Running a household involves many aspects, setting up and maintaining the home being a major part of the deal. This includes purchasing new appliances, especially the bare basics like electrical goods of everyday use. Whether you are setting up the home for the first time, or replacing certain worn out devices during your home renovation project, you will need additional finances to build your home components like gadgets and devices. We may not always plan for such expenses, but living without them is also not an option. That is when a consumer durable loan comes handy.
What is a Consumer Durable Loan?
As the name suggests, a consumer durable loan is a loan taken for the purchase of consumer durables. Some of the white goods that are covered in this loan are washing machine, refrigerator, television, cooking range, air conditioner, smartphones, generator, water purifier, music or audio system etc. One can thus see that it covers a wide range of products, right from the basic essentials to luxury products. The loaning institution disburses the amount, which is to be paid back in the form of monthly instalments or EMIs at a pre-decided interest rate. Thus, a consumer durable loan is a type of personal loan. The loan amount varies from few thousands to even lakhs. The repayment tenure ranges from a few months till up to 5 years, generally. Being a personal loan, it comes with a high interest rate of 15-22%. And it depends on whether you are a salaried employee or self–employed. Moreover, there is generally an additional loan processing charge, which generally amounts to up to 2% of the loan amount with some minimum and maximum thresholds.
The first question that baffles many people is “is consumer durable loan secured or unsecured”. The truth is that it is depends on which bank you avail the loan from, both variants are available.
Benefits of Consumer Durable Loan
The best part is that you can easily avail a consumer durable loan by meeting simple eligibility criteria and providing basic documentation proof. Also, a number of offers are frequently available on such loans, a common one being interest-free loans where the interest component is sub-vented and passed on to the finance company directly by the manufacture or retailer. Another advantage is that companies often provide 100% financing in this type of loan, so you need not shell out any amount from your savings.
Consumer Durable Loan – How to Apply
The basic eligibility criteria is that you must be between 21-60 years to apply for this type of loan. Most banks and lending institutions require you to submit the following basic documentation. These documentations are often in the form of an online application form.
- ID proof
- Income proof
- Salary slips of past few months (generally 3-6 months) in the case of salaried professional, and previous years Income Tax Returns in the case of self-employed professionals. Self-employed also need to provide balance sheet of past few years and bank statement of past few months.
- Residence proof
Difference Between Consumer Durable Loan And Credit Card
It is very much possible to avail a credit card to make a white goods purchase. Why then would an option of consumer durable loan be made available by banks and financial institutions? A credit card is a revolving loan. And does not mean that you have the cash ready, and it can be used for a wide variety of purchases. It is easy to get lost in this “cycle of debt” and never repay your credit outstanding in full. A consumer durable loan on the other hand, is a one-time lump sum disbursement and has fixed monthly EMIs, which will help you track your repayment and become debt-free as per plan. Moreover, the interest on consumer durables (15%-22%) is generally lesser than credit card interest rates, which lie in the range of 20-24%. Availing a consumer durable loan is also less of a hassle than availing a credit card. In a credit card, your credit worthiness over time matters more.
Whether to opt for a consumer durable loan or a credit card is thus a matter of how much repayment-discipline you have, your affordability and your financial debt situation.
A number of consumer durable loan providers also add some benefits to consumer durable loans, especially around the festive times. In fact, a number of online player like MoneyTap offer personal line of credit for such purposes. Many of these offer instant, on the spot approval, minimum documentation and nil foreclosure charges. Look out for these offers and save significant money on one-off but essential purchases like home devices and durables.