Personal Finance

Festival loans: What’s on offer

Keerthi Sanagasetti | Updated on October 10, 2019 Published on October 10, 2019

Deals include reduced EMIs, fee waivers and zero down payment; but look before you leap

The festival season brings with it a host of offers, as customers like to link their big-ticket purchases to auspicious times. This Diwali, on one hand, e-commerce majors and many other consumer durable and retail outlets are offering huge discounts.

And on the other, the Centre and the RBI are trying to boost credit growth through loan melas, revised micro-finance lending/eligibility limits and lower benchmark interest rates. Most lending institutions are also offering attractive deals, putting in their best efforts to push the credit-led spending in the economy.

If you have any major purchases lined up, the following might be worth a look.

New loans

Tweaking certain features and adding a few new ones, banks have come up with new loan offerings.

For instance, for existing customers, car loans from Axis Bank and HDFC Bank now come with a zero down payment facility. In addition to that, Axis Bank customers get other benefits such as waiver of up to 12 EMIs and three guaranteed rate reductions (over the tenure of the floating-rate loan).

For customers looking for personal loans, SBI and HDFC Bank offer their salaried account- holders, pre-approved loans with zero documentation.

On similar grounds, Bajaj Finserv is offering a new personal loan product for their existing borrowers. This is targeted at borrowers with multiple loans which can now be combined into one personal loan, helping reduce the monthly EMI burden. The NBFC has also launched a personal loan product where individuals — whether salaried or self-employed — can get a loan of up to ₹20 lakh against their pre-owned car.

HDFC Bank has special offers for its existing demat customers — a digital loan against mutual funds held in the demat form. That apart, select existing credit-card holders are also eligible for loans against their credit cards.

Lower interest rates

On the regulatory front, the RBI had mandated banks to link their retail and (micro) small business floating-rate loans to external benchmarks starting October 1. Most banks have hence announced their revised interest rates with the RBI’s repo rate as the benchmark. While most lenders have priced the repo-linked lending rates on par with the existing MCLR-based rates, a few have priced them even higher. Hence, despite a policy rate cut in the last MPC (Monetary Policy Committee) meeting, borrowers’ interest burden is not likely to witness much of an easing immediately.

However, to keep the festive vibes going, certain banks are offering discounted interest rates on select loan products. SBI, for instance, is offering a concession of 0.25 per cent on car loans applied through its website or its digital platform, YONO. Bank of Baroda is offering a discount of up to 0.25 per cent on car loan interest rate for borrowers with a good credit history. HDFC Bank offers such discounted interest rates for its gold loan customers, where the amount borrowed is more than ₹5 lakh.

There is good news for purchasers of consumer durables as well. Currently, easy or no-cost EMI options are handy, where customers essentially only pay the price of the product over the tenure in EMI, with zero interest costs. Adding to this, lending institutions are also offering additional discounts, cash-backs and vouchers on select purchases.

HDFC Bank offers an additional 15 per cent cash-back on select electronics and durables brands purchased in any store using the easy EMI option or the bank’s debit/credit cards.

Bajaj Finserv has a ‘Sparkling Diwali Offer’ for its EMI Network Card customers, valid through October 30. Along with lower EMIs and assured gift vouchers of up to ₹9,500, these customers also stand a chance to win digital gold worth up to ₹10,000.

Fee waivers

Banks such as SBI and Bank of India are offering car loan products with zero processing fee as part of their festival offers. The latter is also offering such waivers on certain home loan products till December 31.

While Bank of Baroda has taken steps in similar directions, currently, only existing home loan borrowers (including takeovers) will get processing-fee waivers on top-up loans.

HDFC Bank has waived the processing fees on its two-wheeler and home loans for all government employees. That apart, for employees of select corporates, the bank is offering a 50 per cent waiver on the processing fee for home loans.

Considering the earlier fee structure (data compiled from BankBazaar website), this could translate to an upfront saving of up to ₹11,800 on home loans and ₹3,000 on two-wheeler loans for those eligible. The 50 per cent waiver on the processing fees also applies to business loans given to small business enterprises. According to the bank, this translates to a saving of about ₹45,000, on a business loan of over ₹50 lakh.

The bank is also slashing the processing fee on personal and auto loans on a case-to-case basis.

HDFC Bank has also waived foreclosure charges on gold and car loans after a tenure of three and 24 months, respectively.

Other offers

Adding to the discounts already offered by Amazon’s and Flipkart’s festival sales, SBI, HDFC Bank, Axis Bank and ICICI Bank are also offering their debit/credit card holders additional 10-15 per cent discounts on purchases from these website sales. Customers opting for the EMI option also get a host of cash-backs and vouchers on select products.

HDFC Bank has also waived off the account-opening charges for new demat and trading accounts.

Caveats

While most offers on the table seem interesting, it is advisable to look before you leap. For example, though the new personal loan Bajaj Finserv is offering for its existing borrowers comes with no additional fee, borrowers need to note that the said reduction in EMI is on account of an extension in the loan tenure.

The processing-fee waiver offered by Bank of Baroda comes with a ‘conditions apply’ clause. According to the bank’s website, the waiver is subject to a recovery of an out-of-pocket expense of ₹7,500, plus taxes (GST).

While all government employees get a waiver on the processing fee for two-wheeler and home loans with HDFC Bank, other salaried employees are eligible for this waiver only if they have transferred their loans from other lending institutions to HDFC Bank.

Similarly, while HDFC Bank’s loans against credit cards might look hassle-free, borrowers should be wary of the high interest rates charged.

Personal loans tend to be less burdensome than credit-card loans, in terms of the interest costs and other charges.

Borrowers should compare rates, fee and other terms and conditions across banks and products to see what fits them best.

Published on October 10, 2019
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