Inflation and loans – Loan against Form 16!

Many people think they (and the industry tells them) that they are eligible for a “home loan”, car loan, personal loan, credit card loan etc.

Actually this is not true. You only get a loan against your Form 16, which means this is a loan against your future earning capacity. Imagine telling a lender that you want only Rs. 25 Lakhs for a house costing Rs. 200 lakhs HOWEVER, you will not have any income in the future and you will sell some shares to repay the loan. The lender will baulk.

The loans that you are getting is strictly against your future earning capacity, NOT ON YOUR NETWORTH, not on the cost of the asset that you are buying, not on the reputation of the builder, not on the reputation of the car manufacturer, …just on your future earning capacity!!

So let us call it a Form 16 Loan. And if inflation is likely to be at 13% for the next week, you can rest assured the lending rates now would be in the region of 15% per annum.

So let us welcome inflation!

Explore posts in the same categories: Your money

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