By Jayachandran. S, Zonal Business Head – Gold Loans, Fedbank Financial Services Ltd
Is it worth taking a festive loan?
When festivals are round the corner, they bring togetherness and merriment. And yet! with the festivals, the attraction of good offers and discounts of festive loans are hard to resist. This will make you end up spending more than you calculated; the celebrations may put a strain on your budget. In such situations, financial imprudence is very common and you must be wondering whether to go for a festive loan or a gold loan.
Is festive loan worth taking?
When it comes to borrowing a festive loan, a loan with some offers or discounts should not be the choice for you take it. Always remember, no loan is interest free where you must repay it with interest. RBI has clearly stated that “Every loan comes with an interest rate attached based on the customer’s risk profile.”
For this reason, you must check each and every aspect before choosing a festive loan. Find out your needs, check if that is a long term or short term need, and make the right choice. An offer on the festival loan is best if you have long term plans like buying a home or car. For shorter term expenses for festival celebration it will become a burden rather than a boon.
Let us see the real facts behind great offers of festive loans:
No cost EMI: the real cost
The concept of ‘No Cost EMI’ or ‘Zero Interest Loans’ or any loan actually comes with an interest rate that is connected with customer’s risk profile. But how the lender is offering zero interest loans? Generally, the interest is masked in the form of excessive processing fee and taxed on the customer. In many cases, the internet or market shopping platforms have contracts with the lender to waive discounts offered for lump sum purchases. The lenders adjust this discount over the interest charges.
In some other cases, the customer may be charged a joining fee that will be upfront before the allotment of festive loans. Hence, it is important to understand the real hidden cost in “No cost EMI options.”
Cashback offers: the real gimmicks to lure the customers
This is another way to magnetize the customer. Generally, lenders like e-commerce site, credit card companies, and retailers implement this technique to attract the buyers. Nevertheless, the customers cannot avail cashback easily, to avail the cashback you must fulfill certain conditions. The above-mentioned lenders offer cashback for loan on which in most of the cases the cash is not given to you directly.
Instead, they can be used only for other shopping purpose for festival purpose. You will either get an e-wallet or a voucher which is valid only if you purchase them to reach the maximum cap. This will make you spend more than the budget you planned for.
The benefits of taking gold loan over festive loan
Worthy of its name, a gold is very handy when you need to fulfill your short-term expenses like festival season. The gives you instant money by pledging your gold.
Some of the benefits of Gold Loans are
- When compared to festive loan the rate of interest is less and processing charges are minimal.
- Minimal documentation process for gold loans, modest, KYC-based documentation process is required for gold loan processing when compared to festive loans. Unlike the festive loans, the customer needs to provide only basic KYC details such as identity and address proofs. On the other hand, for festive loan CBIL score eligibility and other requirements are essential.
- Quick turnaround time
- Flexible repayment tenures
- High LTV ratio upto 75% of market rate
- Flexible short repayment tenures
- Bullet repayment of principle can be done
- Gold pledged with us is fully insured
Unless you have long term expenses such a home or vehicle loan when compared, Gold loan is always a better option for fulfilling short-term financial needs for the above-mentioned reasons. You may opt for dependable NBFCs like Fedbank Financial (Fedfina) for your financial requirements. We are happy to serve you.