Impact of Your Credit Score on Consumer Durable Loans

Are you planning to buy household and lifestyle goods, such as home or office furniture, home appliances, smartphones, home theatres or any other electronic gadgets? Consumer durable loans can make it all possible for you.

Consumer Durable Loan and its Usage

Consumer durable loan is a credit product, which various financial institutions provide its customers to pay for the purchase of household appliances and various other electronic products. It is an unsecured loan, wherein you are not required to submit any collateral/security with the lender.

You can use consumer durable loans to purchase a wide range of electronic products, such as smart TVs, air conditioners, laptops, cameras, refrigerators, washing machines, microwave ovens, kitchen appliances and various other warranty-based consumer products.

Know how your Credit Score influences Consumer Durable Loan Eligibility

Your Credit Score influences your loan eligibility, as lenders do check your credit report before approving your credit application to buy products.

Your credit score considered one of the primary components of your credit report that determines your loan eligibility. Try maintaining your credit score above 750 and as close to 900 to avail hassle-free loans with added benefits.

You can check your credit report online which is available free of cost at various web aggregators. Moreover, it is highly recommended to monitor your credit report regularly to make sure that there are no errors, be it a minor or a major one.

If you are ‘New-to-Credit’ or have no credit history then you can start building your credit history by applying for a secured credit card, short-term personal loan or loan against fixed deposits.

Features of Consumer Durable Loan

The consumer durable loan interest rates vary from lender to lender and usually range from 12%- 22% p.a.

Few selected lending banks and NBFCs may offer 0% interest rates based on their promotional offers and discounts.

The processing fee charged is also nominal and can range from 1%-3% of the sanctioned loan amount.

The repayment tenure offered ranges from 8-36 months with foreclosure charges between 2%-4% of the outstanding loan amount.

The documents required to apply for a consumer durable loan include your valid passport, driver’s license, PAN card, voter’s ID, Aadhaar card, income proofs, etc.

Eligibility Criteria

Consumer durable loans can be availed by both salaried and self-employed individuals. Your loan eligibility criteria may vary from lender to lender, depending on your credit score, repayment history, income, loan amount, etc. Find below the basic loan eligibility criteria, as required by most banks and NBFCs:

Salaried Individuals:

• Age: Minimum 21 years at the time of loan application and maximum up to 65 years at the time of loan maturity
• Monthly Income: Rs. 15,000 or above
• Work Experience: Minimum 1 year in the same organization

Self-employed Professionals:

• Age: Minimum 21 years and Maximum 68 years
• Monthly Turnover: Rs. 1.5 lakh or above
• Business Tenure: At least 2 years in the same business

Note: The mentioned eligibility criteria are basic in nature and the actual eligibility criteria may vary from bank to bank.

Personal Loan vs. Consumer Durable Loan

Generally, people get confused between these two loan types because of its significance and usage. However, do not compare personal loans with consumer durable loans. The similarity between these two loan types is that both of these loans are unsecured where there is no need to submit any collateral with the lending institution.

Consumer durable loans can only be used for the purchase of household appliances or electronic products and gadgets whereas, personal loans can be used to meet any urgent requirements related to marriages, studies, vacations, travel, medical supplies, debt consolidation, etc.

Tips to improve your Credit Score

To avail a hassle-free consumer durable loan, you need to make sure that your loan application is successfully approved. For that, you need to follow the below-mentioned important measures:

• Regularly check your credit report for errors
• Pay your loan EMIs and credit card dues on time
• Avoid multiple credit card and loan applications
• Apply for a higher credit limit
• Limit or reduce your credit utilization
• Improve your credit mix
• Lengthen your credit history

Key Takeaways:

Consumers with low or poor credit scores need to follow the above-mentioned measures to start improving their credit scores. Before applying for a consumer durable loan, it is always advisable to check and compare various loan products offered by leading banks and NBFCs.

Do check out for the interest rates, processing fees, late payment charges, foreclosure charges, and other hidden charges before applying for the loan. If you don’t have a healthy credit score, you should work on improving it over a period of time before applying for such a loan. Once you have a healthy credit score, it shall become easy for you to purchase your desired products by availing consumer durable loans.