Things to consider before opting for a festive loan
If taking a festival loan, keep repayment capacity in mind
Taking a loan during the festive season is quite common as one may get the best offers to buy a home, car, jewels, etc. at low interest rates. Besides, the festive season is also the time when banks push their special loan offers in the form of waiver of processing fees, discounted fees, lower interest rates and so on.
However, one should always be mindful while borrowing, as the idea of festive loans is to encourage people to spend more during the festival season.
Read The Terms Carefully
Borrowers should read the terms and conditions and privacy policies properly to avoid any trouble in future. Many of these festive offers often come with specific terms and conditions such as a high credit score, profession of the borrower, loan issued up to a certain amount only, etc. Moreover, there can be various hidden charges related to the loan. Also, borrowers should understand all the details including repayment schedule and charges involved.
Compare Offers And Interest Rates
The benefits of festival loans differ for various banks. Therefore, it is best to each loan offer before finalizing one. During a festive season, lenders offer deals like free gold coins and similar incentives for home loan shoppers. Instead of getting sucked into such meaningless offers, however attractive, look at the interest rates, tenure and fees. Compare based on these attributes so that you can get the best offer.
Also, by keeping an eye on interest rates, borrowers can choose the most suitable lending arrangement, on the basis of the repayment capacity and financial planning. The lower the interest rate, the lower will be the installment that you will have to pay every month. Check the interest rates for various tenures and then determine which is apt for you.
Do Not Over-Borrow
Borrow only when you need it since healthy finance is also important for your overall financial growth. One should always consider the circumstances and then make a choice. Keep in mind that loans need to be repaid, and interest rates and several other charges may apply.
Abstain From Taking Multiple Loans At One Time
Taking multiple loans at the same time raises the possibility of defaulting on the loans, which might influence your credit score and also decrease your eligibility to take future loans. It is suggested to combine all your financial needs into one loan to manage your finances.
Check Whether You Actually Require This Loan Now
A loan with attractive offers should not be the reason for you to make the jump. Hence, recognizing your needs before applying for a loan can help you make the right choice. A loan is best when it is taken for your essential needs. An offer on the festival loan sweetens the celebration more if informed borrowing decisions are made. Borrow according to your repayment capacity to avoid any kind of debt trap.
A festival is a wonderful opportunity if you look forward to taking a big-ticket loan. With the lenders lowering interest rates for individuals with good credit scores, home loans and car loans can become cheaper for credit healthy individuals. But do the due diligence and pay attention to the details before you sign up.
The author is head-retail loans, Vehicles (Chief of Wheels), AU Small Finance Bank Limited.
DISCLAIMER: Views expressed are the author's own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.