Avoid ‘Diwala’ This Diwali: Four Ways To Celebrate & Stay Debt Free!

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Avoid ‘Diwala’ This Diwali: Four Ways To Celebrate & Stay Debt Free!
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Diwali is one festival that we Indians consider an auspicious time to buy new things—right from a new car to new gadgets or appliances. Diwali is also the time when retailers grab eyeballs with fantastic offers on LED TVs, smart phones, refrigerators and what have you, it surely is difficult to keep away from the temptation to spruce up your lifestyle. After all, you work so hard all year round, you deserve to reward yourself just that little bit. However, this indulgence should not cost you dearly in the long run and throw your finances out of gear. Here are four tips to keep in mind if you have set your heart on a particular gadget this Diwali and are considering a loan for the same.

Avoid an impulse purchase
Diwali shopping is a big event for you and your family. While with stores in malls inviting you with incredible“easy finance” offers on the latest smart phone, it may seem within reach but don’t give in to temptations. Make sure your loan is based on a genuine need and not just a tempting offer. If you have already planned for that smart phone and have saved up for it partly, it surely makes sense to consider a finance offer on the same.

Read the fine print
A consumer durable loan may seem tempting because you do not have to pay a steep rate on interest like that in a credit card (where the annualized rate of interest may anything between 36-40%) or a personal loan (12-14%). However, do check out the real debt burden by taking into consideration other costs such as the processing fee that may be 2-3 % of the total cost of the product. Further you will be expected to make a down payment of at least one to three EMIs one lender to the other and the tenure may be a maximum of 36 months. These terms and conditions differ from one lender to the other. Read the fine print before you blindly bite the bait.

Loans are not available on every product
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Lenders usually enter into agreements with certain top-notch brands during the festive season. This means that the product that you may have in mind, may not fall under the ambit of such an offer. Besides these offers come with deadlines, which means you may be forced to make the purchase when you are not really prepared for it, financially. For instance, with both Dussehra and Diwali, falling in the same month this year, you may have already exceeded your monthly budget or are perilously close to exceeding it.

Check out your current liabilities
It may seem easy to make a down payment on the device you want with the Diwali bonus you have just received, but before you avail of any new loan, take a careful look at your existing liabilities and ask yourself honestly whether you are in a position to take on an additional debt burden. Not only should you be comfortable making timely repayments it should not influence your debt to income ratio negatively (financial wisdom suggests that it should ideally be under 35 %). A high debt to income ratio may negatively impact your chances of getting a loan when you are really in need of one.

It surely feels good to buy sparkling new things during Diwali, but if you don’t really need it and do not have the money saved up for it, it is perhaps a better idea to postpone your purchase for a while rather than blindly increasing your debt burden right after Diwali!
About the author: Rajiv Raj is the director and co-founder of www.creditvidya.com