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Consumer durable loan is a special category of personal loan that is generally used to purchase electronic gadgets and household appliances that include smartphones, televisions, PlayStations, home theatres, laptops, cameras, washing machines, modular kitchens and much more. Typically this loan type can be availed for amounts ranging from Rs. 10,000 to Rs. 15 lakh. Consumer loans are mostly available at a 0% interest rate or No Cost EMI and can be repaid within a range of a few days to 36 months.
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Consumer Durable Loan Interest Rates
The interest rate offered on a consumer durable loan may vary across lenders. The cost of the item being purchased (i.e. loan amount) as well as individual applicant’s profile such as credit score, employment type, tenure desired, etc. are some key factors that may influence the interest rate charged by a lender.
Features of Consumer Durable Loan
Some key features of a consumer durable loan are as follows:
- Interest Rate: 0% by most lender
- Loan Amount: From Rs. 10,000 to Rs. 15 lakh
- Up to 100% financing on consumer durable goods
- No Cost EMI is available from leading banks and NBFCs
- Repayment Tenure: From days up to 36 months
- Loan Type: Both, secured and unsecured
- Foreclosure Charges: Nil
- Hassle-free documentation with quick disbursals
Leading Banks/NBFCs offering Consumer Durable Loans
Apply for Consumer Loan with these banks/NBFCs to avail mentioned benefits
- SBI: No Cost EMI by most of the brands with loan amount up to Rs. 1 lakh
- HDFC Bank: Get 100% financing on consumer durable products
- Bajaj Finserv: Avail up to 100% funding on your purchase at zero or low-interest rate
- Tata Capital: 0% EMI facility available
- IDFC First: No Cost EMI with loan amount from Rs. 25,000 to Rs. 5 lakh
- IndusInd Bank: No Cost EMI available with the bank
- Fullerton India: Affordable EMIs for loan amount from Rs. 11,000 to Rs. 30,000
Eligibility Criteria
Most lenders (Banks & NBFCs) offer consumer durable loans to both salaried and self-employed individuals. The eligibility criteria for a consumer durable loan may vary depending upon the applicant’s profile, repayment history, income, loan amount, etc. Below mentioned is the eligibility criteria required by lenders for consumer durable loan:
Salaried Individuals:
- Age: Minimum 21 years and Maximum 65 years
- Minimum Monthly Income: Rs. 15,000
- Experience in the current organization: Minimum 1 year
Self-employed Professionals:
- Age: Minimum 21 years and Maximum 68 years
- Minimum Income: Rs. 1.5 lakh
- Employment Stability: At least 2 years in the current business
Note: The above-mentioned eligibility criteria are generic in nature and the actual eligibility criteria may vary from one lender to another.
Types of Consumer Durable Loans
A consumer durable loan is a form of credit that can be used to purchase consumer durable goods, such as household appliances, electronic gadgets, etc. The most common type of consumer durable loan is termed as an Installment Loan. This type of personal loan differs from an EMI conversion using a credit card/debit card as no card is used to complete the purchase and or set up an installment-based payment plan.
Details of an installment loan and its various subtypes are as follows:
Installment Loans: These are the most common form of consumer durable loans and are paid back in weekly, fortnightly, monthly or bi-monthly installments according to a preset timetable. The interest rate charged on these installments may be fixed or vary with time. Additionally, these consumer loans may or may not require security or collateral. Based on these unique features, installment loans may be further divided into the following types:
- Fixed-rate consumer durable loan: Most consumer loans offered to borrowers are fixed-rate loans similar to the mechanism using which other personal loan interest rates are applicable. As the name suggests, these consumer loans have the same interest rate throughout the loan tenure.
- Variable-rate consumer durable loan: In a variable rate consumer loan, the interest rate charged on the outstanding balance varies with the change in market interest rates. As a result, your interest payouts will vary as well. However, these loans usually have limits on how high or low the interest rate can be.
- Secured consumer durable loans: Secured loans are those which are secured against assets as collateral. Secured consumer loans in India usually involve hypothecation of the item being purchased. Some banks also provide consumer durable loans secured using other instruments such as fixed deposits, RBI Bonds, gold jewelry, LIC policy, etc. Thus, interest rates are usually lower for secured consumer durable loans. If you are unable to repay the loan for any reason, the lender is entitled to claim your security to make up for their loss.
