When we avail a loan facility from SBI or for that matter any other bank, it usually keeps certain "Margin". What is this MARGIN? Can any one through some light on this?
3 Replies
CA Rajesh S
(Chartered Accountant)
(1581 Points)
Replied 30 June 2008
you take loan for a certain purpose , say the whole amout required for that is Rs 100/- . Usually the bank will not finance this full amt ie. Rs 100/- , it asks you to bring certian amount say 25%, i.e Rs 25/-. and will fund only Rs 75/-. Rs 25/- which you bring in or bear is the margin.
ALOK GULATI
(student)
(80 Points)
Replied 30 June 2008
CA Rajesh S
Thanks for the reply
However as you said that we have to contribute Rs 25, thus ideally in this case we should be paying interest on Rs 75 borrowed from bank & not on Rs 25 contributed by us?
CA Rajesh S
(Chartered Accountant)
(1581 Points)
Replied 30 June 2008
u r right, u pay int only on the money borrowed.
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