The festive season of Diwali brings joy, celebration, and togetherness, but it also entails significant expenses. Taking out a personal loan during Diwali can be a practical solution to cover these financial needs, but it’s crucial to exercise prudence and responsibility to prevent unnecessary debt and financial stress.
Budget expenses: The first step in responsible borrowing is to create a comprehensive budget for your Diwali expenses. By outlining your needs and establishing a clear budget, you can avoid borrowing more than necessary. Make sure your budget is as precise as possible, accounting all the foreseeable expenses you may incur during the festive period. This step is crucial because it sets the foundation for your financial decisions and helps you avoid falling into the trap of borrowing more than required.
Comparing different lenders: This is another essential component of responsible borrowing. Don’t settle for the first loan offer that comes your way. Instead, take the time to explore multiple lending options and carefully assess their interest rates, terms, and associated fees. A lower interest rate can significantly reduce the overall cost of the loan, potentially saving you a substantial amount of money.
To effectively compare lenders, consider utilising online tools and resources that allow you to evaluate loan offers side by side. Don’t hesitate to reach out to lending institutions, ask questions, and request loan quotes. This proactive approach can help you identify the most favourable loan terms that align with your financial situation.
Assess borrowing capacity: One of the fundamental rules of responsible borrowing is to take out a loan amount that you can comfortably repay within the agreed-upon tenure. It’s essential to analyse your current financial situation and ensure that the monthly loan payments fit seamlessly into your budget without straining your finances. Overborrowing can lead to financial stress and debt, which should be avoided at all costs. To determine your borrowing capacity, assess your monthly income, existing financial obligations, and the new loan’s terms. Striking a balance between what you need and what you can afford to repay is the key to responsible borrowing. It’s wise to err on the side of caution and opt for a loan amount that offers a financial cushion rather than a burden. Read the fine print: A crucial aspect of responsible borrowing is understanding the fine print of the loan agreement. Before signing any loan contract, carefully read and understand the terms and conditions provided by the lender. Pay specific attention to key elements such as interest rates, repayment schedules, any hidden fees, and the consequences of late payments.
By being aware of all the intricate details of the loan, you equip yourself with the knowledge necessary to make an informed decision. Should there be any ambiguities or uncertainties, don’t hesitate to seek clarification from the lending institution. Being fully informed about the loan’s terms and conditions ensures that you won’t encounter any unpleasant surprises down the road.
Avoid overspending: When you have a personal loan at your disposal, it can be tempting to overspend during the festive Diwali season. To maintain financial responsibility, it’s crucial to exercise self-discipline, stick to your meticulously crafted budget, and avoid impulsive purchases. Remember that the loan should serve as a tool to cover planned, essential expenses, not as a means to indulge in extravagant or unnecessary items.
To resist impulsive spending, consider setting up a separate account for your Diwali budget and only transfer the exact amount needed. This can act as a psychological barrier against excessive spending. Additionally, remind yourself of the financial repercussions of impulsive choices, which could lead to debt and financial stress.
In summary, personal loans can be a valuable financial resource during the Diwali season, helping you navigate the expenses associated with this joyous celebration. However, their responsible use is paramount to avoid undue financial burden. By meticulously planning your budget, comparing lenders, borrowing within your means, understanding the loan’s terms, and resisting impulsive spending, you can make informed financial decisions that enhance your Diwali experience without sacrificing your financial well-being.
The author is • Vivek Veda, co-founder & CFO, KreditBee
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