A consumer durable loan is a type of loan that people take out to fund their consumer durable purchases. This can include purchase of ACs, TVs, kitchen appliances, washing machines, etc. These days, taking out a consumer loan is easier than ever, you can often apply for these loans from the comfort of your homes. Oftentimes, these loans are also approved and disbursed within days, and at times, hours. If you’re planning on availing a consumer durable loan, here are some important things to keep in mind:
- Interest rate
Your consumer durable interest rate will determine the overall cost associated with the consumer durable loan. This is why it’s important to shop around and get the lowest interest available.
Generally, consumer durable loans are repaid monthly through EMIs. One important point to look out for is the repayment tenure. If your repayment tenure is too long, then you will end up paying a lot in interest whereas if your repayment tenure is too short then your EMIs may be a huge burden on you. This is why it’s important that you keep in mind your financial obligations and choose a repayment plan that suits you best.
- Processing Fee
Most consumer durable loans will come with a processing fee of anywhere from 0.5% to 3% of the total loan amount. Read the terms and conditions regarding the processing fees thoroughly before committing to the loan.
While the concept of instant loans to buy your favourite gadgets might seem exciting, there are some factors that you need to consider before availing any consumer durable loans. First, is of course, your ability to repay said loans. Never take on more loans that you’re able to afford as this can put you in sticky situations that are difficult to manage. And, secondly, your credit score, consumer durable loans do affect your credit score and it’s important to be careful with these kinds of loans.
CIBIL score is one of the biggest factors that will play a role in how difficult or how easy it is for you to avail a consumer durable loan. A good CIBIL score automatically increases your chances of not only being able to access a consumer durable loan but will also help you get better terms. In case you’re wondering how to improve your CIBIL score, here are some factors to keep in mind:
- Do not apply for too many consumer durable loans
If you have an urgent need for an appliance or gadget and need the funds to purchase them as soon as possible, it might be tempting to apply for a number of consumer durable loans. However, this might not work in your favour. This is because when you apply for multiple loans with different lenders, they may conduct a hard enquiry on you. A hard enquiry is when lenders approach credit ranking agencies and request information regarding an individual’s credit profile. When too many hard enquiries are conducted against you in a short period of time, this signals to lenders and credit ranking agencies that you are desperate for credit which in turn reflects very poorly on you and your credit score.
- Check your credit score regularly
Many of us think that checking our credit scores regularly will bring our credit scores down. However, this is not true at all! When you check your own credit score, it’s considered a soft enquiry and this doesn’t affect your credit score at all. The reason why it’s important to check your credit score regularly is so you can understand where you are and what you must avoid doing to improve your credit score. In addition to this, checking your credit score regularly will also help you catch any errors swiftly and dispute it with the credit bureaus.
- Never make late payments
Late payments are a strict no-no for maintaining financial hygiene and improving your credit score. Not only are late payments expensive and add to your existing debt, they also negatively impact your credit score.
- Avoid utilising your full credit limit
Credit ranking agencies often take into account your credit utilisation ratio while discerning your credit score. A credit utilisation ratio indicates how much of your revolving credit you actually use. Generally, keeping your credit utilisation rate as low as 30% of your total credit limit indicates to credit ranking agencies that you are not overly reliant on credit to meet your expenses and this will boost your credit score.
- Avoid non-payments at all costs
Whether it’s your consumer durable loan or any other loan that you’ve availed, ensure that you pay the full repayment amount on the due date. Non-payment of loan dues can adversely affect your credit score and make it difficult for you to avail loans in the future.
- Not using credit cards or not taking any loans
While you may think that not having a credit card or not having taken out any loans will make you seem like an ideal borrower, this cannot be further from the truth. Not having any loans or credit cards indicates to lenders that you have absolutely no credit history at all, which means that they have no idea about your repayment patterns and financial discipline. This will make it difficult for you to avail debt, so it’s always better to maintain some type of credit history.
A good credit score is crucial to your financial future and well-being. So, follow these simple steps and make informed decisions to improve your credit score!