The festive season is around the corner. Banks and financial institutions are gearing up with offers to attract customers for loans. Many prominent banks have waived off the processing fee on Home, Vehicle, Gold, and Personal loans to tap on the festive season.
Festival loan is a variant of personal loan offered at lower interest rates and processing fee. The processing time is also faster during the festive season. The amount that can be availed as a festive loan is generally limited and much lower than Personal Loans with a maximum of Rs. 50,000. The repayment period is long too, with most festival loans offered for a period of one year.
Festival Loan Eligibility
You must fulfil the normal loan eligibility criteria for getting the loan, such as adequate income, work experience, age, etc. Festival loan can be availed jointly with your spouse as well. The eligibility norms to get a normal loan are quite stringent as you must fulfil the high-income criteria, whereas, under the festive loan, the income level required is comparatively low, so people looking for a loan up to Rs. 50,000 can easily get it.
Festive Loan Vs Credit Card EMI
Festive loans come with an amount restriction. The extent of offers may vary from product to product as it depends on the tie up of banks with the particular merchant/retailer.
Missing a Credit Card EMI may cost you a high penalty that could be based on the total principal amount, however, under a festive loan, the penalty could be very low or in some cases, no penalty is levied.
You must be very selective and careful while opting for a festive loan as there could be hidden charges that you may detect by reading the fine print. Also, the benefits available on festive loan may vary for each bank and financial institution. So, due diligence and correct evaluation of a loan product is very important before you take a festival loan.
Interest Rate
The interest rate on Personal Loan may cost you around 16% to 24% p.a. and Credit Card EMIs may cost around 18% to 24% p.a., but the interest on a festival loan is much lower.
Charges Comparison
Processing fees on Personal Loan may cost you a higher rate, i.e. ranging from up to 3% of the loan amount. Similarly, Credit Card EMI also levies a processing charge up to 2%. In festive loan, you need to pay a processing charge up to 1% only.
Penalty Clauses
While Personal Loan or Credit Card EMI charges prepayment penalty and foreclosure charge if you pay advance EMI, or close the loan early, the festive loan does not have foreclosure/prepayment charges. Under Personal Loan or Credit Card loan, the prepayment charge can go as high as around 2% to 4% of the outstanding principal amount.
Should You Go For A Festival Loan?
You can consider a festive loan if you are looking to buy high-value products like home or car as several banks offer zero processing charges, and discount on the interest rate for applications submitted within the festive period.
Your choice of loan should depend on the tenure for which you are seeking the loan and amount. Festival loan is currently available up to Rs. 50,000 and the tenure allowed is up to 12 months. So, if your loan requirement is higher or if you are looking for higher repayment period, then a Personal Loan could be the best choice. Else a festival loan is a lucrative borrowing option.
It would be however wise not to go overboard with your shopping as a loan, irrespective of how inexpensive, needs to be repaid. Borrow according to your repayment capacity to avoid any kind of debt trap.
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