Loading...
Browsing Category

Projects

How to hack your home loan

Please note: Though this post talks specifically about a home loan, it is applicable to any type of loan. I only speak of a ‘home’ loan as I have experience there.

Please note #2: All the calculations that you see below have been made by the super-awesome Home Loan Schedule calculator that I wrote a few years ago and something you should check out and bookmark.


So, you have gone ahead and taken a home loan and are looking dejectedly at your bank balance which will never see the highs that it had — just before you put the 20% upfront (required in India). Don’t worry – we have all been there.

I have some good news though – things will get better after a while 🙂

I will try to share some insights and tips that I learnt while we tackled our home loan.

Recently, while speaking to some friends regarding their loans, I realised how uncommon this knowledge is – so decided to write a post and share what I know.

Some jargon that will be used in the post

  • ROI – Rate of Interest (the interest rate that you are paying).
  • Principal – The amount of money you require the loan for.
  • EMI – Equated monthly installments – the amount of money that you need to pay back to the bank every month.
  • Part payment – An amount of money that you pay off more than the required EMI.
  • Pre-payment – The amount you pay and the process of closing of the loan by making a final lumpsum amount which equals to the balance principal amount to be paid.

Things to keep in mind BEFORE you take your loan

Everyone will offer you more or less the same interest rates today – but some have better features than others. So always look around and find the institution that has features which will make your life convenient.

During our time, Axis bank had no pre-payment charges and was okay with you moving your loan to another bank at no additional cost.

All other institutions will charge you a 2% penalty when you try and switch your loan to someone else.

ICICI Bank (with whom we ended up going) provides a nifty feature by which you can call them over the phone and make a part-payment every month in under 10 minutes (up to a certain amount).

This saves you the hassle of going to the bank and sitting across a person who will take 30 minutes to do the same if you are lucky.

SBI always has the best rate of interest but I have found dealing with them to be extremely tedious and something I have really avoided since my college days (I had a student loan with them at the time).

So look around and see what features you will require.

Remember that you can always negotiate your terms with the banks even if they are not part of the normal plan as the banks are quite desperate to hand out loans to people with good credit rating.

Banks versus other Financial Institutions

Please keep in mind that there are many places were you can get loans. These generally come under 2 categories – banks and home-loan institutions.

Examples of banks will be ICICI, Axis, SBI, PNB, etc.

Examples of institutions are LIC, India Bulls Home Loan, Reliance Home Finance, HDFC, etc.

As a caveat, remember that even though HDFC has banks, its home loan department is a separate entity and does not come under a bank.

When we were taking a loan back in 2010/11, different rules governed banks and institutions when it came to loans and we decided to focus on banks as the rules seemed more transparent and governed heavily by the RBI.

Please keep this in mind and do your home work. Financial institutions like LIC, HDFC, etc (from experiences shared with me), tend to be less transparent with their interest rates.

Will the Rate of Interest go up or down?

Hmm… When we took our home loan, we were paying 11.5% (which was the standard at the time).

At the time of writing this post, my friends are taking loans at 9.4 – 9.5%

What my loan advisor explained to me was that even though 11.5% was on the higher end at that time, the good news was that it would go only lower.

It all depends on the economy and the growth rate. So, expect your loan to fluctuate between 9% to 12% depending on how we are doing as a country.

There was a time when ICICI was offering loans at 7% and I have heard of rates going as high as 14% – but I feel those days are behind us.

With so many people buying houses now and RBI playing big-brother, things seem to have settled down.

How much does a 2% change in the interest rate affect you?

  • Loan of Rs. 50L over 20 years (240 months) @ 9.5% ROI = Rs. 46,606.56 per month
  • Loan of Rs. 50L over 20 years (240 months) @ 11.5% ROI = Rs. 53,321.48 per month

So you effectively pay Rs. 6,715 every month for a 2% increase

How loans work?

Apart from the simple principle in which you borrow money from the bank and pay that and some more back, home loans work in a peculiar way when you start repaying the monthly installments.

