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Credit Card or Festival Loans?

Credit Card or Festival Loans?

If you are young and want to purchase your first iPhone this festive season, the ideal advice would be to purchase it on cash without borrowing. But it’s not easy to find so much money in your bank account when you have many other expenses to take care off. So even though financial prudence suggests that you should rethink about this purchase, its possible that you might be tempted to buy it.

Now if you have finally decided to buy it, how should you do it?

The most convenient option is to pay for it using your credit card. Swipe and done – you own the latest iPhone that you can now flaunt in your office. But credit cards are very costly. At times, the annual borrowing rate turns out to be 45%! Just imagine the interest you will be paying on such high-cost loans.

But there is another option that can turn out to be much cheaper than credit card loans. It is the festival loan – a cheaper form of a personal loan.

Festival loans are generally specialized loans that are offered at lower rates or with processing fees than existing personal loan.
Generally these loans cost about 14-16% but come with a lower borrowing limit (generally less than Rs 1 lac). If you compare this with credit cards (@40% plus rate), these are much cheaper option.

Another disadvantage of buying though credit card is the limit on your card will be reduced to the extent of outstanding amount. So, if you already have a significant credit card outstanding and use your card actively, it is better to opt for a personal (festival) loan.

But inspite of being cheaper than credit cards, festival loans suffer from one small drawback – processing time. So while you can simply walk in a shop and swipe your credit card, opting for a festival loan might make you wait for a day or two before the loan is processed. But this is still fine when you compare the personal loan interest rates – which easily tilt the balance in favor of festival loans.

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