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Things you should know before taking festive loan

The idea of festive loans is to encourage people to spend more. Taking loan also helps to pay for things that are essential.

Things you should know before taking festive loan

Festive season has already begun and so are the offers from lenders offering special loans to their customers. Taking a loan during the festive season is quite common as many await this opportunity to grab the best offer to buy a home, car, jewels, etc., at low interest rates. Besides, festive season is also the time when banks push their special loan offers in the form of waiver of processing fees, discounted fees, lower interest rates and so on. However, one should always be mindful while borrowing, as the idea of festive loans is to encourage people to spend more during the festival season. At the same time, taking a loan is also the best option when you do not have enough money to pay for things that are essential. Yet, one must take precaution to choose the right one.

Read the terms carefully before finalizing the loan

It is importance that the borrower reads the fine print of terms and conditions and privacy policy properly and understand it to avoid any trouble in future. Many of these festive offers often come with specific clauses such as a high credit score, profession of the borrower, loan issued up to a certain amount only, etc. Additionally, be careful as sometimes there can be various hidden charges related to the loan. Also, understand all the details including repayment schedule and charges involved.

Compare the offer and interest rates with other banks

The benefits of festival loans differ from each bank. Therefore, it is best to make a fine comparison of each loan offer before finalizing one. During festive season banks offer deals like free gold coins and more similar things for home loan shoppers. Instead of getting sucked into such meaningless offers, you should rather look at the interest rates, tenure, and the fees a loan offer comes with. You should compare offers based on these attributes so that you can get the best offer. Also, by keeping an eye on interest rates, borrowers can choose the most suitable lending arrangement, basis the repayment capacity and financial planning. The lower the interest rate, the lower will be the installment that you will have to pay every month. Check the interest rates for various tenures and then determine which is the most apt for you

Do not over borrow

Borrow only when you need it because keeping healthy finance is also important for your 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.

Abstain from taking multiple loans at one time

Taking multiple loans at the same time raises the possibility of defaulting on the loans, which might influence the credit score as well as decrease your eligibility to take future loans. It is suggested to combine all your financial needs into one loan and further manage your finances.

Check whether you actually require this loan now

A loan with attractive offers should not be the reason for you to make the jump. A loan must be repaid with interest. Hence, recognizing your needs and wants before applying for a loan can help you make the right choice. A loan is best when it is taken for your essential needs. An offer on the festival loan is a sweetener to the celebration if informed borrowing decisions are made. Borrow according to your repayment capacity to avoid any kind of debt trap.

Festival is a wonderful opportunity if you look forward to taking a big-ticket loan. With the banks lowering interest rates for individuals with good credit score, home loans and car loans can become cheaper for credit healthy individuals.

(The author is working with AU Small Finance Bank Limited)

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