Buying festive cheer

Consumer durable loans make buying white goods simpler

Akanksha Jain, a management consultant with a leading telecom company, has just set up house and bought a 29-inch colour TV, a double-door frost-free refrigerator and a DVD player for around Rs 70,000. Did she dip into her piggybank to make these purchases? Nope.

She took a consumer durable loan from the Bank of Baroda. Says Jain, "There are massive discounts in the market right now. Since I didn't have sufficient funds I didn't want to lose out on buying all the white goods at one go, so I took a loan."

The festival season is here and the white goods and consumer durable companies are hoping to make the best of it. They are offering discounts on every possible product, be it TVs, refrigerators or personal computers.

But what about the cash? Well, it's possible to figure that one out because a clutch of banks are offering consumer durables' loans.
 

Bank interest rates
(Figures in per cent)
Bank of Baroda	12.50
UTI Bank	14.75
Punjab National Bank	14.50
Syndicate Bank	12.50
State Bank of India *	13.50
* Festival loan

Some banks like, for instance, the State Bank of India even offer something called the 'Festival loan' "" a loan meant to take care of all your festival related needs, including buying consumer durables.

Consumer durable loans are being offered by nationalised banks such as Bank of Baroda, Punjab National Bank, UTI Bank and Syndicate Bank among others. None of the multinational banks offer such a product. They offer the all-encompassing personal loan which can be used for any purpose, including buying consumer durables.

But why should one go for a consumer durable loan and not a personal loan? That's simple, it's much cheaper. A consumer durable loan is available at between 12 per cent and 14 per cent (see table) as compared to a personal loan, which is available for between 16 per cent and 18 per cent. So if you have to buy a consumer durable on loan then why not go for a loan meant specifically for this purpose?

Of course, the drawback is that since this loan is available only at nationalised banks, the service leaves much to be desired. At most bank branches, you may find yourself being pushed from one desk to another, without anybody showing the slightest interest in offering you a loan. However, if you finally manage to get someone's attention, getting the loan is not difficult.

The only documents necessary are a proof of identity such as driving licence or passport, a proof of income such as your latest salary slip or a copy of Form 16, a proof of residence such as your ration card, passport or latest electricity or telephone bill and a bank statement for the last six months. The loan takes between three to five working days to be processed.

The quantum of the loan varies from one bank to another. However, most banks offer loans of between Rs 10,000 and Rs 1 lakh. For instance, Punjab National Bank offers up to 90 per cent of the cost of the article, subject to a maximum of Rs 1 lakh.

The minimum amount of loan offered is Rs 10,000. On the other hand, Syndicate Bank offers up to 80 per cent of the invoice value of the products purchased or 10 months gross salary, whichever is less, subject to a maximum of Rs 2 lakh.

The maximum limit is Rs 1 lakh for pensioners. Then there is UTI Bank, where the minimum amount is Rs 25,000 and the maximum is Rs 2 lakh, provided it does not exceed 85 per cent of the cost of the product.

A loan can be taken for a maximum period of 60 months. UTI Bank, however, offers it for a maximum period of 36 months. Under SBI's 'Festival Loan' scheme, money is offered for only up to 12 months.

All resident Indians including salaried, professionals, self-employed, businessmen and farmers are eligible for this loan.

Processing fee charged is generally around 1 per cent of the loan and most banks do not charge a prepayment fee. The processing fee for SBI's Festival Loan is Rs 100.

So if you have your eyes set on a new home theatre system, this festive season is the right time to buy it "" maybe with a little help from your neighbourhood bank.