Festive Loans And Offers: Do They Really Help You Save?

The Indian market is flooded with discounts and offers on consumer durable products, No Cost EMIs, app-based loans, credit card EMIs, cashback, car loans, home loans, personal loans, etc., amongst others. While these discounts and offers seem too good to be true, before availing of them, it is crucial to check whether they really help you save your money or are just another marketing gimmick.

Let us see the benefits of buying products and services and availing of loans during the Diwali sale:

1. Discounted Products:

As discussed, almost all online and offline merchants come up with festive season discounts and offer right from Ganesh Chaturthi until the end of Diwali. Similarly, most banks and Non-Banking Financial Companies (NBFCs) offer processing fees and interest rates discounts. Hence, if you have planned for a specific high-cost product or a large-amount loan like a home, or car loan, this could be the right time to avail of those benefits.

2. Cashback Offers:

Many merchants offer cashback on purchases made with debit and credit cards. Generally, online merchants offer attractive cashback offers on co-branded credit cards. For example, currently, Amazon India is offering a 10% instant discount up to Rs 10,000 on Citi Bank and ICICI Bank debit and credit card EMIs, and Flipkart is offering a 10% instant discount with a condition of a total discount of up to Rs 14,750 on SBI cards and EMIs.

3. Lower Interest Rates:

Many leading banks and NBFCs offer lower interest rates on home, car, and personal loans. This is because there is a high demand for these types of loans during the festivals, as buying expensive and important things on such occasions is considered auspicious. Financial institutions try to capture the maximum market by taking advantage of the increased demand by introducing competitive interest rates.

4. Discounts on the Processing Fees:

The processing fee is another pain area for the borrowers which banks and NBFCs offer during the festive season. The processing fee may range between 0.25% to 6% of the loan amount, depending upon the type of loan. Some lenders and credit card providers also charge flat processing fees that remain the same for all borrowers, irrespective of the loan amount. If the discount offered on the processing fee is considerable, it can save your total loan outgo.

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5. Instant Approvals:

Since people prefer to get product delivery on auspicious days like Laxmi Pujan, Dussehra, Padva, etc., financial institutions try to make the loan approval process faster.

6. Helps Improve Credit Score:

Availing of credit card EMIs and loans and timely repaying them will help you improve your credit score. So, if you are trying to improve your credit score or build a credit history and get good offers on credit facilities, you can use it to build your credit profile.

Like every coin has two sides, there are certain downsides of shopping during the Diwali sale:

1. Unnecessary Splurging:

When it comes to big-ticket loans like home and car loans, people opt for them only when they have planned for them in advance. However, many borrowers get lured by personal loans and credit card offers and take the loan or swipe the credit card without any plan. A personal loan is the best choice in an emergency, particularly when you do not have any other financial support and need funds urgently. Sadly, people often apply for personal loans and credit card EMIs for instant gratification and put themselves under stress by paying hefty EMIs. So, if you want to buy that gadget, jewellery or luxurious item that can easily be postponed, it is crucial to analyse your needs and wants so that you can resist the temptation to splurge if it is not necessary.

2. The prices could have been increased right before the sale:

Many times merchants increase the prices of the products and services just a few days before the sale and show discounted rates during the sale, which are, in fact, the actual rates or could be a little lower that might not make any considerable difference to the buyer. Such discounts do not help you save but increase your spending and may disturb your budget.

3. No instant cashback offers:

While many leading merchants offer instant cashback on debit and credit card purchases, others don't. Many times instead of getting an upfront instant discount, you receive cashback or cashback points after 1 to 6 months of making the purchase. Cashback points typically encourage spending as these points generally come with an expiry date.

4. The burden of hefty EMIs:

Buying a product or service through a loan or credit card EMI becomes a long-term commitment. It becomes an extra fixed monthly expense that you cannot avoid until it is paid off. This can be financially stressful, especially when you are on a tight budget. Besides, failing to make timely repayments can attract late payment charges and may damage your credit score.

5. High-cost Loans:

While the banks and NBFCs come up with several offers during festivals, a personal loan, which has a high demand during festival season, is still one of the costliest. The 0.25% to 0.50% discount offered on the rate of interest is negligible if the loan amount and/or loan tenure is lower.

6. Product depreciation over the years:

While buying anything through a loan on a credit card EMI, it is important to calculate the product's expected life. Consumer durable items, especially smartphones, depreciate rapidly over time. It does not make sense if your product loses its value before the loan repayment. Similarly, if the car loan tenure is too long, your car can lose its value before the car loan repayment. Furthermore, most brands launch new models periodically, making the previous models obsolete, and ultimately dropping their prices.

Do festive season loans and offers really help you save money?

Taking a loan is not a 'bad thing' as long as you are taking it after analysing your needs and the ability to repay it on time. It is important to calculate exactly how much you are saving and check if there are any hidden charges. People often make purchases because there is a discount on the product or the EMI option is available instead of buying it because of a need. Taking advantage of the Diwali offers and loans to buy something you actually need during the festival could make sense if you are financially sound enough to repay the loan comfortably and are confident about your financial discipline. A personal loan taken to buy a laptop might be a good investment for someone who bought it for their studies and may turn out to be a financial burden for someone who bought it just to have the newest model on the desk. When you purchase something out of instant gratification instead of a need, you do not save any amount, no matter how much discount and cashback you get. Hence, it is crucial to assess your needs and wants before availing of Diwali offers on different products and loans this Diwali. Instead of splurging, this amount can be invested in short to medium-term financial instruments and then utilised wisely.

Warm Regards,
Ketki Jadhav
Content Writer