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Loan Assignment Final

The document discusses various methods for raising loans to purchase items like cars, houses, and appliances, including bank loans, hire purchase, credit card EMIs, NBFCs, and loans against property. Each method has its advantages and disadvantages, emphasizing the importance of financial discipline and careful selection based on individual needs and repayment capabilities. The conclusion highlights the necessity of understanding interest rates and the implications of missed payments.

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74 views4 pages

Loan Assignment Final

The document discusses various methods for raising loans to purchase items like cars, houses, and appliances, including bank loans, hire purchase, credit card EMIs, NBFCs, and loans against property. Each method has its advantages and disadvantages, emphasizing the importance of financial discipline and careful selection based on individual needs and repayment capabilities. The conclusion highlights the necessity of understanding interest rates and the implications of missed payments.

Uploaded by

sunilkhekare776
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Final Assignment (Internal)

Study: Ways of Raising a Loan to Buy a Car, House, Refrigerator or Television Set
Index
1. Introduction

2. Bank Loan

3. Hire Purchase

4. Credit Card EMIs

5. NBFC (Non-Banking Financial Companies)

6. Loan Against Property

7. Conclusion

8. Useful Terms
1. Introduction
In modern times, many people fulfill their dreams of buying costly items such as cars,
houses, or appliances like refrigerators and television sets through different forms of credit
or loans. This assignment explores the various ways of raising a loan for such purchases,
along with their advantages and disadvantages.

2. Bank Loan

a) For Buying a Car or House


- Car Loan: A bank gives money to the buyer to purchase a car, which must be repaid in
monthly installments (EMIs) with interest.

- Home Loan: A long-term loan taken from a bank or housing finance company to buy a
house. Usually repaid over 10–30 years.

Features:
- Requires good credit history.
- Involves interest payments.
- The asset (car or house) may be taken back if the borrower fails to pay.

Advantages:
- Helps people buy expensive items without full money upfront.
- Fixed EMIs make budgeting easier.

Disadvantages:
- Interest increases total cost.
- Missed payments can lead to penalties or loss of the item.

3. Hire Purchase

a) For Buying a Refrigerator or Television Set


Under hire purchase, the buyer pays for the item in small fixed amounts (installments) over
time.

Example:
- A person buys a fridge worth ₹30,000 by paying ₹3,000 per month for 12 months.
- The fridge remains the seller’s property until all installments are paid.

Advantages:
- No need for a lump sum payment.
- Useful for middle-income families.
Disadvantages:
- Cost is usually higher than the original price due to interest.
- Missing payments may result in repossession.

4. Credit Card EMIs


Credit cards allow converting purchases into EMIs (Equated Monthly Installments). Mainly
used for smaller items like electronics or furniture.

Pros:
- Quick approval.
- Useful for short-term credit needs.

Cons:
- High-interest rates.
- Risk of overspending and debt trap.

5. NBFC (Non-Banking Financial Companies)


NBFCs provide loans for cars, homes, or electronics with easier terms than banks. Useful for
people with lower credit scores.

Note: Interest may be higher than banks.

6. Loan Against Property


A person can also take a secured loan by pledging property they already own. Common for
funding house or vehicle purchases.

7. Conclusion
Raising a loan has become a common and helpful way to afford big purchases. However, one
must choose the right option based on need, interest rates, and repayment ability. Financial
discipline is key to avoiding unnecessary debt.

8. Useful Terms
- EMI: Equal Monthly Installment

- Interest Rate: Extra money paid on loan amount

- Tenure: Loan repayment time period

- Repossession: Taking back the item if borrower fails to pay

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