Are you thinking to make that big time purchase of consumer durable? Do you really want to buy that big screen LED TV or latest mobile phone? When you plan to buy a consumer durable you have a long list of products to choose from. The first thing which comes to your mind is you want to visit a showroom to buy that product or you want to do online shopping. If you are visiting any showroom to buy consumer durable, you will find same product of various brands. Choosing the right product, with best features and with best buy price to fit into your needs is a difficult task.
Many people check product price online before visiting any store. After finalizing a product of your wish, the next thing which comes is payment mode. If you are buying a product from any of the showroom, you have a wide array of payments to choose from. You can make cash payment, or choose EMI option, use your credit card to make payments, you can do debit purchase. You can also take a consumer durable loan from different financing firms to make your purchase. While choosing a financier to buy your consumer durable you should keep few things in mind before making the purchase.
Is the financing option interest free?
The biggest thing which you should keep in mind while selecting any loan is the cost of availing this loan. Mainly there are two types of options available in the market first is interest free loans and second is interest bearing loans. The interest rate might range between 12% to 18%. Different financing firms offer your loan at a different rate of interest. To make the purchase more consumer friendly and within the reach of everyone the manufacturing companies have tie-ups with different financing firms to offer the best loan with easy EMI option to consumers to increase their sale.
The option of financing your product means that you have access to that consumer durable by making small down payment or no payments at all. This way you can buy the product on easy installments prepayment option without make much difference on your monthly budget. The main objective of such finance is to make these products within the reach of common man. If you are using your credit card to make payment this way you will block your card limit for the loan amount taken.
Maximum or minimum number of installments
The advantage of taking a loan to buy your desired product is you can manage your finance better without making any big changes in your monthly budget. This also depends upon the tenure of the loan and the amount you have borrowed to buy the product. One should go with the flexible number of EMIs to make repayments for the loan amount. You should always choose a longer tenure for a higher amount loan. If the loan amount is interest free, in that case go for the maximum number of installments to repay the amount without affecting your other financial plans.
But, if you have taken a loan with interest always select a tenure which will not affect your financial plans much with paying minimum amount as interest. The minimum tenure for interest bearing loans are fixed to 3 months and maximum period is 12 months. If you have taken an interest free loan, then you should use it to get the maximum advantage. You can go for installments of 8 to 10 months to make small interest free installments.
Know about downpayment and processing fee
Down payment is the payment option that one has to make for availing the loan. The upper and lower cap for the down payments varies for different financial firms. It may range between 10-25% of the product price. But in some cases it might be as low as 0%. While choosing a downpayment you should keep two things in mind as such your available budget and number of EMIs after making the downpayment. You should make a downpayment of 20% to 25% of the total amount in ideal scenario as it will further reduces the number of EMIs and due amount.
Always check about the processing fee in advance. The processing fee should remain same throughout the loan tenure and the number of EMIs you have opted. If the financial firms is taking an increasing or decreasing processing fee it will affect your total loan amount. If you are taking a loan for higher duration and paying higher processing fee because of the longer period, as a result it will increase your total amount outgo on your loan. Therefore, always ask about the processing fee and other charges before taking the loan. The best option is to opt for an interest free loan to avoid such extra charges.
Check about services
While taking a loan just enquire about the service available from the financier's end. The ideal situation is any query should be resolved within 48 working hours. A simple query should not take more than 5 to 6 working days. If your financier is having any portal or mobile app download that app for future communication to make the process simple and hassle free. You should always ask from your financier to provide you monthly report or statement of your account and payments to keep you updated with your remaining installments, amount paid against loan, rate of interest and other charges. It should also send you a No Objection Certificate after completion of your loan. The financier should also update your loan report to credit bureau to maintain your credit history and credit score to help you in getting better deals in the future.
Better relationship with customers
While you are borrowing any loan for buying consumer durable always check the credit image and history of the company before taking the loan. The financier should not look at the customer as one time transaction rather it should build a long lasting relation with the customers. To maintain that relationship it should always offer the best assistance and services to the customer to make their loan repayment period hassle free. The financier knows about the financial capabilities of the borrower, if the company has offered you the best service it can offer you best deals in future also to make big purchases. You can also use that financier for taking other type of loans as well if it is offering for different segments.
(Updated on: 25 July, 2016)