As building a house or renovating one is not a recurring expense, people often try to choose the best option available, even if the budget exceeds the home loan and the top up limits.
With so many dazzling, but expensive home décor options available in the market, you may be tempted to exceed your already exhausted home building/renovation budget to go a step further to buy the best items available to decorate the interior of your dream home.
As building a house or renovating one is not a recurring expense, people often try to choose the best option available even if the budget exceeds the home loan and the top up limits.
In such a case, you may have to explore the options available to borrow more money. Three of such options are Personal Loan, Credit Card and Buy Now Pay Later (BNPL).
“As a form of consumer credit, all the three options – Personal Loans, Credit Cards or BNPL – are of a somewhat similar nature that allow one to buy or avail consumer services upfront with repayment over a definite period,” said Amit Chaturvedi, Co-Founder Paytail.
“However, the difference in the repayment period and the rate of interest make them different from each other. While the repayment time is lowest for the credit card, it has the highest rate of interest (in case of a carry forward). The credit card and personal loan also need certain parameters and are often not offered to people with NTC (new to credit),” he added.
Chaturvedi explains, how BNPL as a concept stands out in terms of the flexibility it offers –
- Zero per cent interest in some special cases
- Digital approval in real-time
- Credit offers to an individual who is new to credit
- No or zero processing fee
- Better transparency
“Given the higher benefits associated with BNPL, opting for BNPL is a better proposition than personal or credit card loan,” said Chaturvedi.
Commenting on the three borrowing options, Anil Pinapala, CEO & Founder of Vivifi India Finance said, “The best option would be BNPL because with it, the price will not change much and the individual will get a longer period to repay than with a credit card where the free period is much lesser. One must look for offers and wherever they are available, purchases made on BNPL, like FlexPay offers, should be the first choice.”
“But if flexibility in repayment is what an individual is looking for while also comfortable with paying a little interest, then a credit card might be an option. However, if one is sure that one can repay in a shorter period of time, then our advice would be BNPL. Personal loans, on the other hand, should be avoided for purchases for home decor unless one needs a two-three year repayment period,” Pinapala added.
Talking on the issue, Anshuman Narain, Vice President, CashBean (PC Financial Services Pvt Ltd) said, “Unless the home loan is towards the end of its term one would advise to always go with something like BNPL. This is because BNPL can come without any added interest on the product and is more transparent in its details and fees than Credit Cards. It is recommended that for a loan that you may need as an emergency Personal Loan is the best option as it will be quickly disbursed and is usually short term hence won’t add much to your long term debt.”
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