Banks will always try and recover the interest component of their loans first.

To see what is really going on, you need to take a look at your amortization schedule.

Say for example, you are taking a loan as follows:

  • Loan Amount: Rs. 50,00,000 (50 lacs)
  • Rate of Interest: 9.5%
  • Tenure: 20 years (or 240 months) – the standard tenure nowadays
  • Start Date: 1-Jan-2016

This works out to an EMI of Rs. 46,606.56

If you will look at your amortization schedule, it will look like this:

Amortization Schedule


As you can see, the bulk of your installment goes into the interest component.

So after 1 year, you have paid the bank Rs. 5,59,278 but the actual loan amount paid is Rs. 88,046.94 (16% of the amount paid). The rest of the money or Rs. 4,71,231.78 (84% of the amount paid) goes as the interest component to the bank and does not help in reducing the loan amount.

So at the end of year 1, you have paid the bank close to Rs. 5.6L but your loan has reduced only by Rs. 88K

If you go down further and see how your year 5 looks like, there isn’t much improvement.

Amortization Schedule - 5 years

  • You pay: Rs. 5,59,278
  • Interest: Rs. 4,30,721 (77% of amount paid)
  • Principal: Rs. 1,28,557 (23% of amount paid)

Total paid at the end of 5 years / 60 installments is:

  • You pay: Rs. 27,96,390 (~ 55% of your home loan amount)
  • Interest: Rs. 22,59,662.83 (81% of amount paid)
  • Principal: Rs. 5,36,730.74 (19% of amount paid)
  • Load pending: Rs. 44,63,269.26 (89% of the home loan amount taken)

That means if after 5 years of paying the loan, you win a lottery and decide to pay back your 50L loan, you will still have to pay Rs. 44.6L to the bank.

So how much do you actually end up paying the bank over 20 years?

Loan Paid over 20 years


Rs. 1,11,85,574.25

Or Rs. 1.11 Crores on a Rs. 50L over 20 years!

How do I beat this thing?

There is a very simple way to beat this and unfortunately, this is not very common knowledge.

This is the most important bit – so read carefully.

The biggest damage that you can do to your loan is in the first few years while the interest component percentage is at the highest. As time goes by, this tends to get less and less effective.

Option 1: Increase your EMI

Once you have paid your first monthly installment, head over to the bank and ask them to bump up your EMI to whatever you can afford.

I’ll show you a simple example of how this will have an effect.

From our earlier example of a Rs. 50L loan / 20 years @9.5%, the EMI comes to Rs. 46,606.

If you can even afford to pay Rs. 50,000 – i.e. approximately Rs. 3,400 more from month #2 onwards, this happens:

Change in EMI to 50K


Your tenure is reduced from 240 months -> 200 months

That is, 40 months are shaved off your home loan and you are now paying the bank a total of Rs. 99.6L (approx) versus Rs. 1.11 Crores earlier.

A saving of Rs. 12.26L overall or 11%

If you say you can afford to pay a little more – say Rs. 55K (instead of Rs. 50K), this is what happens:

Change in EMI to 55K


Your tenure is reduced from 240 months -> 162 months and you pay the bank Rs. 88L instead of 1.11 Crore and save a whopping Rs. 22.9L in the process (20.50%)

How does this work?

If you compare the original payment schedule and the new one, can you spot the difference?

Amortization Schedules Compared
(click for a larger image)

Basically any excess that you pay over your existing EMI, goes directly to your principal.

So where earlier, you were paying only Rs. 7,000 odd per month against your principal,  you are now paying Rs. 15,000 which really eats up your principal and reduces the interest and hence the tenure.

This is the magic of compounding interest and how you can use it to your advantage.

Option 2: Make part-payments

Some banks allow you to make part-payments which are equivalent to one month’s EMI or more while others have no such restriction. (You should find out what your bank’s policy is.)

So whenever you are able to save up some money, put it in the loan. It REALLY helps killing that loan off.

Say you are able to save up Rs. 1L at the end of the year and you make a part-payment. What happens?

