1 day ago
Consumer Durable Loans Carry Costs Beyond Advertised EMIs
Consumer durable loans let people buy electronics and appliances by paying smaller amounts over time.
They can also help people who have never borrowed money build a credit record.
However, the monthly payment may not show the loan’s full cost.
A no-cost EMI can still include processing fees, taxes or other charges.
It may also mean losing a discount offered to people who pay in full.
Borrowers should read the agreement and check the lender before agreeing.
They should make sure all their loan payments stay within a manageable part of their income.
If an automatic payment fails, they should pay quickly and tell the lender.
Waiting to buy may be wiser when the loan is expensive or the purchase is not necessary.
Consumer durable loans can help first-time borrowers finance purchases and build a credit history.
Processing, convenience, tax, prepayment and foreclosure charges can raise the total cost of a supposedly no-cost EMI.
Borrowers should compare the EMI offer with outright prices, discounts, exchange benefits and other full-payment offers.
Total EMIs should ideally remain within 40% of monthly take-home income, including the proposed loan.
If an auto-debit fails, borrowers should pay manually within 24 to 48 hours and contact the lender.
- Who
- Consumers, especially first-time or new-to-credit borrowers, and the lenders offering consumer durable financing.
- What
- Guidance on checking the real cost, conditions and repayment risks of consumer durable loans and no-cost EMI offers.
- Where
- At the point of sale and through the borrower’s linked bank account used for auto-debit.
- When
- Before accepting a loan, throughout the repayment period, and immediately after an EMI auto-debit fails.
- Why
- To avoid unexpected charges, protect credit scores and keep total repayments within manageable limits.
Key facts
- Main risk
- The advertised EMI may not reflect the loan’s total cost.
- Possible additional costs
- Processing charges, convenience fees, applicable taxes, prepayment charges and foreclosure charges.
- Budget guideline
- Total EMIs should ideally remain within 40% of monthly take-home income.
- What to compare
- The financed price should be compared with the outright purchase price and any available discounts or exchange benefits.
- Auto-debit checks
- Borrowers should verify the authorised amount, frequency and validity period of the e-NACH or auto-debit mandate.
- Failed payment response
- Make a manual payment within 24 to 48 hours and proactively inform the lender.
- Credit impact
- Even one missed instalment can significantly affect the credit score of a borrower with limited credit history.
Sources
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