Setting up a Systematic Transfer Plan (STP) allows investors to transfer a fixed amount from one mutual fund plan to another at regular intervals. This helps investors benefit from the potential returns of equity funds, while reducing the risks of lump sum investments. Here's how to set up STP.
Choose funds
Identify the two mutual fund schemes that will be involved in the STP process. Money is transferred from one scheme to another Typically, the source scheme is usually a liquid mutual fund, which provides stable returns at low risk and in which lump sum can be invested. The target scheme can be an equity-oriented mutual fund in which regular transfers can be made, securing investments at different points in time.
Choose the STP parameters
Investors need to decide the amount they want to transfer from the source fund to the target fund. This amount can be chosen based on financial objectives and liquidity requirements. The frequency of transfer (weekly, monthly, quarterly, half-yearly) also needs to be chosen. The STP has to be determined to indicate the period for which regular transfers will happen.
Registering the STP
Once the STP parameters are decided, there is a quick process of registering the STP, either through the mutual fund's online platform or by filling up a physical STP form and submitting it to the fund house or registrar, and to the transfer agent's office.
Should You Buy a Car Cash Down or Through the Finance Option?
In today's world, cars are evolving faster, increasing car lovers' passion
However, only some people can save enough to buy a car outright without taking out a loan or withdrawing money from a fixed deposit. This results in people wondering about buying a car on loan vs cash in India.
For many of us, owning a car is essential as part of our daily work responsibilities; For others, owning a car is an aspirational value demonstrating to our contemporaries that we are successful.
Pay cash outright for a car usually takes time, commitment, or relatively large paycheck. This is why most of us, who do not think about financing the purchase of furniture or appliances, take out a loan to finance our cars without thinking twice.
That's why financing is available to those who qualify and is the most popular way to purchase a car. In addition, many financial institutions offer car loans to help customers buy the car of their dreams even when they lack funds.
With financing, you can pay for your dream car over time. (with an additional charge of "interest" as a fee for borrowing the money)
Once again the question arises as to whether you should purchase a car cash down or via the finance route. However, before jumping to conclusions, let's analyze the basic characteristics of both options and find out whether we should buy the car on loan or cash.
Understanding the Cash Down Option
It's simple to pay with cash. You find the desired automobile, pay for it and take possession of it. The only expense is what you pay the seller for the car. Lower your out-of-pocket costs by trading in an old car.
There is no need for financing. This way there will be no interest or fees. You won't have to make any monthly payments or take on any debt because you'll own your car outright.
While this is beneficial because it is less expensive and more manageable than taking out a loan, there are some potential drawbacks. First, remember that you are missing out on the opportunity to build credit by paying cash.
Second, spending money on a car will not make you more money. Cars in reality, degrade as you drive them. Therefore, you should consider whether this money would benefit you more if invested instead.
If the returns on your assets exceed the costs of financing a car loan, taking out a loan will be more beneficial than paying for your car in cash.
Advantages of the Cash Down Option
Some of the advantages offered by the Cash Down option are:
• Simple Process
It is a relatively simpler process as it consists of three steps.
- Pick a car
- Pay the dealer
- The car is yours.
Apart from registration, insurance and other matters, you don't have to waste time worrying about credit checks.
• More flexibility
It is more flexible as you can easily trade in the existing car or sell it when you buy the new one. You don't have to worry about loan repayment or cancellation fees, as the car becomes yours immediately once the loan is paid off.
• Cheapest source
It's cheaper because you don't have to pay fees or interest.
In addition, car companies love to attract customers with amazing financing offers. However, the customer must remember that all these offers carry a higher price.
Disadvantages of the down payment option
Some of the disadvantages offered by the Cash Down option are:
- Limits the Choice of Vehicle
It limits the choice range because it might not match the money you physically have in your account.
It will leave you settle for cheaper cars with fewer features that may not meet your needs and may be at risk of having a short-lived life.
- No Credit Building
Getting a vehicle loan and making regular payments could assist you in establishing your credit history and improve your credit score. However, let's say you pay cash for a car.
In this case, you won't be able to build your credit with car loan payments, which may limit your ability to obtain credit in the future for other purposes, such as buying a home or opening a business.
- Financial impact
Getting a car requires a lot of money up front, which can affect your overall financial situation.
Additionally, paying cash can deplete your savings or investments, leaving you with fewer emergency funds, assets, or other financial goals based on the cost of the car.
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Understanding the financial option
If you take out a car loan, it is in your best interest to look for the financial institution that can provide you the best deal in terms of interest rate, loan terms and service.
It will take time. You will also have to pay for finance, which will increase the price of the vehicle. Naturally, you will make monthly payments and only own the automobile once it is paid off. However, if you make regular payments, you will build your credit and will have money that you would otherwise have available to spend as needed.
Advantages of the Finance Option
Benefits offered by the Finance option include:
- Expands the Choices of Vehicles
- Expand the selection of vehicles as the price range increases. If you can comfortably repay the instalments, a car loan will help you buy a more expensive vehicle best suited to your needs.
- But the terms of a car loan can sometimes limit the choice of vehicles you want to buy.
Credit history
It builds and improves your credit score because it improves your credit score for future purposes when you successfully apply and responsibly repay the loan.
Payment Over Some Time
It won't empty your savings. Therefore, the process does not leave you at financial risk. Instead, a car loan extends your car repayment time over many years by allowing for monthly payments while maintaining enough household finances to cover day-to-day costs.
Disadvantages of the Finance Option
The disadvantages offered by the financial option include:
- Expensive Source
It is more expensive, because borrowing money and repaying the loan over time will include interest costs and other fees. In addition, the car is considered a depreciable asset and the amount decreases when you drive it off the lot.
Therefore, after a certain period, the money needed to pay off the car loan will be more than it is worth.
So, before applying, you need to calculate the monthly car loan installment, the total repayment cost, interest and other fees that determine whether you are ready to pay this cost.
- Higher Risk
It uses your vehicle as security, which means that if fail to make repayment and default on your loan, the lender can repossess your car and sell it to make up for the loss.
Summing up Car Loan vs Full Payment, which is More Feasible?
Many people wonder whether they should buy a car on loan or cash, or contemplate about is it better to buy a car on loan or cash, round the clock. Both options have pros and cons. Therefore, it is essential that you think about the car you want to buy and how you plan to pay for it. Of course, using cash is the best way because you do not need to pay any interest.
If you cannot afford a big car, it is better to buy a small car, but try to avoid taking out a car loan. However, if the loan rates are feasible, a loan can help you if you can avail it.
Buying a car on loan and investing the available money in a mutual fund having a higher return than the cost of the loan can help you pan out an advantageous situation.
Also Read: Buying A Second-Hand Car? Follow This 10-Point Checklist!
