February is about to end and the festival of Holi is in March. During the festive season, many types of offers come from many places. Amidst these offers, people are looking for a better deal. If you are planning to buy a new car amid Holi offers, then you should understand some things clearly, so that you do not lose out and you do not regret any of your decisions. Know here about the formula of 50/20/4, it will be very helpful in keeping your budget balanced.
Understand what the formula is
In this formula, 50 means 50 percent of your annual income. If you want to keep your family budget balanced, then you should buy a car only at the price that your pocket allows. The financial rule says that the car should cost half your annual income. Suppose your annual package is Rs 14 lakh, then you should not buy a car worth more than Rs 7 lakh. Due to this, your budget may get shaken if you buy an expensive car.
20 means a 20 percent down payment. Meaning, if you are going to buy a car worth Rs 7 lakh, then in any case give 20 percent of Rs 7 lakh i.e. Rs 1,40,000 as a down payment. If you can give more than this then it is good, but do not give less. Whereas in the formula, 4 means the tenure of the loan. If you are buying a car by taking a car loan, the tenure of your car loan should not be more than 4 years.
It is important to understand these things also
- If you are taking a loan to buy a car, then compare the interest rates in different banks before taking the loan. Even a small difference in interest rates can make a big difference to your EMI.
- Preclosure penalty is charged in many places. Therefore, be sure to know the rules of loan preclosure. If you ever get the collected money, you can get the loan closed before time.
Whenever you take a loan from any bank, the bank charges processing fees before the loan. This processing fee may be more or less. Find out about it.
- During the festive season, many banks come with many offers. Find out about the offers and schemes in different banks.
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