Festive home loan schemes: Good or bad?

Last Updated: Tue, Jul 31, 2018 12:06 hrs
Real Estate (Reuters image)

As the Dussehra-Diwali festive season approaches each year, home loan finance companies and banks queue up to offer a wide range of festival discounts and offers. These schemes include loan processing fee waivers, lower interest rates, cashbacks on paying EMIs, gifts and a host of other discounts.

Culturally, it is during this season that people make big purchases because it is considered to be a very auspicious time in India. Market studies have also indicated that there is a surge in demand for loans during this period. Owning a home is a lifelong dream for many but buying a home is not easy in today's times when real estate prices are soaring. This is when home loan providers come into play and make owning a home a tad bit easier. Cashing in on this opportunity, builders, developers and banks, put on their festive hats to entice home buyers with freebies and attractive home loan schemes. For example, this Diwali, a well known private bank launched a new scheme, under which, there was a waiver of 12 Equated Monthly Installments or EMIs on home loans. This offer, however, does come with certain conditions. The loan amount cannot exceed Rs.30 lakh, the tenure has to be 20 years and this loan is only offered for floating interest rates.

Another bank is offering a cashback of Rs.10,000 on home loans. To become eligible for this scheme, the borrower has to make purchases worth Rs.30,000 or more using their credit or debit cards. If the customers uses his/her credit card to make the purchase, the cashback money will be credited to the bank account. If the purchase is made using a credit card, the customer will be given a credit gain, which means Rs.10,000 will be reduced from the outstanding balance.

One of the other private sector banks in India offered a festive home loan scheme, under which, borrowers will get a cashback of 1% on all EMIs paid throughout the tenure of the home loan. Many banks have come up with offers such as these, for all bank offers check here. But, are these schemes really worth it?

There are many advantages in applying for a home loan during the festive season. Firstly, the interest rates offered are much lower, making the loan much more cheaper. Loans are processed faster during the festive season and many loan providers also waive off the loan processing fee and give borrowers flexible tenure options.

To sum it up, there are many perks offered during the festive season that may not be available at any other time of the year. Some loan financiers also offer a range of freebies such as free vacations, gold coins, and other gifts.

Weigh the pros and cons

On the other hand, before making a decision and signing your home loan papers, it is also important to weigh the pros and cons. A customer should check if these offers really reduce the cost of the loan. Beware that though the home loan interest rates offered under these schemes are low initially, the rates may be increased at a future date. This is especially true if the loan is offered on a floating rate.

Home loan providers will take all measures to entice a customer, so do not get distracted by attractive offers. Make sure you first consider the most important factors that determine the cost of your loan: tenure, interest rate and processing fees. Most offers come with certain conditions, so make sure you read the terms and conditions, so that you know exactly what you are signing up for.
To put things in perspective, it is great to go for a festive season home loan, but before making a decision, first make sure you are choosing the right festival loan offer that suits your personal needs.

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