Whether it's the peak of summer or the height of winter, the demand for household appliances and electronic devices remains constant. Items such as mobile phones, laptops, air conditioners, and more are always sought after. Retailers and banks entice customers with various discounts and financing options. While credit cards are a popular choice, it's worth exploring an alternative—consumer durable loans—before making your purchase.
Consumer durable loans are money borrowed from a bank to buy something, and you can pay it back in easy instalments. The good part is you don't have to risk any personal assets, and approval is quick. Plus, the eligibility criteria are less strict compared to other loans, and you don't need a lot of documentation.
Considering consumer durable loans? Here are key factors to keep in mind:
Interest Rate: This is crucial because it determines the extra amount you'll pay. Consumer durable loans usually have lower interest rates than credit cards or other loans. Some institutions even offer zero per cent interest on specific products. Interest rates for a consumer durable loan vary from lender to lender and range from 12 to 22 per cent. Some lenders also offer zero per cent interest based on their promotional offers. A nominal processing fee ranging from one to three per cent of the loan amount is charged by most lenders.
Tenure: The number of months you'll be paying instalments matters. Opt for a shorter tenure to repay the loan quickly and minimize interest costs. Consumer durable loans typically come with a flexible repayment period, usually lasting from eight to 36 months.
Down Payment: Banks often cover 80-95 per cent of the product cost, leaving you to pay the rest as a down payment. Check these details beforehand to be prepared.
Hidden Costs: Some consumer durable loans offer a zero per cent interest rate, but be cautious. These schemes may include hidden costs like processing fees, deducted from your loan amount. Additionally, choosing zero per cent interest means forgoing cash discounts available with full upfront payments. Consider these hidden costs before opting for zero-per cent interest loans.
Documentation: Consumer durable loans are easy to get with minimal documentation—identity proof, address proof, and income proof are usually sufficient for instant approval.
Foreclosure Charges: You have the option to close the loan whenever you want. The foreclosure time varies among lenders, usually starting from the first EMI to six months after loan disbursement. While many lenders don't charge for closing consumer durable loans, some may impose fees ranging from two to four per cent of the outstanding principal amount. Feel free to contact your lender to learn about their specific foreclosure procedure.
Consumer durable loans offer several benefits:
Accessibility: These loans allow people to get essential items even if they lack sufficient funds, improving their quality of life by keeping them updated with technological advancements.
Flexible Repayment Options: Lenders often provide flexible repayment choices, including no-cost EMIs and zero down payments. This helps borrowers manage their finances better and choose the payment mode that suits them.
Building Positive Credit History: Repaying the loan on time can build a positive credit history, increasing the chances of getting loans in the future.
Bundled Offers: Some lenders offer additional privileges like extended warranty, insurance coverage, and cashback rewards, adding extra value to the consumer's spending.
In essence, consumer durable loans can be a double-edged sword—it's up to you how you want to leverage this borrowing option.
