We live in a smart world. A world of smart phones, smart televisions and smart home assistants, that can switch on lights, fans, and televisions on a single verbal command. But many of us struggle with coming up with the finances for such appliances. If you don’t have enough money to purchase these fancy gadgets, you can always opt for a loan. All you have to do is apply for a consumer durable loan by choosing from a range of financers. Also, consider the following factors before applying for the loan.
Consider the available options: You must first decide on the loan amount and the maximum amount you can allocate towards loan repayment before approaching a bank. Since you intend to use the money to purchase consumer products, ensure you opt for a consumer durable loan and not a personal loan, as the later can cost you more. Most durable dealers are tied up with financiers. Remember that financing costs may vary from dealer to dealer.
Criteria for selecting a lender: Before you finalize a lender, you must find, the minimum and maximum duration of the loan, and the down-payment amount. Also read the document t closely to understand the the total cost of the loan, repayment period and interest calculation method.
Effective finance cost: Remember that the effective finance cost differs from the rate of interest. The total cost of the consumer durable loan includes the interest charged along with the upfront service charges, processing fees and pre-payment charges in case you choose to prepay the loan. You may be charged either a flat amount or a percentage of the loan amount for the paperwork, all of which is profited by the financier. E.g. if you take a one-year loan for ₹20,000 at 15 per cent, paying ₹250 as upfront charges, your effective finance cost will be 16.25 per cent if we assume a flat interest charge.
Calculation of interest: Make sure that you are not charged on a flat basis. Most banks allow you to pay only the outstanding balance of the loan, and not on the full amount. Interests are calculated on daily, monthly, quarterly and annual basis. The most beneficial one is the daily reducing balance method since you only pay for days that you actually use the funds. E.g. if you take a loan on January 25, and have to pay your first instalment on 7 February, in the daily reducing balance you pay interest only for 12 days.
Prepayment policies: If you decide to pre-pay your loan at some point, you are more likely to be penalized, which is why you must think about the loan tenure well in advance. You needn’t lock yourself in a longer tenure unless it is absolutely necessary.
Service quality: Consider important factors like time taken for paper work, processing the papers and getting the cheque, and easy methods of prepayment. Some banks even send over a representative to enhance your service experience, while other can make the entire process tedious, so select wisely when opting for a consumer loan service.
Consider the available options: You must first decide on the loan amount and the maximum amount you can allocate towards loan repayment before approaching a bank. Since you intend to use the money to purchase consumer products, ensure you opt for a consumer durable loan and not a personal loan, as the later can cost you more. Most durable dealers are tied up with financiers. Remember that financing costs may vary from dealer to dealer.
Criteria for selecting a lender: Before you finalize a lender, you must find, the minimum and maximum duration of the loan, and the down-payment amount. Also read the document t closely to understand the the total cost of the loan, repayment period and interest calculation method.
Effective finance cost: Remember that the effective finance cost differs from the rate of interest. The total cost of the consumer durable loan includes the interest charged along with the upfront service charges, processing fees and pre-payment charges in case you choose to prepay the loan. You may be charged either a flat amount or a percentage of the loan amount for the paperwork, all of which is profited by the financier. E.g. if you take a one-year loan for ₹20,000 at 15 per cent, paying ₹250 as upfront charges, your effective finance cost will be 16.25 per cent if we assume a flat interest charge.
Calculation of interest: Make sure that you are not charged on a flat basis. Most banks allow you to pay only the outstanding balance of the loan, and not on the full amount. Interests are calculated on daily, monthly, quarterly and annual basis. The most beneficial one is the daily reducing balance method since you only pay for days that you actually use the funds. E.g. if you take a loan on January 25, and have to pay your first instalment on 7 February, in the daily reducing balance you pay interest only for 12 days.
Prepayment policies: If you decide to pre-pay your loan at some point, you are more likely to be penalized, which is why you must think about the loan tenure well in advance. You needn’t lock yourself in a longer tenure unless it is absolutely necessary.
Service quality: Consider important factors like time taken for paper work, processing the papers and getting the cheque, and easy methods of prepayment. Some banks even send over a representative to enhance your service experience, while other can make the entire process tedious, so select wisely when opting for a consumer loan service.
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