Buy, rent, or pay an EMI?
BUYING APPLIANCES While young earners moving to new cities generally tend to go for EMI or rent while purchasing appliances owing to the lack of a lump sum, those who are settled mostly go for a direct purchase
My husband and I saved up to buy a smart HD TV. We didn’t want to go for EMIS as there isn’t much info on it. ANKITA PRIYADARSHINI, 31, a former human resources executive and currently a painter We rented a fridge and washing machine as combo deals are cheaper and shared it among four of us. It’s convenient and cheap.
MUMBAI:BUYING appliances may give you the sense of ownership, but it may only be advisable when you are sure that there are fewer chances of you frequently moving between cities as it adds the burden of resale at a lesser value or transportation costs.
FIRST SAVE, THEN BUY
For New Delhi-based Ankita Priyadarshini, 31, who is a former human resources executive and currently a painter, purchasing a smart TV is on the cards. “My husband and I want to buy a smart HD TV within ₹60,000. We began saving some amount in our bank account to create the lump sum,” said Priyadarshini. “We did not want to go for equal monthly instalments (EMI) because of information deficit on the specifics of it.”
Information on how EMI works, rate of interest, number of instalments, size of instalment and minimum purchase amount, etc, should be more easily accessible, said Priyadarshini. “When we buy smaller, cheaper appliances such as an oil radiator we bought recently, which cost around ₹10,000 to ₹12,000, we do not require an EMI option,” she said.
For Priyadarshini, anything less than 15% of her and her husband’s monthly salary does not require an EMI option. For the upcoming TV purchase or similar purchases, Priyadarshini saves up for months. “As we live in a rented house now, the rent becomes an expenditure too. Hence, 80% of our salary goes into the regular monthly expenditure and investment expenses. What remains of it, we save in our bank account as liquid money for medium-term expenditures and buying appliances is one of them,” she added.
TREAD CAREFULLY WITH EMI
For those who just started working, a ready lump sum may not always be available easily and purchasing any appliance one wants can become a financial burden. Take San Francisco basedsrishti Bisen, 25, a former software engineer for example. Bisen wanted to buy a speaker worth ₹18,000 when she was living in India last year, but did not have the lump sum amount as she had just begun her professional life. “I had to apply for a credit card to purchase the speakers on EMI even though I did not even need one. My EMI amount was ₹1,414 and I finished paying the whole amount in 12 instalments,” said Bisen.
Although her credit limit was ₹15,000, the total buy cost her ₹18,000 as she had to pay a one-time penalty of ₹1,200. “The price shown to me at the time of purchase was ₹16,200, but with bank charges and the penalty, my total cost went up to ₹18,168, which was way above the intended price.” Bisen said she may have had a slight idea of bank charges and that the total cost would end up being more than the maximum retail price (MRP), but the unavailability of a ready lump sum made her opt for EMI.
“These days, sales seasons exist throughout the year with EMI offers, but youngsters need to engage in need-based purchases. For example, purchasing an expensive smart LED TV becomes a luxury buy and an EMI offer may seem lucrative, but your future cash flow will get affected and investments that you had lined up will get compromised,” said Deepali Sen, founder of Srujan Financial Advisers LLP.
I had to apply for a credit card to buy the speakers on EMI although I didn’t need one. The total amount including bank charges exceeded my credit limit and I ended up paying way more. SRISHTI BISEN, 25, former software engineer
TO RENT OR NOT
For some people, the stepping stone of their work life involved moving to multiple houses, especially in metro cities where there is an added burden of higher rent. “In my three years of working in Mumbai, I have already lived in three different accommodations and if I had bought my appliances, then moving around with them would have hiked my transportation expenses. Also, sharing the cost of the appliances with new roommates can be tricky,” said Mumbaibased 24-year-old Prarthana Mazumder, a former syndication executive.
“We rented a fridge and washing machine as combo deals are cheaper and shared it among four flatmates. The cost would come around to ₹1,360 a month, which we divided amongst ourselves,” she said. The deposit amount does not seem to be that burdensome as one gets it back, said Mazumder. However, she and her flatmates did have to pay a penalty because they had to terminate the membership before the stipulated time period.
The deposit for them was ₹3,500 and they paid a penalty of ₹1,000. “Financing the rent is also not much of a hassle as around 33% of my monthly remuneration went into my accommodation rent and furniture rent,” she said.
It can be convenient too. When Mazumder moved again, they had to terminate the membership and go for a new one for personal reasons, but rental websites also provide free transportation for the rented appliance in case one continues with the same membership. “The products are new and of good quality which can be returned easily. Even now, I will be moving to New Delhi and I don’t have to face the burden of selling my furniture,” she said, adding that she only wants to buy furniture when there are lesser chances of moving around. According to Pawan Agrawal, founder of Investguru.in, a financial advisory firm, renting is a good idea if one knows that the usage of the appliance is not permanent and one may be constantly moving.
Experts think that such purchases and the decision of the payment mode is need-based. “When it comes to bigger appliances, it is always advisable to buy only those which are required; in that case you can either pay upfront or if there is no lump sum, it can be bought on EMI as well,” said Agrawal. “If you know you will be setting up a house, you can park some money in ultra-short term funds, fixed deposits, short-term debt funds or liquid funds as your money will be safer and you might get consistent returns of around 7-8%. You can then redeem your investment whenever you have to purchase the products.”
WHAT IS IT?
It is the number of the claims that the insurer has paid whenever the claims are filed in case of non-life insurance, and on the death of the policy holder in case of life insurance. For example, in case of life insurance, if an insurer has settled 90 out of 100 claims that are filed when a policy holder dies, the claim settlement ratio of the life insurer is 90%.
HOW DOES IT WORK?
“A high claim settlement by count suggests that claims are likely to get paid. A high claim settlement by value suggests that even the large claims get paid effectively. Ideally, an insurer should have settlement ratios of over 90%,” said Kapil
Mehta, founder of Securenow.in.