YOUR QUERIES: LOANS: For car loan, go for a floating rate loan as interest rates are declining now

November 16, 2021 1:00 AM

In any daily reducing balance loan, the interest is applied on the day-end balance and aggregated for the whole month.

car loan, home loan, car loan queries, car loan info, home loan info, loan questions, information on loansSince currently we are in a declining rate period, it would be advisable to go for a floating rate loan.

By Chaitali Dutta

How is daily reducing balance in a car loan calculated? Should I opt for a fixed or floater loan for a car loan?
By Bhupender Singh

In any daily reducing balance loan, the interest is applied on the day-end balance and aggregated for the whole month. Hence, the earlier you pay the EMI in the month, it will be slightly beneficial, by way of lower interest than as compared to paying the EMI towards the later part of the month. Interest component in a month of 31 days will be higher than, say, February, which has fewer days. Since currently we are in a declining rate period, it would be advisable to go for a floating rate loan.

For prepayment of a home loan, should I pay in bulk after accumulating for a few years or pay any amount whenever I have a surplus?
By Samir Gupta

The decision would be defined by the growth rate possible on your surplus money. Here the net yield (interest rate less tax payable) is to be compared with the interest you are paying on the home loan. If you can grow the surplus at a rate higher than the home loan interest rate, you should accumulate and then pay off the loan. Otherwise, pay surpluses into the loan directly, as and when available.

Can I deposit Rs 1.5 lakh in my son’s (minor) account in addition to Rs 1.5 lakh in my PPF account in the same financial year. Can I deposit in two different accounts?
By Romil Shah

The maximum amount of deposit by an individual is Rs 1.5 lakh including the deposits made into minor accounts where the individual is a guardian. In your case, the aggregate in both accounts should be Rs 1.5 lakh only.

After working for two and half years, I left the services to pursue higher studies. Can I withdraw the accumulated EPF and VPF balance to fund my education? What are the tax implications?
By Sreenivas

Yes, you can withdraw from your EPF account. The TDS on the withdrawal will depend on the number of continuous years of service. If it is five years or more, then TDS is not applicable. The interest on your contributions to EPF, employers’ contribution, interest paid on employers’ contribution are taxed as per your slab.

The writer is founder, AZUKE Personal Finance Advisory (www.azukefinance. com). Send your queries to fepersonalfinance@expressindia.com

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1After the market rally: Get ready for next phase of investment journey
2Your Queries (Income Tax): Long-term capital loss on NCD can be set off against long-term capital gain
3Your Money: Follow the 12:80:80 asset allocation approach