Part Payment of 1L


As you can see, making a part-payment of Rs. 1L in month #13, cuts down your tenure from 240 months to 228 months. A saving of 12 months of paying EMIs or basically Rs. 4.72L by paying 1L earlier.

Hence, in addition to increasing your EMI, if you make part-payments, that really helps in killing your loan.

Should I save up for part-payments or increase my EMI?

Say for example, you can save 1L additional every year. Does it make sense to part-pay 1L at the end of the year or increase your EMI by Rs. 5K?

It definitely helps to increase your EMI as the extra money you pay cuts into the principal every month and the compounding principal helps you pay lesser every month compared to waiting for 12 months and then making a lumpsum payment.

However, the goal is to do either or both. Whatever you can afford. It does not matter as long as you are making some kind of additional payments.

Reduction in tenure versus EMI?

Whenever you make a part-payment, the bank will ask you whether you want a reduction in EMI or in tenure.

It is ALWAYS better to ask for a reduction in tenure. Reduction in EMI will keep giving the bank interest for extended periods of time and is not beneficial to your cause at all.

However, there may be some special circumstances under which you would want to reduce your EMI for some temporary relief. In those cases, after making a part-payment, you can ask your bank for a reduction in EMI. However, this should be the exception rather than the norm.

Some final notes

Every bank is different and they have their own weird clauses.

So if you want to follow any advice from this blog, I would highly recommend checking up with your bank first.

There could be a clause that you cannot reduce your EMI once you increase it to some level or that you cannot make part-payments for the first year, etc.

You have to do your homework and spend sometime with customer care to get your doubts cleared.

Some Examples

The following Google Sheet contains examples of the following:

  1. Schedule for 20 years with no part-payments
  2. Schedule for 20 years with increase in EMI to realistic levels (depending on job promotions, etc)
  3. Schedule for 20 years with part-payments
  4. Schedule for a non-aggressive, realistic home loan payment (increase in EMI and part-payment)

Spreadsheet: https://goo.gl/qcyPLn

The Calculator

After learning about the amortization schedules and the way this works, I wrote a calculator to help myself with this. You can find it here:

http://calculatehomeloaninterest.com/

I would highly recommend you play with it and find your own sweet spot. If you stumble upon any errors, please do let me know (though I have verified the calculations with my banks schedule and they match up).

The table generated can easily be COPY-PASTED into excel for further analysis, etc.

Hoping this post has been useful to you. Happy home-loan-hacking!

Take a Logo Quiz with your Friends

Though this post could be considered to be a shameless plug, truth be told, it is not. 🙂

If you own an android or apple smart phone, you would have definitely played one or another flavour of a Logo Quiz game. You know those games in which you see one logo after another of various brands – altered in some manner, and you have to guess which brand that is?

Games like these are perfect for battling it out with your friends – short, quick, 30 second bursts to see who amongst you is the most observant when it comes down to brands around you.

And that’s what we have been working on for the past month.

Presenting: Logo Quiz Friends which is now ready for prime time.

Logo Quiz Friends


Would love for you to download the app and try it out and let me know how you like it.

The iOS version can be found here: http://bit.ly/logoquizapp

And the android version here:

http://bit.ly/LogoQuizGame

Challenge me: My username is: saurabhj84

How to install Windows 8 or Windows 7 drivers for Boot Camp 4 on Mac OS X Lion

UPDATE: Though this post was written for Windows 7, I recently installed Windows 8 on my Macbook Air using the same steps and it worked effortlessly.

