🧮 Detailed Comparison Explained
Let’s break down what these numbers mean for your situation. You’re considering a purchase worth
₹1000000
(the principal, or P) with a loan interest rate of
8% p.a.
and a total tenure of 60 months.
1️⃣ Option A – Taking a Loan Now
If you take the loan now, you’ll pay a monthly EMI of
₹0.
Over the next 60 months, your total outflow (principal + interest) will be
₹0.
This means you’ll pay an extra
₹0
as interest to the lender, on top of your original loan amount of ₹1000000.
💡 Tip: The higher the loan rate (r), the more you’ll pay overall. Even small rate differences can add up significantly over time.
2️⃣ Option B – Saving Instead of Borrowing
Suppose instead of borrowing, you decide to save the same EMI amount every month —
₹0 — in a savings or investment that earns
6% p.a..
Over 60 months, you’ll accumulate approximately
₹0.
This includes both your monthly contributions and the interest earned.
However, during those 5 years, inflation at 7% per year means
the cost of the same item would rise to around
₹0.
📉 Inflation Impact: Inflation (ir) reduces your money’s purchasing power over time.
Even if you save regularly, your target amount needs to grow faster than prices do.
3️⃣ Putting It Together
So, after 5 years:
- Total spent if you take the loan now: ₹0
- Total savings if you save first: ₹0
- Inflated price after 5 years: ₹0
In real terms (after adjusting for inflation), the better option is
–,
where you save approximately
₹0
compared to the other approach.
4️⃣ In Simple Words
If the loan interest (8%) is much higher than what you can earn on savings (6%),
taking a loan now generally costs more. But if inflation (7%) is high and the loan rate is relatively low,
buying now can sometimes make sense — since waiting might make the goal much more expensive later.
✅ Conclusion:
This comparison highlights the trade-off between time cost (inflation) and interest cost (loan).
The right choice depends on which one increases faster in your scenario.
