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In today’s customer-centric market, loans are a prerogative of the consumer. And there are various payment options as per the convenience of the buyer.
If you wanted to surprise your dad with a beautiful mobile, you might plan for payment in installments. Have you ever thought of other modes of payment vis-à-vis the credit card? You might want to avail of choices other than the credit card. You may wish to pay EMI online or through predated cheques.
In hindsight, you know if you default paying up the outstanding finance charges are going to kill you. Whatever the reason, having knowledge of other payment options and its due diligence, would be a good idea. We will tell you about other EMI options without the credit card.
Understanding the Credit Card System
Just to douse your curiosity; what can go wrong with credit card borrowing? Assume you get a loan of INR 100,000 against any well-known credit card. You have to pay a 14% annually reducing rate. This amounts to INR 7745 interest and EMI of INR 8979 over 12 installments.
Read on the hard part. The innocuous-looking instrument will not remind you to clear the monthly dues. This will get you into the trap of high finance charges amounting to 3.5% pm of the card outstanding.
That is equivalent to whooping 40.2% per annum. 4 such defaults of even simple one single outstanding EMI will shoot up the cost of borrowing to 18 percent.
Sounds scary? Let us look into some alternatives.
A Personal Loan from your Traditional Bank (Scheduled / Co-operative bank)
Heard of 3-second loan? Go to the website of any famous bank. The minimum documentation required is to address proof and identity proof! The loan range varies from INR 50000 to INR 2000000. Attractive interest rates ranging from 10% to 16%.
You can opt for flexible EMI tenure from 12 to 60 months. Want a better deal on interest rates? Show up your CIBIL score or leverage your company credentials and get the benefit of 50 to 100 basis points.
Mode of payment can be post dated cheques from your salary or pension account. Or you may opt for a pre-mandated ECS facility. Some minor pre-processing charges are there. Most of the loan is unsecured, which means the bank will not mortgage any asset or instrument.
A Pre-approved Personal Loan from Scheduled Bank or NBFCs
Here much is the same in terms of interest charges, tenure or other terms and conditions. NBFCs know you are a good customer armed with favorable credit scores.
The impact on you is in terms of speed of disbursement. The day you ask for a loan, your bank account is credited with a pre-approved limit. You will need to sign in a few places.
You have an option of ECS or pay EMI online. NBFCs may levy some pre-processing charges. Take note of penal interest or foreclosure charges. Definitely, penalty charges are much lower than that of the credit card.
Loan Against Debit Card
No bothering on documentation.
Just text the keywords (merchant will guide you) to your bank. Many popular private banks offer pre-approved limits on a debit card. Within seconds your mobile phone will receive the pre-approved limit. This can range from INR 25000 to INR 200000.
Debit card information will validate you and deduct INR 1/-. What’s more, many banks offer 0% charges for as low as 3 months tenure. If you are choosing 12 or 24 months, you can get some cash back after 6 months making the effective rate low.
The interest rate can range between 11% to 18% based on the type of profession and quantum of loan. EMI deductions will happen automatically from your savings account. Pre-payment attracts some charges in this case.
Secured Loan or Loan Against Collateral
The advantage this offers is a lower interest rate like 9.5% to 11% compared to a personal or unsecured loan.
The institution asks for collateral like shares or fixed deposits. Mortgaging immovable property can get the customer even cheaper loan. EMI options are in terms of ECS mandate or post-dated cheques.
Situations like marriage, house construction, and education warrants a long-term low-interest choice. This is when secured loans are a preferred choice.
Chit Funds
This is quite popular in South India. It is a process of pooling money in a group and drawing it when there is a financial need.
Every month there is an auction. The lowest bidder gets the amount and balance get distributed among the rest of the members. The one who avails the needed amount will have to continue paying the EMI for the remaining month.
Is it beneficial to traditional loans in terms of interest? YES and NO. Typically availing the loan in the middle of tenure is most attractive. But the cost of credit can go up to 20% plus. The trust factor is most important here.
Boost Loans from MobiKwik or PayTM app.
Want to buy your favorite musical instrument? Or arrange capital for a spontaneous trip?
Download the app, fill in the necessary details and get instant approval. Then withdraw any amount at any time from the point of the approved loan. Minimum documentation like PAN or Aadhar card is required. Also, If you wish to earn some additional income you can try some other sources.
The rates are high as 2% per month. The app can scan your credit score from independent agencies. Thus, you can get some benefits if your credit score is good. Again, EMI gets debited from your bank account and wallet account credit.
Conclusion
There are hordes of methods of paying EMI without credit card. Each of them comes with their own share of advantages and caution. Scan the options, read the fine print carefully and avail the most convenient one.
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