The holiday season is here and you may be starting to worry about the costs it brings - new clothes, decorations, gifts, home decor, and other big-ticket purchases. Your mailbox is already full of ‘festive donations’ from banks. Many banks and financial institutions have come up with attractive deals that make the cost of the festivities a breeze for their customers.
Festive loans are a variety of personal loans that are offered at a lower cost compared to a small amount. While some banks prefer to name the product as 'festival loans', others prefer to advertise it as part of their loan offerings. These loans are usually offered for a limited amount, say Rs 50,000, which is why banks may be more inclined to issue festive loans. With such great deals available on the market, it is easy to be lured into getting a personal loan for a holiday. However, is it a good choice? Let's find out.
When should you take out a loan for a festive season? Taking out your loan to finance your wedding expenses does not hurt if you plan. It can be helpful in the event of a major purchase such as electrical appliances, jewelry, etc., the cost of which can meet your normal income. Small home renovations can also be paid for with such money. Since the Christmas season personal loans are offered at a low- personal loan interest rates and processing fees, they can be considered a viable option.
However, points to be noted:
Loans last longer than festivals - Unfortunately, loans cannot be passed on to someone else like the fun boxes in Diwali. Once you have taken out a loan, EMIs are unavoidable and needless to say, personal loans are one of the most expensive loans. EMI payments will add to your monthly expenses so you should plan accordingly so that you do not get caught up in the endless cycle of debt.
All that is shiny is not gold - It is extremely easy to be seduced by that ‘big’ offer of personal loans and not to look at the ones available on the market. Look at the Christmas season deals with other banks and compare them with the ones you are looking at. Don’t just compare deals and discounts; consider the total cost of the loan. For example, a 100% withdrawal of processing fees may seem tempting but not as good as a 1-2% reduction in interest rate.
What are some other financial options?
Personal loans come with a high-interest rate so unless you are sure you should not use the discretionary costs like a festive purchase. Instead, you can look at other options depending on the type of cost.
As given below are a few of them-
Consumer durable loans - If most of the items on your shopping list are domestic, long-term consumer loans can be a good idea. This is available at a lower Bandhan Bank Personal Loan rate than that of personal loans or credit cards. Some Non-Banking Financial Corporations (NBFCs) are also partnering with supermarkets and product stores to offer affordable EMI during the holidays.
Credit Cards - For general purchasing and gift requirements, credit cards are the best. So, if you plan to buy that, keep the credit limit free on your card. EMIs can be created directly by the merchant or by calling your bank's customer care number. While credit cards also come with interest rates, they can be easily managed with good planning.
Top-up Home Loan - This loan is best if you are looking forward to renovating your house and you already have a mortgage loan. Most lenders offer additional home loans that can be a good place for personal loans. Now that you have a home loan and bank account, there will be less paperwork.
Conclusion:
The fact is that personal loans for holiday shopping can be a good idea if you need a small amount of short term, say one year. Before choosing a lender, weigh some of the options available and make a decision.
Comments