Putting your Emergency Funds in FD's ?

Putting your Emergency Funds in to FD/s – now there is an option

Key principal for putting money into FD is quick access to emergency:

In India people are very familiar with FD’s as we feel, it is quick access in case of emergency, it is true in some sense, but now we have alternative to that, i.e. Liquid Mutual Funds or Floating Rate Mutual funds.

Particulars		Short Term FD’s		Liquid Mutual Funds
Emergency money planning	:	Not really as you can not break or withdraw It overnight	:	Yes – as you can withdraw it from any Visa ATM centre across the world.
Easy Access	:	No. As one has to go to bank to withdraw the amount.	:	Access to all visa ATM* across the world, Online Access
Tax	:	Interest will be clubbed into your income & will be tax accordingly.	:	No Tax to pay directly by Investor if opted for Dividend Reinvestment option.
Penalty	:	Usually Charges are there if you break an FD before its maturity.	:	No Entry or Exit Charge
Small Investments	:	Generally in FD’s min amount is 5000	:	Here you can save even rs. 500 on monthly basis and enjoy all the benefits mentioned above.
Duration	:	Min 7-14 days of investment, varies from bank to bank	:	Easy Parking facility, You will get interest on daily basis and can park your money for 2-3 Days also.

*some mutual fund offers ATM & online easy access in liquid/floating rate fund.

Understanding Housing Loan EMI, Principal & Interest

HOUSING LOAN :-

This is a must read article, if you already have a housing loan or you are planning to take a housing loan

Breakup for EMI (Principal & Interest Explained here)

EMI BASIC CALCULATION:-

Loan is opted from a bank say for example (Rs. 35 Lacs for 20 Years of Term) you have to pay an EMI (Equated Monthly Installment) & when you pay your EMI, it consists of 2 major part, one is Interest on your EMI & second is Principal amount you have paid. By paying an emi, every month it reduces the loan by some amount as it goes towards payment of your principal out standing. With passing each installment every month, your loan amount decreses by some extent. You pay More Interest when the loan /Emi starts and pay less when you come closer to pay off your loan. The longer the period of loan….the component of interest is high. So one thing is pretty clear from the above sentence, your initial EMI goes majorly towards INTEREST on your housing loan, PRINCIPAL amount is just too low.

This example will be more useful to understand the breakup towards your EMI on Housing Loan.

If you take a Housing Loan of 35 Lacs, for a period of 20 Years @ 10% Interest Rate, Emi Would be Rs. 33,776 per month.

· 1st month - 33,776 emi , 29167 - Interest & 4609 - Principal

· 2nd month- 33,776 emi , 29128 – Interest & 4648 - Principal

· 3rd month- 33,776 emi , 29029 - Interest & 4686 - Principal


· 24th month- 33,776 emi , 28197- Interest & 5578 – Principal, outstanding loan = 33,78,104


· 60th month- 33,776 emi , 26255- Interest & 7521 – Principal, outstanding loan = 31,43,085


Scenario – ONE – If you pay off your entire loan after 5 years.

Total payment done by you after 5 years will be 20,25,545 out of that INTEREST Component is 16,69,631 & rest 2,70,657 is your loan PRINCIPAL,

Just in 5 Years , you are paying an interest of Rs. 16,69,631, on your total loan of 35,00,000, which comes to almost 50% of the Loan Amount & you still have to pay Principal outstanding of Rs. 31,43,085

So, if you foreclose the Loan at the end of 5th year, your total payment will be,

1. Interest Paid till date = Rs. 16,69,631
2. Principal Paid till date = Rs. 2,70,657
3. Outstanding on 60th month = Rs. 31,43,085


TOTAL PAYMENT TO BE DONE AFTER 6TH YEAR WILL BE (TOTAL OF 1+2+3) i.e Rs 50,83,373

AGAINST THE LOAN OF 35,00,000 YOU WILL PAY TOTAL AMOUNT OF Rs 50,83,373 + LOAN FORECLOSURE CHARGES *IF ANY


Scenario – TWO – If you pay off your entire loan after 10 years.

Total payment done by you after 10 years will be 40,53,091 out of that INTEREST Component is 31,08,942 & rest 9,44,149 is your loan PRINCIPAL, after paying this all…..outstanding on loan will be 25,55,851

So, if you Payoff the Loan at the end of 5th year, your total payment will be,


1. Interest Paid till date = Rs. 31,08,942
2. Principal Paid till date = Rs. 9,44,149
3. Outstanding on 60th month = Rs. 25,55,851



TOTAL PAYMENT TO BE DONE AFTER 6TH YEAR WILL BE (TOTAL OF 1+2+3) i.e Rs 66,08,942

AGAINST THE LOAN OF 35,00,000 YOU WILL PAY TOTAL AMOUNT OF Rs 66,08,942 + LOAN FORECLOSURE CHARGES *IF ANY

Next Week Article : - How 1% Interest Rate hike will effect on your Housing Loan