Shoud i Take it as opportunity

POSTED BY Jig ON February 20, 2011 6:26 pm COMMENTS (8)

Hello all,

I am offered a personnel loan with 8% interest. Should i take it and invest to generate 12 % return? I have 10K per month to repay the loan for next 3 years.

Whats experts opinion if supposed they do have such opportunity.

 

regards

 

Jig

 

8 replies on this article “Shoud i Take it as opportunity”

  1. Ankur Lakhia says:

    Jignesh,

    I presume that you are taking loan in some foreign currency and investing in Indian rupees, trying to capture interest rate arbritage.

    You are taking currency risk in this case. 9.5% interest rate in foreign currency does not give you any cushion to absorb currency fluctuation as safe bank interest in India is also around 9.5% to 10% range. If rupee depreciates, you could quickly get in the loss.

    So, in my opinion, it is better to avoid such leverage for small returns.

  2. jignesh says:

    Yes Manish,
    i figured it out from some online calculators.
    Well i will share the new loan data soon once i will receive the same. offering 8% and considering hidden things it will come to max 8.5%. though is it not good enough?

    Tell me if i can get 20% by offering you the same.:)) ( just kiddin ) just show me the way i can generate max safe returns by utilizing this loan opportunity.

    What is your opinion ? should i go ahead if it is true?

    Regards

    Jig

  3. Jignesh

    Its turns out to be around 9.5% interest , assuming loan of 153750 🙂

    Manish

  4. jignesh says:

    Thanks all to reply.
    Let me clear your view by providing I am an NRI and here banks are offering with this rate. i took loan previously with 8.99 % loan. well there is an excercise for experts.
    below are data for previous loan and tell me how i can calculate the actual interest ?

    My loan amount 150000
    processin charges 3750 ( so total loan i took 153750 )
    EMI :3214
    tenure: 5 years
    monthly loan insurance charges : 0.05%( OTHER THAN EMI )

    i have little doubt with calculations and so seeking experts thought on this.

    Regarding new offer , that is very clear that they are offer this 8% rate.
    I have asked more details to the bank rep and i will share the info here once i will get details

    Thanks

    Jig

  5. Anand says:

    Who is offering you a personal loan at 8% ?

  6. Ramesh says:

    No one is presently even giving a secured loan like home-loan @8%.

    So, this personal loan, which is a unsecured loan, @8% cannot be true at all. Also, the calculation of 8% canbe misleading.

    ask an eg. for 1 lakh and the corresponding EMI and the processing charges.

    I would bet that the “actual” rate will be somewhere around 16%.

  7. Ankur Lakhia says:

    Jignesh,

    It looks too good to be true. Why anyone would lend you at 8% when there are plenty of avenues to earnt 9%-10% returns without risk?

    Please check what EMI you would pay and compare equivalent interest rate charged to you on monthly reducing balance by using some online software. Please also add associated charges in your calcualtions.

  8. You should – except that please be very very careful about the fine print. I had done this with Stan chart in 2003. They were literally begging me to take money when I did not need it. I took it, paid it back after 90 days and thought everything was over until they stuck me with a processing charge which was not mentioned anywhere. They kept on showing this as o/s and I refused to pay as a matter of principle. This got resolved four years later and that too because we had the pull to do it. So, please be careful about the fine print, get everything in writing and keep a copy of all that you sign with you

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