India is a country rich with
various diversities, cultures, ethnicities, and real beauty lies in the
citizens that comprise various religions, living in harmony, which is showcased
during festive seasons.
The festive season is a time when all the differences synchronize to create a beautiful environment decorated with smiles, happiness, laughter, humanity, compassion, and bring out the real essence of life while embracing the heritage of all cultures.
It’s during this time that people invest in themselves and the ones close to them. Gifts are shared with loved ones, and the quality of living gets emphasized. While the price tags are kept under considerations, banks and the financial institutions prepare themselves with various new schemes and loan offers paired with attractive advertisements to lift the value of gifting above a budget’s limitations.
What are Festive Loans?
Many prominent financial institutions and banks bid goodbye to the processing fee on Home Loans, Vehicles, Gold Loans, Business Loan and even Personal Loans during this Festive season. These Festival Loans are basically a modification of Personal Loans with low-interest rates, faster processing time, and low processing fees. In addition, most of the festival loans provide a long period of time of almost a year. However, the loans are of less amount compared to personal loans, and the maximum loan offered is of Rs. 50,000.
Who needs a festive loan?
Festive loans are made to make festivals more exciting and to add joy to life. Nowadays, loans are of prime importance in mostly the lives of millennials. These loans are of a restricted amount so that one can easily afford them and repay during a year, making it easy and flexible. Festivals can be a bit too heavy on pockets at times; these loans make sure to ease the pain of paying an amount all at once by making the repayment tenure 12 months.
Why should one opt for a festive loan?
Festive loans come with a lot of additional benefits and schemes like low-interest rates, zero processing fees, and a flexible tenure with no prepayment penalties. In other loans, they always turn out to be more fund exhausting and come with a lot of extra charges, where festive loans come to the rescue.
Eligibility criteria for Festival Loans
The eligibility criteria for
festival loans remain the same as any other loan requirements, which include:
- Credible income source
- Self-employed individual
- Age
- Work experience
- Adequate income
- Spouse’s income for being a guarantee (for joint based loans)
Usually, in cases of personal loans, the individual must fulfill the high-income criteria. Whereas, in festival loans, the minimum amount of income required for being eligible is comparatively set to a very low amount. Thus, for applying for a loan of up to Rs. 50,000 one can easily cover all the requirements without any worries.
Interest rates in Festival Loans
Compared to Credit Card EMI and Personal Loans, Festival Loans provide fairly low-interest rates that start from 6.9% to about 9% per annum and can range according to the loan amount and different banks or financial institutions.
On the other hand, credit card EMIs range from about 18%- 24% per annum, and personal loan interest rates range from about 16%-24% per annum.
Comparison of charges
In festival loans offered by various banks and financial institutions, the processing fees are comparatively low of up to 1%. Whereas, in the case of personal loans, the processing fees are of higher rates and range from up to 3% of the whole loan amount, and in the case of credit card EMI, that ranges up to 2%. Considering the maximum amount of loan granted in festival loans, this amount is negligible and can be done with.
Penalty Clauses in Festival loans (foreclosure/prepayment charges)
There is no case scenario of penalty charges caused in foreclosure or prepayment of festival loans. However, in cases of personal loans and credit card EMIs, if the loan is closed early or the EMI is paid in advance, a foreclosure charge and prepayment penalty is deducted with ranges from 2%- 4% of the outstanding principal amount. Festival loans are more flexible and allow the borrower to handle finances with ease.
Things to keep in mind while borrowing
While festival loans have tons of
new exciting offers and flexibility, there are certain things that one needs to
consider for clear, hassle-free finance management.
- While
selecting a loan- one
needs to be extra careful while selecting a loan as there can be various hidden
charges related to the loan. Also, the benefits of festival loans differ from
each bank. Therefore, it is best to make a fine comparison of each loan offer
in a shortlisting process before finalizing one. It is also of immense
importance that the borrower reads all the terms and conditions with utmost
concentration and understanding to avoid future troubles.
- Do not
over-borrow– it is
advisable to borrow only what is needed. Gifting is more about the emotions and
relations that humans share; it’s celebrating the bonds but keeping healthy
finance is also important for a person’s overall growth. Therefore, it’s always
beneficial to consider the circumstances and then make a choice. One needs to
keep in mind that loans need to be repaid, and there are interest rates and
several other charges that come along with it.
- Do not
apply with multiple lenders – every
loan you take gets recorded in your credit score and will be visible to every
lender. Therefore, applying to multiple banks or financial institutions will
lead to the rejection of all the applications and will leave a negative mark on
your financial needs and future transactions with such lenders.
Festive loan offers are of huge benefit as this leads to much less expenditure and a long-time benefit. These loans are flexible in every way but need to be selected carefully in accordance with the necessity. Festival Loans are limited to a price of Rs. 50, 000, therefore, personal loans will be the preferable option if the necessity is of higher value. However, a loan always needs to be repaid. It is always better to make a choice that fits one’s pockets.
Should You Go For Festive Season Loan Offers FAQs:
1. What is the end utility of a loan?
End utility of a loan is the expenditure one makes with the loan amount. While taking a loan, one must be clear with the utility of the loan amount to avoid extra or unnecessary expenditures that destroys the main purpose of applying for that loan.
2. How much should be the tenure of the loan repayment?
This depends on the borrower and his/her financial stabilities. It is always advisable to select a tenure that one is comfortable with. Many other things are dependent on this, like the principal loan amount, the interest rates, and after all the calculations, one needs to select a preferable tenure in which one can repay the amount without nerve-racking about the shortage of time or resources.
3. Should one choose a very long repayment tenure?
No, there needs to be a perfect balance of the time and the money. A very long tenure will cause fund loss in interests and several other instances and will end up being baggage. While in festival loans, there are no prepayment penalties, in other loans like personal or credit card EMIs, there are. Thus, it’s important to make a plus-minus calculation of the tenure in accordance.
4. What happens if there is a delay in Repayment?
Penalty. Festival loans are way more flexible in penalties and are often found to excuse minor delays, but however, one must be very disciplined while repaying the loans. Credit card EMIs and personal loans charge a penalty fine in such cases.
5. Is it important to compare among other banks?
Yes, it is very important to list, compare, and shortlist and then finalize a bank from which one is comfortable to borrow that suits their needs.
6. How important is a credit score for Loans?
Credit scores are very important while applying for loans. One needs to maintain a score of 750 to be able to have access to a loan. Lenders have the eligibility to pull out the borrower’s credit score and check if he/she is eligible for affording the loan. This is known as Hard Enquiry.
7. How to check credit score?
8. What is the documentation required for applying for a festival loan?
Minimal documentation includes Id proof, address proof, employment details, income statements, and tax receipts. There is no such requirement for lengthy paper works or hassle.
9. Is every festival loan processing fee-free?
While almost all prominent institutions waived off processing fees, there are still some cases where it exists. Therefore, it is mandatory to read all the underlying terms and conditions before opting for one.
10. Is it true that zero interest or no-cost EMIs does not exist?
Yes, RBI clarified that no such term exists as the banks earn their profit from interests. Therefore, it would not be wise to believe in advertisements that suggest some unbelievable deal. However, there are certain schemes where the interest rates are pulled down to a very low amount and, in some cases, are even exempted. This is a highly unstable and unreliable matter. Maintaining extra caution while reading terms and conditions is the most valuable part of choosing a loan.
