Helping Yourself

In Sep 2023, I bought my Dzire car from Spinny. Car cost was around Rs. 5L. I thought of making a down payment of Rs. 1L and taking a loan of Rs. 4L. With the EMI the car would have costed me Rs 5.5L

I had savings of more than Rs 5L in FD. I thought instead of paying interest to bank, why not take loan from myself ? I broke the Rs 5L FD and started an RD of Rs 20k for 3 years.

I am planning to buy a new car in 2027. My budget is around Rs 15L. Now since I know the budget beforehand, I can plan for it.

I would have invested Rs 7.2L in RD that I made and it would return me minimum of Rs 8L in 3 years. Dzire has good re-sell price as it is used by cab drivers due to high mileage. I expect it to be solved around Rs 3-3.5L

So, I have already budgeted for around Rs 11.5L out of Rs 15L. A lakh here and there and I would hardly need to take any loan. I would have eventually bought a Rs 15L car in Rs 14L (the remaining amount coming from bank interest).

Had I not planned, I would have taken a loan of Rs 10L for the Rs 15L car. Even a 3 yr loan would mean interest of Rs 1.6L . So, with loan the car would eventually cost me Rs 16.6L (minimum).

Thus, just by planning ahead for a known expense, I can save Rs 2.6L (16.6-14) and help myself. Besides, this also has a psychological effect. When a monthly installment is going for car, you are relaxed about finances and can dig deeper into technological aspects of car that you want to buy.