Marriage Loan

A wedding ceremony involves a wide variety of expenses and the availability of cash is very important. A marriage loan allows people to have the required amount of money at their disposal so that they can easily allocate it as per their requirements. Some other benefits of a marriage loan are briefly discussed below:

• The biggest advantage of availing a marriage loan is the flexibility of usage. This means that an individual can use the money as per their requirement and convenience and not just to pay for the decoration, food, and other expenses for the wedding.
• Weddings can be expensive and a marriage loan helps an individual to deal with the expenses related to the wedding. If someone does not avail a marriage loan, he/she might have to dip into the assets and investments to meet the wedding expenses.
• Application for a marriage loans require minimal documentation for the application and the approval process is equal to other loans such as home loans or business loans. This makes the process less troublesome and simpler for the loan applicant.
• The documentation and disbursement of a marriage loan is simple and fast. Most of the banks transfer the loan amount within 72 hours into the account of the borrower after loan approval.
• The loan tenure of a marriage loans is flexible. Applicants having a good credit history can choose their loan tenure as per their convenience.
• Banks do not ask for a security or collateral to approve a marriage loan since it is a type of unsecured loan.
• Marriage loans are a good way to build your credit portfolio as a well-managed loan increases your credit score and improves your credit history. This helps a lot in the future in terms of obtaining other types of loans or credits.

Regardless of being a lucrative tool for personal financial needs, marriage loans can easily become a financial burden if not managed properly. It is important to understand a number of important factors as mentioned below before applying for a marriage loan:

• Total Cost of the Loan: Interest is not the only cost associated with a marriage loan. Some other types of costs include prepayment charges, penalties, and processing fees that borrowers have to consider. Assessing such costs will allow the borrower to plan and manage his or her finances better. Processing fee is the amount that you have to pay to the bank for them to process your loan application. Banks charge 1% to 2% as a processing fee depending on the loan amount you wish to borrow. Prepayment fees are the charges that borrowers have to pay when they are willing to repay the loan in advance. This is because banks have to bear the loss of interest that they would have got through the entire tenure of the loan. Borrowers save on this interest by foreclosing the loan. Prepayment charges are generally limited up to a certain percentage of the outstanding amount. However, it is always better to prepay the loan if your cash flow has improved because it makes more sense to pay even a high 3% or 5% prepayment charge than to bear an 11% rate of interest. 

• Penalty: These are the charges applied on delayed EMIs. Borrowers should pay their EMIs on time as each late payment lowers their credit score.
• Interest Rates: Marriage loans usually come at a high interest rate and this is why most people opt for the lowest possible interest rate without even understanding the nature of the interest rate levied on the loan.The nature of the applicable interest rates for marriage loans is briefly explained here: 
  1. Fixed Interest Rate: In this type of interest, borrowers pay a fixed amount of interest calculated at a fixed rate on the principal amount for the whole tenure. Under this method, the interest and EMIs are calculated on a fixed rate on the basis of principal amount, tenure, and the interest rate. Not every bank offers loan at a fixed interest rate for the entire tenure as it increases their cost in case the base rate rises beyond the fixed interest rate. Most banks change the method of interest calculation after a period of 2 years into a floating rate.
  2. Floating Interest Rate: As the name suggests, the interest rates under this method vary every year as per the current economic situation and RBI guidelines. A benefit of floating interest rates is that the borrowers do not always have to pay their EMIs at high interest rate. Usually, the interest rates remain moderate and even banks lower the rates if the borrower maintains a good credit record by paying the EMIs on time. 
  3. Reducing Balance Interest Rate: This method is followed by the banks to calculate the interest on EMIs of the marriage loan. Under this method, the interest is calculated as per the reducing principal amount. Every time the borrower pays the EMI, a noticeable chunk of that goes to repay the principal, reducing the principal amount in the process. In the beginning, the portion of the interest on EMI remains bigger but as time passes, the portion of the principal amount in the EMI gets bigger. This means that the interest is calculated on the remaining portion of the principal which reduces every month.