- Unsecured consumer durable loans: Unsecured consumer durable loans are the most common. The borrower does not have to provide any kind of. Interest rates for unsecured loans can be higher than the secured variant. However, most banks and financial institutions that offer consumer durable loans do so at competitive rates that are at par with personal loan interest rates. In some cases such as during festivals, you might even qualify for special offers with nil or zero processing fees and an effective interest rate of 0%.
Fees & Charges
Besides interest charges, there may be other additional fees and charges that may be applicable on a consumer durable loan. Some of these are discussed in detail below:
- Processing Fees: The administrative fee/charges involved in the disbursement of a personal loan are covered under processing fees. The processing fee generally varies between 0% and 6% of the loan amount sanctioned.
- Late Payment Charges: In case you are late in paying your EMIs, you have to pay these charges (generally a fixed charge) along with the due EMI amount.
- Cheque Bounce Charges: Cheque bounce charges are payable in case you miss an EMI payment because the account linked to the post-dated cheque is either low on funds or has been closed. It is generally a fixed charge of around Rs. 500.
- Foreclosure/Prepayment Charges: Prepayment involves paying an amount in excess of the actual EMI amount. However, when you pay off a loan completely before the end of the repayment tenure it is known as foreclosure. This complete prepayment usually involves some charges known as foreclosure/prepayment charges. These generally range between 0% and 6% of the principal amount prepaid plus taxes as applicable.
Documents Required
Given below are some common documents required to avail consumer durable loan:
- Duly filled application form with passport-sized photographs
- Identity Proof: Aadhaar Card/ PAN Card/ Driving License/ Voter’s ID/ Passport
- Address Proof: Aadhaar Card/ Passport/ Bank Account Statement/ Lease/ Property purchase Agreement/ Utility Bill (not more than 3 months old)/ Driving License
- Income Proof:
– For Salaried Individuals: Salary Slips/ Bank Account Statement/ Form 16
– For Self Employed Individuals: Bank Account Statement/ Previous Year Income Tax Return (ITR)/ P&L Statement and Balance Sheet
- Any other document required by the bank
Factors Affecting Consumer Durable Loan Interest Rate
Though some lenders offer consumer durable loans at a 0% interest rate, there are some that do charge interest on these loans. The interest charged by a lender not only varies with the financial institution but also with the individual applicant’s profile. Given below are a few key factors that affect the interest rate charged to an individual:
- Credit Score: Credit score is a 3-digit numeric summary of your credit report/ credit history and ranges from 300 to 900. A score closer to 900 (such as 750 or above in case of CIBIL score) helps you secure a consumer durable loan more easily as it indicates higher creditworthiness. It also helps you avail it on better terms such as a lower rate of interest.
- Loan Amount: Higher loan amounts generally result in the applicant being at a higher rate of interest. This is because higher loan amounts generally lead to higher EMI payouts which increase the risk of default for the lender.
- Loan Tenure: Longer repayment tenures usually come with higher rates of interest and vice versa.
- Current Outstanding Debt: A higher rate of interest may be charged on consumer loans in the case of applicants with high existing debt as this is perceived to increase the risk of default for the lender.
FAQs
1. What is the difference between a personal loan and a consumer durable loan?
Ans. Personal loans come with flexible end-usage and can be availed to meet various personal financial needs such as medical expenses, home renovation, debt consolidation, etc. Consumer durable loans are a specific type of personal loan which can be availed to purchase consumer durable products such as household appliances, electronic gadgets, other common household goods, etc. However, these are generally cheaper as compared to typical personal loans as they are often offered at a low or 0% interest rate and nominal processing fees.
2. How is interest payable on a consumer durable loan determined?
Ans. Interest payable on a consumer loan may vary with time and from one lender to another. It may also vary with the product, brand, or seller that you may wish to purchase from as well as your profile as a loan applicant, the loan amount, tenure desired, etc.
3. Is it possible to foreclose or prepay my consumer durable loan?
Ans. Yes, most lenders do offer borrowers the option to foreclose or prepay their consumer durable loan and save on the overall interest payout. However, often borrowers may be required to pay a foreclosure charge ranging between 0% to 6% of the outstanding loan principal amount along with the applicable taxes in case they decide to repay their loan before the end of its tenure.
4. How much finance can I avail through a consumer durable loan?
Ans. Many lenders finance up to 100% of the product price when disbursing a consumer loan. In some cases, only 80% to 90% of the product price is finance and the remaining 10% to 20% needs to be paid by the customer through a down payment made at the time of the purchase of the product.
5. How is a Consumer Durable Loan Disbursed?
Ans. Upon approval of your consumer durable loan application, the loan amount is usually disbursed directly to the seller’s account.