Personal loan to buy appliances and gadgets
Personal loans should be taken to finance your needs and not your wants. Once you are clear about your wants and needs it will become easier to manage your funds.
The temptation to take a loan is ever increasing more over due to the various new loans by the banks which lowest interest rates. You may find it tempting to purchase a washing machine or an LCD television, or even fund a holiday to an exotic destination abroad! You need to first separate your need from your wants and then plan on taking a personal loan to fund your needs. Financing your wants by borrowing is a strict no-no; as there is no end to anybodies wants, but needs are always limited.
So strike a balance between what you need and can’t do without and, what you fancy. Then sign up for a loan that either create an asset or finance a must-have.
Consumer durable like washing machine, oven, refrigerator etc. falls somewhere between need and luxury. A refrigerator, for instance, is a necessity, rather than a fanciful desire, in cities. So, affordability cannot be the only deciding factor here. It would also depend on
• the intensity of the need,
• the cost of the loan and
• the ability to service the same.
For instance, if such a scheme is being offered in association with the company’s financing arm, the deal promising zero interest loans might make sense. At the same time, if the dealer is offering a discount against full cash payment you can choose what suit your needs. It also depends on how expensive the scheme is — if the interest rate is, say, 12% per annum, you could consider it, but if it is over 18% – this scheme will work out little expensive. Also, you may have to pay a processing fee or other charges that could increase the amount.
Let us understand this by the following example. Suppose one has an annual income of Rs 10 lakh then he/she should avoid taking a loan for, say for a washing machine costing Rs 15,000, as he/she can easily afford to buy it by saving enough. However, those earning Rs 2 lakh per year with a genuine need for the appliance could choose to buy it with an EMI of Rs 2,000, (as it would be a convenient offer).
