Money Matters

Auto Loan

Sumit Pathak

I want an auto loan. The best reducing rate I have got from a bank is 10 per cent. However, another lender is now offering me a flat rate of 7 per cent for five years. What is the difference between reducing and flat rates? Which one should I go for?

Naveen Kukreja - CEO& Co-founder, Paisabazaar.com

In flat rate loans, lenders charge interest on the original principal amount throughout the loan tenure. Hence, the interest as well as the principal component in the EMI remains unchanged throughout the loan tenure. In case of loan with reducing/diminishing balance, the outstanding principal is reduced by the principal repaid each month, and interest for the next month is calculated on the reduced outstanding principal amount. Thus, the interest component keeps decreasing with repayments. In your case, the interest cost of 7 per cent flat rate would be equal to the interest cost incurred in case of a reducing loan availed at 12 per cent.

Hitesh Jain

I am buying a house worth Rs 50 lakh next month. I am thinking of getting it insured. But I am confused whether I should go for a term plan of Rs 50 lakh or home insurance of Rs 50 lakh. I have an existing term insurance cover of Rs 1 crore.

Vaidyanathan Ramani, Head, Product and Innovation, Policybazaar.com

As you have mentioned, you are already covered by term insurance of Rs 1 crore sum assured. So, it is advised to cover your home under separate home insurance rather than buying another term plan that insures your home as well. Home insurance is about protecting your asset (home) against damages. This is different from a term plan. It is, therefore, advisable to always cover it separately as that risk will never be covered by the term plan. A comprehensive home insurance policy will provide your home (structure + contents) adequate coverage against earthquake, fire, terrorism, lightning, burglary and theft.

Sanjeev Gupta

My age is 48 and I am looking for a health insurance policy that can give me coverage till the age of 75. Is there any policy that can give me the medical coverage till that age without increasing the premium with age? If I go for policies with premium increase, what is the maximum hike I can expect on the initial year premium?

Answered by Ashish Mehrotra, MD & CEO, Max Bupa Health Insurance

There are many policies available that cover individuals till the age of 75 years and above. The premiums for most health insurance policies increase with different age brackets. That is why it is recommended to purchase a health insurance plan at a younger age. For example, the premium in a product for Rs 10 lakh cover, for an individual aged 35 years residing in Delhi or Mumbai could be Rs 11,200 (including GST). The premium for a similar cover for an individual aged 75 years, could be Rs 75,000 (including GST), hence an increase of six-seven times.