By Chaitali Dutta
As I am planning to buy a car with a loan, can I repay the amount within six months without any penalty?
—A R Srinivasan
The floating rate car loans can be prepaid after six months of taking the loan. Most banks will restrict full repayment within six months of availing the loan.
I retired from service four years ago and my wife will retire this year. Our daughter wants to go abroad for higher education. Can we apply for an education loan for her and can we show our house as collateral?
—Pawan Gupta
If the course is for one year the education loan is possible. If it is for two years or more, you have to offer the collateral which could be multiple times the value of the loan. Typically, the interest on the loan is paid by the parent till the child completes education although it is not mandatory. The EMI has to be borne by the student once she starts working/after six months of completion of the course.
Is it better to go for a repo linked lending rate for home loan?
—Sudip Kumar
Yes, absolutely. We expect a reduction in the interest rate, probably by the second quarter of next year. In such a situation, with the repo rate linked loan, you can expect the interest rate to also reduce proportionally.
I am in need of some money for one year. Should I opt for a personal loan or take a loan against securities?
—Raman Adhikery
Taking a loan against securities is a better option as it is cheaper. The latter being a unsecured or collateral-free loan comes at a higher interest rate.
Is the interest rate for personal loan based on the credit report?
—Vijay Pamar
Yes, most loans, specifi-cally personal loans, would be priced within a range. An existing relationship with the bank, a higher repayment capacity, high CIBIL score— all contribute to a lower interest rate.
Do banks offer car loans on reducing interest rates and what is the maximum tenure that one can opt for in a car loan?
—Ravi Guliani
Yes, the interest on almost all the term loans — home, car, personal loans — is calculated on a daily reducing balance. Hence the earlier the EMI, the lower the interest on the next cycle. Typically the car loan tenure would be seven years.
The writer is personal finance wellness expert and founder of AZUKE Finance. Send your queries to fepersonalfinance@expressindia.com