This post concerns a very small niche – people who have Mac machines (Mac Air) in my case and would like to install Windows 7 on it.
I was able to do this successfully using the boot camp assistant – but got stuck up majorly while trying to install the Windows 7 support drivers for Display, sound, wireless etc.
After a lot of digging, I finally found it – so wanted to share it here – so that others searching could benefit from it.
As far as installing Windows 7 goes, it is fairly easy and has been covered at many places.
for eg:
http://manuals.info.apple.com/en/boot_camp_install-setup_10.6.pdf
and
http://www.simplehelp.net/2009/01/15/using-boot-camp-to-install-windows-7-on-your-mac-the-complete-walkthrough/

However, what has happened with Boot Camp 4 (found on Lion) is that the drivers for Windows 7 have to be downloaded and it takes forever to do it.
Most of the times the download gets stuck or fails – and you need to start all over again. (It is an extremely frustrating experience this).
The download is actually a 700 Meg file – which is why it takes so much time.
The direct link is not available anywhere and you need to use the Boot Camp wizard only to do so.
Until now …

How to download Boot Camp 4 Windows 7 drivers without using Boot Camp Assistant

  1. Head over to:
    http://swscan.apple.com/content/catalogs/others/index-lion.merged-1.sucatalog
  2. You will see an XML file with a lot of stuff that you do not understand. Ignore this.
  3. Using the Search functionality on your browser (CMD + F or CTRL + F), search for this: BootCampESD.pkg
  4. You may get more than one entry – when I searched, I got 2 entries.
  5. I got the following 2 entries on searching:
    <string>http://swcdn.apple.com/content/downloads/54/00/041-0694/sq2RLp7XVNQzRG8qdpsq9sj4pHsgXkgPYg/BootCampESD.pkg</string>
    and
    http://swcdn.apple.com/content/downloads/54/25/041-0707/2VPHmdxTTJW2yYdy3qHCChmQPH5dn74pbR/BootCampESD.pkg
  6. What you need to do is to copy paste the URL between the tags and download that pkg file.
    I downloaded the latter one because it seemed to me to be more recent.Notice the (041-0707):

    http://swcdn.apple.com/content/downloads/54/25/041-0707/2VPHmdxTTJW2yYdy3qHCChmQPH5dn74pbR/BootCampESD.pkg
  7. Ok. So download it – its about 700 Megs and if you are in India (like me) – it will take about 20 – 30 mins for it to complete.
  8. Double click on the pkg file and it will install (basically unzip) files at a place of your choosing.
  9. Once this has been done,  you need to go to that folder using Finder and go into: Library\Application Support\BootCamp
    and then double click on the: WindowsSupport.dmg file.
  10. This will the mount a virtual drive on your system.
    Open Finder and click on: Boot Camp under the DEVICES section.
  11. Copy paste all the files on a USB pen drive.
  12. Reboot into Windows 7 (if you have already installed it)
  13. Double click on Setup.exe
  14. Wait for a couple of minutes – and you’re done!

Hopefully this helps someone else save time.
Let me know in the comments below if this helped you!
PS: Credit to this workaround goes to this post:
https://discussions.apple.com/thread/3257424?start=0&tstart=0
Which I was able to come across after days of searching.
Update:
Thanks to Chris in the comments below, the latest package (as of 23-July-2012) is available at:
http://swcdn.apple.com/content/downloads/55/51/041-3891/se4uhpqng48t842cdsosqh28lft54fmswl/BootCampESD.pkg

Blogging again …

I think I am finally in that place, where I can start blogging again …
The past couple of months have been pretty hectic – and everytime I thought I’d start writing, I would realise I had something better to do …
As you can expect, some important stuff happened since the last time I wrote …
A small recap is the order of the day I guess …
I will dedicate a blog each to all of these things …

