Our two cents on saving few cents
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Do you compare products across websites and read multiple reviews to get the best deal before buying? If so, you’re in the right place.
Here are some tips to save money when buying an air-conditioner and reducing interest payments on loans.
Savings on Air-conditioner
For your home, it’s better to buy a 3-star AC rather than a 5-star AC. Here’s why:
As per the BEE label
A 3-star 1.5 ton AC running for 1600 hours a year uses 975.26 units of electricity and costs ₹33,000.
A 5-star 1.5 ton AC running for the same time uses 751.28 units and costs ₹40,000.
If you use the AC from April to September for 5 hours a day (900 hours a year)
The 3-star AC will use 550 units. The 5-star AC will use 420 units.
With electricity costing ₹5 per unit, you’ll save ₹650 a year with the 5-star AC. However, since the 5-star AC costs ₹7,000 more, it will take nearly 10 years to recover the extra cost through these savings of ₹650 per year. If you think you can use the AC for more than 10 years then go for 5 star AC.
Strategy while availing a loan
Let say you want to buy a car which costs around 20 lakhs. You have saved 5 lakhs for the car and for the rest you are thinking of taking a loan at 8.5% annual interest rate with 10% of the cost as down payment. Bank at max will give you the loan for 8 years. Let’s assume your per month EMI paying capacity is ₹30k.
The usual method is trying to lower the Interest amount by giving a higher down payment.
Let’s see how much you will end up paying in this method
If you opt to use your entire savings (₹5,00,000) as a down payment, and take a smaller loan (₹15,00,000) for a tenure of 6 years, the final cost of the car will be ₹24,20,066 at an EMI of ₹26,668.
But there is a better strategy
Down payment: You should make a down payment of ₹2,00,000 out of your savings.
Loan Details:
Amount Financed: After making the down payment, you will take a loan for the remaining amount, i.e. ₹18,00,000.
Interest Rate: 8.5% per annum.
Loan Tenure: 7 years.
EMI: The monthly EMI for this loan will be approximately ₹28,506.(I know it is higher than previous method but still under your budget of 30k)
Investing Your Remaining Savings:
Amount: You will be left with ₹3,00,000 in savings, which you should invest.
Expected Rate of Return: 10% per annum.
Investment Tenure: 7 years (same as the loan tenure).
Using this strategy, the final cost will be ₹23,09,861.
By adopting the proposed strategy with a partial down payment and investment, you save approximately ₹1,10,204 compared to using all your savings as a down payment.
These are just two scenarios of how having access to insightful suggestions can help you save money. There are many more situations where the right financial advice can boost your savings. Once we build the product you will find tips and tricks personalized just for you.
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