Add Good EMI to your Loan EMI

Today's young generation is completely hypnotized by the latest gadgets, new clothes and accessories to maintain their fancy lifestyle amongst their group. Thanks to the improving Indian economy which is helping the youth to fetch decent salaries which they usually spend for their status war with peers. Well, this could be the reason, the majority of today's generation is paying more EMI's as compared to their monthly savings. 

In addition to the above, personal loans, home loans, car loans and consumer durable loans are adding a burden to their pockets. 

Let us take an example, Mr. A & Mr. B wishes to buy dream house & opted for identical loans for their houses, but Mr. B simultaneously started with a SIP in Equity Mutual Fund. 


Mr. A & Mr. B (Loan EMI)
Loan Amount (Principal)
Rs.30,00,000/-
Tenure of the loan
30 years
Monthly EMI
23,600/-
Total Interest Paid
55,00,000/-
Total Amount Paid
85,00,000/-

Mr. B Investing in Equity Mutual Fund
SIP Amount
2,800/-
Tenure of SIP
30 years
Total Investment (Principal)
10,00,000/-
Total Corpus Created
86,30,000/-


Note: 

1. Home Loan Interest Rate assumed at 8.75% p.a. 

2. SIP returns assumed at 12% p.a. 

Thus, from the above example we can see that Mr. B by starting a SIP along with the EMI is able to potentially recover his total loan repaid by the corpus created in SIP Investment. 


GOOD EMI (SIP)
Bad EMI
·  Invest Today for Future Goals
·   Pay Today for Lifestyle & Goals of today
·  No stress in ability to pay as it is lighter on your wallet
·   Heavier Outflow paying off an existing liability
·      Highly Flexible across instalment amount & period of instalment
·        Little Flexible
·      Potential to beat inflation& create wealth in long run
·        Constant Stress to maintain ability to pay

·        At times Loan is served but asset is not ready


KEY TAKEAWAYS 

· Always add a sprinkle of “Good EMI” to your salary basket. 


· Good EMI helps to create wealth, which can be used for various life goals. 


· Unlike a loan EMI, Good EMI provides flexibility in amount, time period and helps beat inflation. 


· Good EMI requires a much smaller investment (10-12% of your Loan EMI) to create a large corpus. 


· It is advisable to continue the Good EMI even beyond your loan tenure, to benefit from the power of compounding.







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