Loans: Festive season offers and should you take them

During festival season, banks come out with various special loan offers. These loan offers are usually in the form of a waiver of processing fees, lower interest rates and so on. However, the question arises should you avail these loan offers?

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Financial planners also have a word of caution for borrowers taking festival loans offers.
Due to five consecutive rate cuts by the Reserve Bank of India (RBI), taking new loans from banks has become cheaper. In addition to that, as per RBI's circular dated September 4, 2019, banks are required to link interest rates on loans to an external benchmark such as the repo rate, or Government of India's Treasury bill etc with effect from October 1, 2019. Therefore, any change in RBI's key interest rates will now be clearly visible in your EMI (equated monthly instalment) payments.

Not only are loans getting cheaper, festive season is also the time when banks push their special loan offers. These loan offers are in the form of waiver of processing fees, discounted fees, lower interest rates and so on.

For instance according to Myloancare.in, an online platform for availing loans and credit cards, Axis Bank is offering special discounted fees of Rs 2,950 till October 28th, 2019, as compared to its regular fees of Rs 10,000 on the home loan.


Similarly, Citibank is offering special discounted rate of 10.5 per cent for personal loan of Rs 10 lakh and above till October 31st. HDFC Bank is offering 10.75 per cent on personal loans of Rs 20 lakh and above. This special rate is also available for savings account customers of HDFC Bank working with Top 11 corporates as per the bank's internal list. Also, special rate for balance transfer is 11 per cent. This is a Diwali offer, yet the bank has not announced any scheme ending date. HDFC Bank has also come out with a special Gold Loan festive offer at a lower rate of 10.5 percent for loan amount of Rs. 5 lakh and above, which is valid till 31st October.

Festival loan offers from banks
Bank Regular Offer Festive Offer Valid Till
Axis Bank - Home Loan Processing Fee of Rs. 10,000 Processing Fee of Rs. 2,950 28th October
Citibank - Personal Loan 10.99% 10.50% for Loan Amount >10 Lakh 31st October
Kotak Bank - Personal Loan 11.25% - 11.50% 10.50% for Loan Amount >20 Lakh Ongoing from last 2 months
HDFC Bank - Personal Loan 11.25% 10.75% for Loan Amount >20 Lakh No end date announced
HDFC Bank - Gold Loan 11% 10.50% for Loan Amount >5 Lakh 31st October
Source: Myloancare.in

The question now arises is that should you take such festive loan offers.

Gaurav Gupta, CEO, MyLoancare.in says, "Festive Loan schemes are launched by the banks to capture the festive mood and spending needs of the borrowers by offering discounted rates. One should definitely opt for these schemes to reduce the cost of borrowing. At the same time there is a need to avoid the temptation of taking a loan just because the interest rates are low. The loan has to be taken for genuine fund requirement. Further, many of these schemes are on-going and positioned as special and limited offer schemes which the borrower needs to watch out for to avoid taking a decision in hurry. Also, if you look at the terms and conditions of such festive offers, usually such offers are offered for big loan amounts. Therefore, small borrowers must check whether discounted interest rates and offers can also be availed on the loan amount, they wish to borrow."

For instance, Citi Bank's special discounted rate of 10.50 per cent is available for personal loan amount of Rs 10 lakh and above or for employees with monthly salary of Rs 1 lakh and above. Therefore, if you avail a personal loan less than Rs 10 lakh, say Rs 5 lakh, then the interest rate that you will have pay on such loans is 11.25%. Similarly, Kotak Bank has a special discounted rate of 10.5% for Personal Loan of Rs 20 lakh and above and 10.99%% for personal loan of Rs 10 lakh and above. However, the scheme has been going for some time now and is not a special Diwali Scheme.

Financial planners also have a word of caution for borrowers taking festival loans offers.

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Vikas Gupta, CEO & Chief Investment Strategist, OmniScience Capital says, "Festival loan offers are worth considering. However, a borrower should not be in a rush to take such loan offers. Typically, such loan offers start with a lower interest rate which presently might be favourable for the borrowers, however, in later years of the loan repayment process, due to terms and conditions, the interest rate paid by you might be hiked because of the loan agreement by the bank or due to RBI's policy rate decisions. In addition to that, the borrower must also check the pre-payment penalties. Stricter pre-payment penalties may make the refinancing of a loan from another bank prohibitive."

Raj Khosla, founder & Managing Director, MyMoneyMantra.in says, "In this festive season, top banks have come up with genuine bargains for new borrowers on Personal Loans for example, ICICI Bank - disbursal in 3 seconds ; Citibank - interest as low as 10.5% ; and SBI's - enhanced tenure of up to 6 years. An overwhelming choice is indeed available and one should definitely consider taking advantage of the multifarious offers on the table. A word of caution, do not let exuberance overpower decision making and always remember that loans have actually to be paid back. Furthermore, do not forget to read the fine print and also evaluate processing charges & foreclosure conditions."
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