Monday, July 16, 2007



A few days back I was with one of my local friends at his shop,[our locality, which is as per the government papers is a village, from the business views point is, one among the biggest wholesale markets of south Maharashtra and as per the standard of living is not far behind the metros] when he was summoned on telephone by his wife asking him to come home immediately, at that time we were waiting for tea so he asked wife to keep ready tea and me to give him company to his home. We both went to his house and found that his 12 years old son was following Gandhi’s path of hunger strike to support his demand of car on his birth, which was just 3days away. As father promised that before the birthday they will have a brand new Maruti car so son took the food and we return back to shop after taking tea. All the distance of 5-7 minutes to shop I was thinking about the result of this false commitment because I was familiar with un matching financial status of my friend with the buying of a brand new car. I was with him for next about 50 minutes but every second my mind was trying to find out the answer for the situation that my friend has to face after 3 days. At last, before taking leave, I asked my friend about that. “Oh! Dear you are thinking about useless thing. I will fulfill my commitment.” looking at my surprised face, he kept on saying “Look! Tomorrow morning I will make a call to finance company, they will sanction a loan of 80-90% of the prize of car and by paying just 10-20% amount I will have the car.”

This is just an example which show that how the trap of EMI is hunting its prey, though days are no more in the modern life, when people were working all the life for buying a flat or car. Today all the domestic appliances including Laptops are available on the installments, some companies are even went further and they are offering you tours and travel loans. This easy availability of finance boosts the purchasing powers of common man to a great extant, now as soon as young ones starts earning they thought of buying all the life comforts but many times this easy availability made them trapped into web of EMI , this fact can be supported by the figure that finance companies are forced to cease every 11th vehicle financed with two years from the date of finance due to non payment of EMI.

The most visible effect of the technological advance on the industry is the hyper productivity. Companies have to sell their products within a specific time frame to keep them away from the losses hence they always try to generate demands for the product and the installment facility is one step in that direction. Exchange offer is another way of boosting one’s product.

Benefits of Buying on the Installment

In fact consumer gets more benefits from this, if a few precautions are taken, first and most is the repaying capacities, never allow the EMI to go beyond 25% of your total earnings because as the loans are easy available so are the harsh ways of collection. A single non paid EMI will cost you something ranging from Rs. 250 to some thousands depending upon your EMI amount. Further in this era of hire and fire, possibilities are there for unemployment of few months. If you took this as investment than you can go in the right direction as in that case the difference will be only that instead of buying appliance after saving, you are buying first and saving [paying EMI] afterwards. Do remember your day to day life needs about 50% of your earnings and for securing future of self and kids you will have to invest at least one forth of your earnings.

Why EMI is a trap

Just consider you are buying a color television, shopkeeper will ask you to go for finance offer with no interest for one year, you agree for that but look at the following facts
1] You are not getting one full year but most of times it is eight months.
2] Finance is made on the companies M.R.P. , which is always much higher than the market price of the product , for example the same television that you have purchase for Rs. 16999/- with finance option is available in the market for almost 2500- 3000 less on cash purchase.
3] Finance company will charge you about Rs. 650- 900 as the loan processing charges.
4] It means you are paying about Rs. 3000-4000 extra for just eight months.
5] There are all chances that due to this easy availability will tempt you go for buying less useful or commodities used once in blue moon.

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