Benefits of Consumer Durable Loans at Zero Percent Interest Rate

Last Updated : March 11, 2019, 11:19 a.m.

In an era where the customer is unanimously called ‘King’, the existence of zero percent offers on loans is no surprise. And when these offers are available on the daily need consumer durables such as washing machine, refrigerator, air conditioners and even the mobile phones, the feeling of being a king becomes ever so prominent amongst customers. Yes, there are a handful of financial institutions that do not charge interest on the consumer durable loan subject to customers meeting the eligibility criteria. However, most of you may not be familiar with the operational methodology of consumer durable loan at 0% interest rate. Keeping this is mind, the article would first deliberate on the loan type and its benefits in general before taking a close look at the institutions that have such an offer.

What is Zero Percent Interest on Consumer Durable Loan All About?

The term ‘Zero Percent Interest’ says it all. It clearly means the customer does not need to pay any interest on the loan availed by him/her to buy the consumer durable products. Yes, the loan would be repaid in the conventional form of Equated Monthly Installments (EMIs). But, contrary to the normal modus operandi of loans where the EMI constitutes a portion of both principal and interest, the zero percent offer would have installments having only the principal portion.

You may ask, why would financial institutions compromise on the interest given that it’s the source of their earning, won’t you? Well, it’s the seller and manufacturer of consumer durables who own the task of paying the interest to the lender. These market participants do this to push sales and clear the large pile of inventories stuck in their shelves. This arrangement proves beneficial to customers, lenders as well as those manufacturing and selling the product.

However, the quantum of finance and tenure regulations would remain the same in zero percent consumer durable loan as compared to the loan with an interest rate. The loan can be financed at about 80%-90% of the product price. You need to pay the remaining 10%-20% to the manufacturer or seller of the product. The loan comes with a maximum tenure of 2 years, with a few giving you as much as 3 years to pay off the debt.

Get the Slice of Zero Percent Benefit in Mathematical Terms

The benefit can be explained better with an illustration comparing two individuals.

Example – Shenoy and Kavita are two colleagues working in an automobile company. Both apply for a consumer durable loan at the same lender to buy an LED television. While Shenoy was offered the loan of ₹70,000 at 13% interest rate, Kavita got the same loan amount at zero percent interest rate. Both were given a year to pay off the debt. Let’s check out the different in repayment of Shenoy and Kavita in the table below.

Kavita saves ₹418.67 (approx.) and ₹5,027 in terms of EMI and overall interest outgo, respectively, over her colleague Shenoy.

Note – The calculation of the EMI and interest results of Shenoy is made through the EMI Calculator. On the other hand, the EMI for Kavita is calculated by dividing the loan of ₹70,000 by 12 as the installments do not bear interest in her case.

How to Grab Zero Percent Interest on Consumer Durable Loan?

Lenders forge tie-ups with manufacturers and sellers to provide consumer durables to customers at zero percent interest rate . However, zero percent offer may not apply to every product you wish to buy. There would be a select bunch of products on which the offers apply to. You can find those products on the website of the lender. You can apply online by providing a few details. Once the application is approved online, you can head to the network store and buy the product at 0% interest rate. The store officials might ask you to provide the approval ID that you get when the lender nods your application. The details of the network store can be found on the website of the lender.

For offline application, you need to first reach the store first before choosing from the list of products available at zero percent interest. You would need to submit documents at the store, which would then send it to the lender they are tied up with. The lender would check the documents thoroughly before approving the loan.

Financial Institutions That Offer 0% Interest on Consumer Durable Loan

Almost all banks and non-banking finance companies (NBFCs) offer consumer durable loan. But the loan offers would mostly come at an interest rate ranging from 13%-18% per annum. However, financial institutions such as Bajaj Finserv, Tata Capital and Capital First provide loans at 0% interest rate.

Bajaj Finserv 0% Interest Rate Consumer Durable Loan Offers

Tata Capital Consumer Durable Loan at Zero Percent Interest Rate Offers

What About Capital First Consumer Durable Loan at 0% Interest Rate?

Documents Needed

To obtain a consumer durable loan at zero percent interest rate, you must submit the following documents for a hassle-free approval.

• PAN Card
• Identity Proof – Any of Voter ID, Passport, Aadhaar Card, Driving License
• Residence Proof – Any of Voter ID, Passport, Aadhaar Card, Driving License, Utility Bill
• Income Proof – Salary slips for the last 3 months, bank statement showing the credit of salary
• Duly signed ECS mandate
• One cancelled cheque
• Duly filled application form
• Passport size photograph