  1. I have switched to wordpress. It was waiting to happen. Blogger has been extremely awesome – and I will miss a lot of things there, but it was time that I took up the hosting of my blog on my own server.
    (As of writing, this blog is actually on wordpress.com – but I will be moving it soon to another personal server)
    Wordpress has tonnes of more features too which I just loooove … so the move was just waiting to happen…
    More about this in another post …
  2. We finally registered our own company – ThinkingSpace Technologies.
    Technically, we’re 4 months old already – but the registration happened of late – and I am still basking in that sense of achievement.
    We’re just three classmates from college, don’t have posh offices (yet) but are poised to get there extremely soon!
    Watch this space for more …
    And yes, we also do useful things (see next point)
    http://www.thinkingspace.in
  3. We took ActiveCiti to Public Beta.
    ActiveCiti – our first product, entered into its public beta phase (after a month of being in stealth private beta) and the response has been good so far.
    If you don’t know what it is — ActiveCiti is this extremely cool event management application — with which you can create, plan and organise your events very, very easily.
    From inviting friends, adding other organisers, polling people to what they’d prefer, sending automatic emails about changes to the original plan — ActiveCiti does it all.
    You can check it out at: http://www.activeciti.comIf you are wondering, this is not quite the same application we did for our final year project a year ago.
    It has been completely written from scratch – and does tonnes of things the previous version did not …
    Please do check it out and we’d love to hear your comments and feedback on this.

Hmm …
So, these are the things that have happened to me so far – and which have consumed the bulk of my time.
Will update this list if I think of anything else …
And please do update your bookmarks / blogroll to: http://blog.saurabhj.com for my blog.
Even if the base platform changes, my blog will always be accessible from this URL.
(Now why didn’t I think of this before !!!)
Anyways, feels really good to be back.
Thank you for being so patient and coming back and reading what I write.
[ Min number of posts to go till Mar 17, 2008 : 82.]

CampusCombine …

http://www.campuscombine.com

Hey!We (The ActiveCiti Team) just wanted to inform you about the new initiative we just started – CampusCombine.

How many times have you felt the need to know what was going on in other colleges – from which questions were asked by the external examiner during the viva to which companies are coming for campus placements to when that inter collegiate event is going to take place. How do you know if the college/stream you are entering is the right one for you?

How many times have you felt frustrated while completing an assignment which even the staff members had no idea about? Wouldn’t it be awesome if you could ask people from other colleges for help – those who had completed the assignments you wanted…

How many times have you got stuck due to lack of ideas and guidance while working on a project and had no one to take help from or turn to…

Well, trying to provide a solution to all these problems and thousands more – which students face, we give you “CampusCombine”.

CampusCombine aims to bring students, ex-students, companies and interested mentors – all together on a common platform so that they can help each other out.

So, if you are a student and the next time you are wondering how a particular problem can be solved, or what questions were asked by the external examiner in other colleges, all you need to do is log on to CampusCombine for your particular city and get your doubts and queries cleared.

And if you are someone who has gone through the rigors of the Indian education system and wants to lend a helping hand to people still stuck there, you can log on to CampusCombine and help out the students and make their lives a little easier.

So, please head on to http://www.campuscombine.com and be a part of this revolution that we’re trying to start.

Aao banaye education behtar 🙂

– The ActiveCiti Team

PS: As we are very short on our advertising budget, please could you forward this email to all the people you know who you think could use this service?

Thanks 🙂

What you just read up there was the pitch to a new site that we started a day before called CampusCombine.

As this is a non profit venture, with no revenues whatsoever and no venture capitalists or angel investors backing us up, it gets kinda difficult to sometimes spread the word.

So we have to resort to emailing friends, asking them to forward the link and hoping that they will do. We had already done this for ActiveCiti – and the initial response was great – but once you run out of people to email, the number of people signing up everyday slowly dwindles down.

The important thing then, becomes to get as many people as you can email to actually join the site and hope that you did a good job with the site – so that people can refer people and so on …

The very difficult and thus quite interesting part of this job becomes to word the email.

You have to keep it somewhat short and get all your ideas in place – worded properly so that your readers can empathize with what you’re doing.

However, this time I think we’re working with a more serious problem than we were with ActiveCiti – coz the response has been fairly decent.

Not to mention these are very early days and the student population of Pune is monstrous.

