DEBT WEDS SAVINGS:: PART: 2

Apart from understanding various forms of debt like Secured/Unsecured, Revolving debt, Mortgage we also need to know about one more form called:

5. Instalments: 

You would have seen in on-line purchase sites where they have mentioned saying – “No Cost EMI” …..Do you remember this? It is the instalment payment, where in you get the product upon paying initial payment and the rest in equated monthly instalment without any interest added. While that is NO-Cost EMI, normally the instalment will include some interest portion also in the EMI (Equated Monthly Instalment) Instalment and revolving debt will differ in many ways.

a. Unlike revolving credit, INSTALMENT type of debt is closed-ended. That means it’s repaid over a fixed period of time & payments are often made monthly in equal instalments. Depending on the loan agreement, payments could be due more frequently.

b. In instalment debt, one must pay money borrowed and interest at the same time. Often, the amount of each payment that goes toward interest decreases as the loan is paid down. Instalments are mostly made equal and this helps the borrower to plan repayments easily

c. Few examples of this type of loan: Educational-loan, Home-loan, Car loan, etc.

In the next episode we will try to understand the various aspects of savings and more about it .

….TO BE CONTINUED PART : 3