• Calculate the EMI: Marriage loans usually have high interest rates and borrowers should calculate their EMIs before applying for a marriage loan to avoid default in payments and manage the loan efficiently. This is the best possible approach to calculate the overall cost of your personal loan. Borrowers can also use online EMI calculators for the purpose. 
• Alter Your Repayment Period Carefully: Banks usually offer a loan for decent decent loan repayment tenure as per the financial capability of the borrower. The borrowers can increase or decrease the repayment period but they have to be very careful while doing that. Lower repayment period means less interest but increased EMI amount whereas higher repayment period results in a low EMI amount but increased overall interest amount. Borrowers can manage high EMIs by lowering their expenses but it is highly taxing on one’s budget to pay a huge interest amount throughout the loan repayment tenure. 

• Only Take the Amount You Need: Borrowers should first plan to borrow a loan by priotising their needs and not just their repayment capacity. The customers should understand that a marriage loan is one of the most expensive forms of loans and taking more than you need will only increase your financial liability and make you pay more interest to the banks.

• Pay Attention to Your Credit History: Marriage loans have high relevance to your credit history. The credit history and credit score of an applicant are the key factors in determining the approval of a loan application and rate of interest. Also, a well-managed personal loan adds to your credit history as most banks report this information to credit bureaus such as CIBIL. You should check your credit score before applying for a personal loan. Also, try to settle your debts before applying for a marriage loan. This way, you will apply with a good credit score and it will be easier for you to manage a single loan.
• Consider the Number of Active Loans: This factor is also related to the credit history of a borrower. Banks perform a check on your active loans before granting you another loan even if it is a marriage loan. This is to make sure that you as a borrower would be able to repay the loan in full or not. Banks do not consider applicants as good candidates for marriage loans who already have multiple active loans because there is a high amount of risk associated with such candidates. They have too many financial obligations that can turn out negatively and impact their repayment capacity.

In India, almost every public and private sector bank offers marriage loan under the personal loan scheme. Some details on marriage loans from some of the leading banks in the country are given below:

• SBI Personal Loans for Marriage: State Bank of India (SBI), the largest bank in India, both in terms of assets and customers base, offers personal loans for marriage under two schemes – Xpress Credit and SBI Pension Loan. Both loan schemes are specially designed to take care of the expenses of specific individuals.Xpress Credit schemes are designed for salaried and self-employed individuals whereas Pension Loan scheme is designed for seniors who are availing their pensions. Both the schemes can be utilised for taking care of marriage expenses. The effective interest rate for Xpress Credit scheme ranges between 12.50% p.a and 16.60% p.a. On the other hand, the interest rate for Pension Loan scheme is currently 12.45% p.a.

• Bank of Baroda Personal Loans for Marriage: Bank of Baroda (BOB) is one of India’s leading public sector banks and offers personal loans for marriage at reasonable interest rates. The bank offers a loan of more than Rs 2 lakhs to applicants having an account relationship with the bank. The maximum loan amount is kept at Rs. 10 lakhs.The interest rate for the loan ranges between 11.60% p.a and 16.60% p.a. The offered tenure for the loan is also quite sufficient with maximum loan tenure up to 7 years. Borrowers can also take advantage of the flexible repayment scheme of the bank. The prepayment charges are levied at the rate of 4% p.a. on prepayment made within a period of 6 months whereas no prepayments charges are levied on prepayments made after that period.
• HDFC Bank Personal Loans for Marriage: HDFC Bank is a leading private sector bank in the country. The bank offers personal loans for marriage at competitive interest rates. The bank also has a special loan scheme for women. The interest rate offered by HDFC bank is between 11.00% p.a. and 20.00% p.a. Processing charges are levied at the rate of 2.5% but cannot exceed the limit of Rs 25,000. Prepayment is not permitted before 12 months and maximum prepayment charges are levied at the rate of 4% during the second year.HDFC Bank allows interested applicants to check their eligibility within a minute through their online eligibility calculator available on the bank’s website. The bank also follows a thorough but quick mode of documentation in which the borrower has to provide the relevant documents such as income details, ID, and address proof. Apart from these procedures, loan disbursal for the HDFC Bank personal loan for marriage is quick.