So only time will tell … 🙂

Finally done and over with …

Today probably marked a pretty important day for me – college is finally done and over with !
I know this has been said before, but we had our project demonstration today, and so (considering I clear all my papers), I should not have any official reason for going back to college ever (except for collecting my marksheet)
Anyways, even though all these past four years have had many pleasant memorable experiences, I would be leaving with sort of a bad taste …
The only requirement for our project demonstration that we had off the college was access to a decent internet connection – we were carrying our own notebook (mainly because the college computers would not be able to support our development environment :p)
Anyways, our project guide from college called us personally a day before and informed us that the college was having some trouble with their internet lines and asked us if we could make some arrangements ourselves.
We ended up carrying a CDMA Wireless phone which gives dial-up speeds internet connectivity. It did get our job done, but was painfully slow and frustruating !
Anyways, on reaching college, we realised that the internet connection had been down from a couple of days and no one had many arrangements to fix it – or even call the customer care support for that matter, even though many teams needed an active connection to demonstrate their projects.
Moreover, all the computers were infected with worms and viruses which caused unexpected behaviour on the systems – adding to our misery.
The final ‘real’ downer – was that the examiner who came to check out our project was very, very unqualified to do so …
I’d go as far as to say that he was a complete idiot and had no idea at all about software development.
The college is not to be blamed for it – because the University sends these people – but c’mon, there has to be atleast some level of competence!
The guy who came to us, asked us questions like:
– What are the number of classes have you used in your project?
– How many tables are there in your database?
– How many pages does your site have?
It was very apparent that the guy knew nothing at all within the first five minutes, and to save his blushes, he had to ask us questions – many of which could clearly be termed as ‘stupid beyond belief’.
The demonstration did go past 60 minutes and he kept interupting us with his moronic questions throughout – half of which we had to strain to make sense off in the context of our demonstration!
It actually hurts when people spend months in completing a project – with the time, money and energy spent – and the person who is supposed to assess the project turns out to be a complete moronic idiot and does not even make an effort to understand what you have done.
With everything said and done, my other project partners feel that we did the best we could with this sort of a guy and we should be happy that its gone well.
I guess so … but the Pune University really needs a wake up call !!!

ActiveCiti goes LIVE

This post is coming after a fairly long time – and for good reason too…

The last week was pretty hectic – I was very busy studying for my exams and more busy in trying to get our Final Year Engineering Project done and released.

Well, I am happy to inform you that we went live today at 5:30 pm (thats when our faulty registration page got fixed) :p

Presenting … ActiveCiti

(clap clap clap clap … )



Unlike so many other Final Year projects that we had seen – which mostly are very, very niche and no one ever seems to use them, we decided to go and do a complete product from scratch – however insignificant it might be, or no matter how many people use it.

We wanted to go through the entire site of developing a product …

So we wrote our own spec document, did our own database designs, did all our own interface designs, chalked out flow diagrams and made our own mistakes (which are quite a lot actually)

And to tell you frankly – the feeling is brilliantly awesome.

At the other end of the road, seeing the number of registered users increase by the hour is damn awesome 🙂

As of writing this – 7 hours into launch, we now have 50 registered users.

I know that this will now decline exponentially, but we hope that we make 100 atleast.

Something about the project

The entire project is a web application which makes planning a piece of cake.

It removes all the hassles of calling so many people back and forth while planning anything – a movie, a trip or even just planning to hang out at a local coffee place.

Though the content on the site is Pune Centric – that should not be a drawback and everybody anywhere should be able to use it – as we let users customize and add to the already existing content.

The entire application is done up in ASP.Net 2.0 with SQL Server 2000 as the backend database.

It took us about 4 months to get this done – working part time, managing college and stuff.

But it feels awesome now …

We did have some anxious – adrenalilne pumping moments when 2 hours into the launch (we actually did it at 3 pm) we found out that the register page was not working.

Then later quite a few pages started acting up and were not working as expected … but we managed to fix them and as of now everything seems to be chugging along nicely (touchwood)

We still have some way to go before this is finalised and polished.

Have got tonnes of feedback and our list of todo’s has already gotten filled.

Anyways, please do visit the site and register there.

The address is : http://www.activeciti.com

Any feedback would be deeply appreciated and you can drop it off at : http://www.activeciti.com/contact.aspx

Yay ! ActiveCiti is LIVE 🙂