Durga Puja, Diwali 2024: 6 key loan management tips for first-time borrowers this festive season

The festive season is a time of joy, celebration, and increased spending. For many first-time borrowers, personal loans can help cover additional expenses. However, it's vital to borrow wisely to avoid future financial issues. Here’s a guide to managing loans responsibly during this festive period.

Tips for festive borrowing

Plan your budget carefully

• Identify essential expenses such as gifts, travel, and home improvements.
• Create a clear budget to prevent unnecessary borrowing.
• Stick to your budget to ensure manageable loan amounts and repayments.

“The first thing to do is plan your festive budget carefully. Festive deals can be tempting, but knowing what you need to spend on is crucial. A clear budget helps you avoid borrowing more than necessary,” says Sidharth V, Chief Risk Officer at KreditBee.

“Evaluate what you need versus what you want, and ensure the amount you borrow is within your repayment capability,” advises Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited.

Research loan options

• Avoid rushing into the first loan offer you find.
• Compare various lenders to find better interest rates and terms.
• Always read the fine print to uncover any hidden fees.

“Many first-time borrowers rush into accepting the first loan offer, especially during festive promotions. Comparing lenders can help you find more favorable terms,” explains Sidharth V.

“Don’t just chase attractive schemes; carefully review all contracts to understand the associated costs,” adds Siddharth Maurya.

Understand your borrowing capacity

• Ensure your loan repayments align with your monthly income and expenses.
• Aim for loan repayments to be about 30-40% of your disposable income to minimize financial stress.

“Understanding your borrowing capacity is crucial. Keep your loan repayments within your financial means,” emphasizes Sidharth V.

Utilise festive loan offers wisely

• Look for deals like zero processing fees or lower interest rates.
• Choose loans that align with your budget and repayment capabilities.

“Festive loan offers can provide attractive deals that make borrowing more affordable, but ensure the loan fits your financial situation,” recommends Sidharth V.

Stay disciplined with repayments

• Set up automatic payments or reminders to avoid missing due dates.
• Opt for loans with flexible repayment options to pay off debt quicker without incurring extra fees.

“Discipline in repayments is essential. Set up reminders or automatic payments to avoid penalties,” advises Sidharth V.

Consider shorter loan terms

• Choose shorter loan periods to reduce the total interest paid.
• Remember that loans are long-term commitments and should be approached with care.

“Look for lower rates outside of promotional bundles, and factor in the repayment of borrowed amounts along with daily expenses,” suggests Siddharth Maurya.

By planning, comparing offers, and maintaining discipline, first-time borrowers can enjoy the festive season without financial stress.

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Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.