Avoid debt for purchase of vehicles, as a thumb rule

I’ve saved 8 lakh by way of fairness and debt funds and now plan to buy a automotive by finish of the yr. Ought to I take a automotive mortgage or pay the total quantity by way of downpayment?

—Title withheld on request


If you happen to had amassed the quantity by fairness and debt for the target of shopping for a car then it’s best to use it for a similar. However, if this quantity is supposed for every other short- or mid-term monetary goal, then you could have to guage your choices accordingly. The rate of interest on a automotive mortgage at current is about 8%. In case your funding portfolio can generate a better return than the curiosity you may be paying for the mortgage, solely then you might think about taking the mortgage. If the return out of your funding is marginally greater than the rate of interest of your mortgage it’s higher to make use of the cash to buy the car as an alternative of taking the mortgage. As a thumb rule, it’s all the time higher to keep away from debt.

Harshad Chetanwala is founder, MyWealthGrowth.com. Have private finance queries? E-mail us at mintmoney@livemint.com

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