While India celebrates festivals round the year, the Indian festival season begins in August/September and ends with the New Year celebrations in December. Many people also plan to make important purchases like a house, car, or other expensive consumer durables during this period, as it is considered to be auspicious. Also, brands extend discounts during this season. Lending institutions usually observe an increase in the demand for loans during the festival season.
A loan is a responsibility. When you opt for a loan, you need to ensure that it is repaid in time so that your credit score does not take a beating. In fact, if you borrow and repay responsibly, then this can be a good time to boost your credit score.
Here are five things that you should consider before availing of a festival-season loan.
Work on a budget
With festivities and celebrations all around you, it is easy to get carried away and spend beyond your means. Hence, it is important to create a budget for all the expenses that you plan during the season. Even if you are planning to take a loan for a purchase, make sure that you think about the maximum loan amount that your finances can allow. Keep a responsible approach to your spending while revelling in the festivities.
Keep regular tabs on your credit score
If you are planning to make a loan-based purchase during the festival season, then it is prudent to start working on improving or maintaining a good credit score well in advance which can be checked instantly. Lenders review your credit history and credit score before approving a loan. Typically, a credit score of 750+ is considered good by most lenders. If your score is low, then you can work on it by clearing debts and avoiding defaults. You must avoid applying for multiple loans in a short span of time as it can negatively impact your score.
Choose the loan options wisely
If you are planning to buy an expensive television set, then opting for a consumer durable loan might be better than swiping your credit card or availing of a personal loan. Evaluate all the loan options available for your purchase and compare features and interest rates to find the best loan. Furthermore, make sure that you check your credit score before you apply for a loan, as it will give you a clear picture of your credit profile and you can opt for the most suitable loans and schemes.
Read loan terms and conditions thoroughly
During the festival season, many banks and financial institutions announce special loan offers to attract more customers. Before signing up for any such offer, make sure that you go through the terms and conditions thoroughly. There have been many instances when people have skipped reading the fine print and ended up repaying more than what they had accounted for. Hence, go through all documents carefully and get a complete understanding of the offer/loan before signing on the dotted line.
Never miss your EMIs
You might opt for a loan to buy a product. It is important to remember that while the purchase gives you joy, you need to repay it in equated monthly instalments (EMIs) over the next few months or years. Failing to do so can reduce your credit score. This will make it difficult to get loans in the future. Hence, ensure that you borrow only if you are confident of your re-paying ability and do not miss a single EMI.
Summing Up
In India, the festival season is associated with wealth creation and prosperity. During the festival season, many lenders offer customised loans. If you are planning a high-ticket purchase and want to benefit from these festival-based loan offers, then keep the above-mentioned points in mind and borrow responsibly. Remember, fraudsters get active during the festival season. Make sure that you borrow from reputed and RBI-approved institutions only.
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