For all my friends & their friends & their their friends. " There’s more to 0% finance schemes than meets the eye! " A simple calculation to make us feel good but in turn loosing our money Gopal wants to buy an LCD TV for Rs 36,000. At a major retail store, there is a cash discount of Rs 2000 available on the LCD. However, Gopal does not wish to pay the whole amount cash down and also does not want to spend on his credit card where the interest cost would be high. To avail of the scheme, Gopal will need to pay a processing fee of about Rs 1,000 to the NBFC. He will also have to forfeit the cash discount of Rs 2,000 since the discount is not available on a finance deal. Now, on a loan of 12 months, Gopal will have to pay 4 EMIs in advance, i.e. 36,000 / 12 X 4 = Rs 12,000. So, effectively Gopal has got a loan for Rs 24,000 only. His total cost of taking the loan was Rs 3,000 (processing fee + forfeiting the cash discount). So for 8 months, Gopal paid Rs 3,000 on a loan of Rs 24,000, paying an effective interest rate of 18.75% annualised.
Posted on: Tue, 24 Sep 2013 14:26:30 +0000
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