With the festival season round the corner, many banks and financial institutions have started luring loan seekers with discounts in the form of processing fee waivers and some other offers like waiver of 12-month EMIs, among others. For instance, the State Bank of India has recently announced waiver of up to 100% processing fee on car loans, personal gold loans and personal loans, which is in addition to the existing waiver on the processing fee on takeover of home loans. While the processing fee on car loans has been waived till December 31, 2017, the bank will charge only 50% of the processing fee on personal gold loans till October 31, 2017. Besides, till September 30, 2017, customers can avail 50% waiver on the processing fee on Xpress Credit – a personal loan offering by the bank.
Similarly, Axis Bank has recently announced the launch of a new home loan scheme, called Shubh Aarambh Home Loans, under which borrowers applying for loans up to Rs 30 lakh will be able to avail the benefit of 12 EMIs’ waiver. Some other banks have also come out with their own set of offers. However, does it make a sense to take a car loan, home loan or personal loan based on such offers alone?
Financial experts say that with the festive season coming soon, financial companies are offering best deals to attract loan seekers. ‘Processing fee waiver’, EMI waiver and special interest rates are being offered to entice the aspiring borrowers. However, before you file in your paperwork and seal the deal, take a moment out to ask yourself, “Do these waivers really benefit me and what is the total cost of the loan?”
“Processing fee makes up about 0.5 to 1 per cent of the total loan amount. Waiving it off undoubtedly offers a tangible reward to the loan seeker, enabling savings to the tune of thousands of rupees at the very beginning. However, the benefit of this move is often used to draw away the attention from other less appealing aspects of the loan product such as flexibility to choose the loan amount, repayment option, prepayment penalty, and foreclosure charges, among others,” says Satyam Kumar, Co-Founder, Loantap.in.
Market trends also indicate there’s an increase in demand of personal loans during the festive period. The waiver, in this case, becomes absolutely redundant if the loan amount is not delivered on time since it merely brings a discount of a few hundred rupees. Rather, what a personal loan applicant truly needs is the urgency in delivery of the loan, sometimes even within 24 hours.
Moreover, “since festive expenditures are variable, a large portion of the borrowed sum can remain unutilised, contributing unnecessarily towards the interest. In this case, availing credit line-based loans or EMI-free loans brings better financial benefits to the borrower than the processing fee waiver,” says Kumar.
Taking a loan, in fact, is a big financial decision and you must weigh all your options properly and beforehand in order to ensure that you don’t end up paying more than you have to. Evaluate each and every aspect of the loan keeping these factors in mind, and devise your loan repayment strategy well in advance. Also read the terms and conditions carefully before going in for any loan.
If it is a home loan, then don’t go for it just because some banks or HFCs (housing finance companies) are willing to waive some EMIs for you. The loan interest rate, credibility of the bank, its past record in lowering interest rates in a falling interest rate scenario, loan processing time, total cost of the loan, etc, all these important factors should be taken into consideration before opting for the loan. Thus, festive offers are good, but should not be the only consideration for opting for any loan.