Ravi is graduating this week. He wishes to upgrade his phone to the latest smartphone available in the market. Likewise, Amisha wants to refurbish a part of her home. Both Ravi and Amisha can fund their purchases instantly by procuring a personal loan, typically categorized as a “shopping loan.”
Shopping loans are personal loan products that help you fund your purchases promptly. They can be availed at borrower-friendly terms. Many lenders, NBFCs, and mobile apps offer quick shopping loans. Let’s understand the basics of a shopping loan.
Need for a shopping loan
Just like Ravi and Amisha, you may also need to buy some personal products. These products may be exclusive or limited-edition merchandise. You might be getting a lightning deal on it, or maybe you need the product immediately and have your funds blocked.
Reasons for procuring a shopping loan could be ample and unique for each person. You must know your exact reason for procuring a shopping loan. Further, the decision for procuring a shopping loan must be made keeping the short- and medium-term goals in mind, i.e., you may require a home loan or education loan for higher studies in the near future.
Terms of a shopping loan
The terms of a shopping loan are designed to be very convenient for the borrower.
First of all, a shopping loan is available at a nil (or minuscule in some cases) interest rate. This ensures that you don’t have to pay a penny above the purchase price. In some cases, online lending apps may also offer a discount on the purchase price if a loan is procured through them. If you are thinking about how a lender can earn without charging interest, rest assured that the lender gets a commission from the seller of the product.
Flexible loan tenure is another advantage. Typically, you can choose a loan tenure between six to 24 months and pay EMIs during this period. Further, assuming there is a cash inflow due to a bonus or profit in the share market, you can opt for early repayment. No foreclosure charges are levied on repayment before the due date.
Shopping loans are generally unsecured loans. Lenders do not demand any collateral or security while granting these loans.
Some lenders may demand upfront down payment from you and lend up to 75% to 90% of the purchase value. This reduces the risk of bad debts for the lender.
Documentation and eligibility
Typically, the documentation needed for a shopping loan is simple. The lender may ask for your KYC details, i.e., a copy of your Permanent Account Number (PAN) Card, Aadhar Card, driving license, etc., and bank account details for linking it with EMI payments. Individuals between 21 and 60 years of age are eligible for shopping loans.
If you are planning to fund your urgent purchases, a shopping loan comes in very handy. This personal loan product is also designed in a way that gives you quick access to funds with minimum documentation. Since the personal loan interest rates is often nil, you do not pay anything more than the original cost of the product, which is further spread over a period of six to 24 months.
Shopping loans can be of great help for individuals without a credit card or an impressive credit history. A shopping loan comes at very attractive terms; however, remember not to go overboard with shopping loans as it tends to affect your credit score over a period of time. Before applying for a shopping loan, it would be worthwhile to do some basic research about the lender, your eligibility using the personal loan EMI calculator, and the personal loan products available with different lenders.