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
- 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.