Understanding EMIs

“Empower a woman with finances, and she’ll light up the world.”

- Melinda Gates

W: Welcome Story

This is Priya’s story, a determined young woman aspiring to launch her own service-based business. She needed a reliable laptop as all her work was online, but she faced budget constraints.

In a time of necessity, she opted for a wise move by purchasing the laptop through an EMI plan. The EMI option eased her financial burden, allowing her to acquire the essential tool for her business without a hefty upfront payment.

As she embarked on her entrepreneurial journey, she leveraged her laptop, closed clients, and made profits. The EMI payments seamlessly integrated into her monthly expenses, leaving room for business growth and stable personal finance.

Over time, her strategic decision to use EMI not only helped her secure the laptop she needed but also enabled her to manage her finances intelligently. Her business flourished, and she soon expanded her services, all while comfortably balancing her EMI commitments.

E: Education

EMIs are a part of our everyday financial jargon. Whether it’s buying a new home, a car, or any large purchase, we keep hearing this term.

But what exactly does it mean, and why should you learn about it?

What are EMIs?

EMIs stand for Equated Monthly Installments. They simplify repayment by allowing you to repay large amounts, like home or car loans over a set period in shorter amounts. It’s like cutting a large cake into smaller, manageable pieces, spreading the financial burden across months or years.

For example:

If you choose to purchase a product worth INR 5 lakhs with an EMI option at 10% interest for 5 years, you will pay around INR 10,624 monthly until the loan is repaid.

This will keep your pockets safe from a lump sum payment.

But between an EMI plan and an upfront payment, how do you know what’s best for you?

Consider three basic factors:

1. Assess Your Budget: If you want to buy an INR 10 lakh car and have enough savings without compromising other financial needs, paying upfront might be wise.
2. Consider Interest Rates: If the interest rate on the EMI is high, paying upfront might save you money in the long run.
3. Maintain Financial Flexibility: If you need your savings for other emergencies or opportunities, an EMI might be more suitable, giving you financial breathing room.

Since our needs and plans are diverse, we (most often than not) choose EMI options that fit our budget.

In such cases, there are a few things you need to know before opting for an EMI:

Understand how you can make the most of EMIs:

• Compare Options: Like shopping for the best deal, comparing EMI plans from various banks can lead to substantial savings.
• Negotiate Interest Rates: Don’t hesitate to negotiate with the bank; a good credit score might even get you a lower rate.
• Understand the Terms: Reading the fine print and understanding all terms and conditions helps make an informed decision based on your needs.

Avoid Penalties and be aware of prepayment charges:

• Be prompt with EMI payments, as late payments might lead to penalties.
• On the other hand, paying off the loan early might have prepayment charges.

Understand your current situation and seek help:

• Know Your Needs: Choose a plan that fits your income and lifestyle.
• Income Assessment: Make sure your monthly income comfortably covers the EMIs and other essential expenses.
• Seek Professional Advice if Needed: Consult a financial advisor to help select the right EMI plan.

A: Actionable Steps

1. Interest Rates: Compare EMI plans for the lowest interest rates to minimize overall cost.
2. Tenure: Choose an EMI tenure that aligns with your budget and financial comfort.
3. Downpayment: Opt for a suitable down payment to reduce the EMI amount and interest burden.
4. Hidden Charges: Check for hidden fees or processing charges before finalizing an EMI plan.
5. Credit Score: Ensure a healthy credit score to qualify for better EMI terms and rates.

Your Path to Financial Independence:

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• Clear understanding of key financial terms
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IMPORTANT:

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L: Learning

Since we are talking about EMIs, we decided to share with you our exclusive EMI calculator.

Moolah’s EMI calculator allows you to calculate the EMI of any purchase you plan to make.

You just need to use enter:

• Cost of the asset
• Down Payment Percentage
• Loan Tenure
• Interest Rate.

…and it automatically calculates the EMI for you within seconds.

Download the calculator here.

Use passcode Moolah to open and edit the calculator.

T: Thought Leadership

“EMIs reflect disciplined financial planning.”

- Suze Orman

EMIs serve as indicators of an individual’s organized financial strategy.

This approach involves carefully selecting purchases that can be paid in installments, demonstrating thoughtful budgeting and financial responsibility.

Suze suggests that by adhering to planned EMIs, you showcase your commitment to wise money management and a structured path toward achieving your financial goals.

H: Happenings

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Monthly Q&A session:

Meeta answers all your finance questions on the third Friday of every month. Use this link to register for the session and get your queries cleared!

PS: The event is TODAY.

Venue: Zoom

Date: Friday 18th August 2023, 6:30-7:30 pm IST

That’s all we have in today’s issue. We’ll see you again in fourteen days.