'Cheap' loans are VERY expensive!

Show me the money!
The bank levies a service tax of 12.36% on processing the fee, which it needs to pay to the Government. This works out to Rs 1,236. Factoring this into your cost, increases the bank's IRR to 21.86%.

Further more, you need to pay service tax @ 12.36% on the interest component of your EMI, too. Many banks don't tell you this, and the extra charge turns up in your loan or credit card statement. Now, add this and your cost increases to an astounding 24.56%!

So, the next time you see a loan deal coming your way at say 12% per annum think again. The 'real cost' to you is easily double of that, to say the least. It's worse if you have taken it from a credit card company. The reason: if you forget or delay to make even one payment the bankers will rejoice -- you have a late fee plus about 3% more interest as penalty on the outstanding amount, plus service tax on the above.

No free lunches!
If we are told that the cost of this loan is 25% per annum and we agree to it, then it's fair. What really pinches when we are misguided and information is not correctly and openly given to us.

In this case the bank and its officers via their bonuses, commission and salary, are making money completely at your expense and many a time unethically by not guiding us correctly. To me, this is unfair. But this practice is rampant, and no one seems to have a problem with it. But remember: there's no such thing as a free lunch. And this is especially true in the case of money. 

Now, I hope you wouldn't be as careless as Mr Mohan Kumar was.