Your Question – Loan: Pay a heavy EMI instead of waiting to prepay a handful of money

Written by Chaitali Dutt

Home loan interest rates are rising now. I have a new loan for 10 years. Should I double the EMI amount or deposit some one month to pay a portion of the principal?
—Dhiraj Kumar
If you have a monthly surplus fund, then increasing the EMI at a time when interest rates continue to be on an upward trend. Interest is calculated on the daily depreciating balance of your home loan, so early repayment saves you more interest.

What procedure should I follow to get a gold loan for one year as I need money for emergency?
-Ashok
The first option is to search with your current bankers where you have a salary account or you have a lot of money. You will be more likely to get a good deal and service. If your banker does not provide gold loans, you may want to look at some financial institutions that are leaders in the gold loan market. It is advisable to go with a reputed company known for its gold loan because you want to get your original ornament / piece of gold back intact after repaying the loan. The process is similar for banks / FIs. The ornaments are first tested for gold purity, weighed and evaluated. You will be granted a loan depending on the value of the gold. The paperwork is then completed before the loan is disbursed to your account.

I am a senior citizen and my retirement funds are in fixed deposit schemes of nationalized banks and come with very low interest rates. If I invest Rs 5 lakh in each private bank, will my money be safe?
– Name secret
FDs (or any deposits) that come with higher returns carry an underlying risk for their capital. The underlying risk is the liquidity risk and the default risk. Under the DICGC guarantee, the amount of deposit (including interest) per bank up to Rs 5 lakh per person is covered. If you choose to pay interest, you can choose to deposit Rs 5 lakh. If you opt for a growing deposit, the maturity amount under DICGC should not exceed Rs. 5 lakhs.

Author Founder, AZUKE Personal Finance Advisory (www.azukefinance.com).
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