I repay a part of my home loan instead of investing?
Look at the interest rate differential. If you can make at least 2% per annum more than what your bank is charging you on your loan, then you should go ahead and invest. Otherwise, it is advisable to reduce your liability.
> I plan to purchase a car for `10 lakh. I need a loan of `5 lakh. Should I go for a three-year or five-year tenure?
Maximum tenure of an automobile loan is seven years. Ask for prepayment charges and the period in which prepayment is not allowed, before availing the loan. Then decide to go for a longer term loan with the flexibility to pay off earlier, as and when you have extra funds. This way your monthly obligation of EMI will be lower.
The writer is founder, AZUKE Personal Finance Advisory (www.azukefinance.com).
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