ARE YOU planning to buy that 29 inches colour TV which you’ve set your eyes on? Or do you want to buy a PC for your daughter or a new AC to beat the summer, but do not have enough cash in your account? Don’t worry. Welcome to the era of any-purpose, no-questions-asked consumer loans.Thanks to the easy availability of finance, the Indian middle classes are going on a shopping binge, and 50 per cent of the buying is with the help of consumer finance. In fact, banks and consumer finance companies are falling over each other to give loans in order to increase their profitability. Private banks (like ICICI Bank and HDFC Bank) and foreign banks (like Citibank, Stanchart, HSBC etc) are leading the race in extending consumer loans. The loans, at an average interest of 16 per cent per annum, look a bit on the high side, but considering that banks ask for almost nothing as collateral, and do not seek a guarantor, it looks like a fair deal for both parties. Says Chetan Mehra, Managing Director of Weizmann Homes, a Mumbai-based firm specialising in home and consumer loans: “In consumer finance, how fast a company delivers its product to its consumer is important. Speed is the key in this segment as consumers are getting more demanding. We are noticing that the small office home office segment is turning out to be biggest taker of consumer loans.” Mehra says the only those consumers should opt for a personal loan who want to tide over a short term liquidity crisis. Depending upon repayment capacity, one can get a loan of up to Rs 3 lakh for almost anything: be it refrigerators, washing machines, TVs, personal computers, two or four-wheelers or even to fund a marriage in the family. All a consumer needs is to walk into the nearest bank or to a dealer’s outlet along with your salary certificate, and or last two years tax returns and proof of residence to get loans faster. A passport sized photograph, banking history and proforma invoice are also necessary while applying for the loan. Many banks also give express service to those customers who own a credit card issued by them, and many demand to see a customer’s banking and credit card history. While HDFC Bank finances up to 90 per cent of the product prices, Countrywide finances up to 85 per cent for consumer durables and two-wheelers. Countrywide also finances up to 90 per cent of product price for high value items like air conditioners and up to 75 per cent for branded PCs. Almost all salaried employees earning Rs 3,500 per month (gross) and between the age group of 21-58 years, if working in private sector, and 21-60 years, if working in the government sector, are eligible for finance. Self-employed professionals with earnings of Rs 42,000 per annum and between the age group of 21-65 years are also eligible. All banks offer a flexible tenure of between 6 months to 36 months while charging a processing fee of 2 per cent of the loan amount. Though repayments can be made through equated monthly installments (EMIs) through post-dated cheques, for pre-payments a consumer has to pay a penalty of 2 per cent on the remaining amount. The best, or cheapest, loans, however, are those offered by finance firms which are owned by the same management whose products you’re buying. So, it’ll always be cheaper to get a loan for a Bajaj Auto product from Bajaj Auto Finance, for instance. Many consumer durable companies like Bajaj Auto, LG, Kinetic have their own finance companies who will give you a loan at a more attractive rates if you buy a product of their company. All you have to do is give one or two installments in advance and buy the product. All such loans are available from the dealers’ outlet. For example, if you a buy Bajaj Caliber Chroma — costing Rs 49,058 in Mumbai — ICICI will offer you a two-year loan with a lower EMI of Rs 1,765. Bajaj Auto Finance — a subsidiary of Bajaj Auto — will charge you a higher EMI of Rs 2,353 per month but the catch is that in the case of ICICI you have to pay Rs 15,000 in advance while Bajaj Auto Finance will take only 3 EMIs in advance. With this, you end up paying Rs 1,000 more in the case of ICICI over the tenure of the loan. So, it’s best to shop around for good deals, and look carefully at the finance arm of consumer-good firms.
