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This festive season just like every other one has set in with a variety of discounts and offers to come in the market from the retailers on products and services for spurring the purchases. With such amazing baits being offered to you, it is pretty simple to get attracted and spend, at times even beyond your financial capabilities.
When products come with an offer, finance experts will advise you to go for personal loans in UAE for hefty shopping. However, the question is that are personal loans the only option for you? If not, then what can be the alternative options for financing?
Financial experts feel that personal loans must be one of the last financing options on your list because they include a high price and may ruin your financial planning. Such loans may involve an annual rate of interest of approximately 20% or more.
Personal loans in UAE are pretty costly and must only be taken as a last resort in the event of an emergency. You must not go for a personal loan, for funding discretionary charges such as an extravagant wedding, a vacation, and more. Doing this may lead to an increase in the burden of debt and also crunch the cash flows.
The financial experts say those who opt for personal loans for festival shopping are the indication of your inability for handling your personal finances properly. In fact, a personal loan for doing spending during the festivals shows financial indiscipline on your part. Personal loans were not conceptualized for such spending; however, for your emergencies, like, medical emergencies when there isn’t any way of getting funds. With the loans coming with rates of interest of 12-18%, they are very expensive.
These loans can be availed only in the case of all the attempts of arranging the required funds getting failed. You should not use these loans for the purpose of a vacation, shopping, and other such extremely short-term objectives. Do not get fooled by flexible repayments and simple EMIs. You must focus on the total payment of interest and charges in case any for making the prepayment.
Personal loans in UAE are helpful in many situations. In case you have the financing requirements for a longer duration, personal loans are the ideal option. In case you need around AED 200,000 and may take somewhere around two years for making repayment, personal loans will be a better alternative as the rate of interest is charged on reducing balance instead of the entire amount.
Along with all this, the sellers promote their financial services and products by providing heavy offers, reduced rates, and waivers at the time of the festive season, which will be an opportunity for saving more funds. Because festivals are an auspicious time for doing huge purchases or events such as buying a car, DSLR camera, and more or events such as your first international vacation, or your wedding, this can be a frugal alternative for you.
But, in case a person is keen on getting a personal loan, you should do your research carefully. The borrowers must always study and understand the market before selecting a lender. It may be easy to get attracted to that offer, which you forget to look at the things that the rest of the lenders are providing. Don’t just compare the rates of interest and fees. You should, in fact, calculate the entire cost of the loan while comparing. You should be fast in spotting the problematic clauses & this could be possible only when you have read the fine print thoroughly.
Hence, in case you have been looking for funds for your festival shopping, what can be the other options, which you can consider? There can be multiple alternatives. There are various options to get funds for your huge-ticket spending such as appliances, jewelry, vehicle, and furniture, among others. One way is to keep aside a little portion of your income each month and make use of that amount, get a loan (unsecured or secured), swipe the credit card, borrow funds from family and friends, go for a retail EMI, get an advance income from your company, and more. Amongst all these options, personal loans and credit card loans are the most often used.
Here are some of the short-term options for loans.
One option that you can consider for an instant loan amount is a loan on your credit card. This could be selected on the basis of the credit history of the applicants, repayment ability, and the credit limit. Because credit card loans are pre-approved; hence, the processing is fast and you can get the funds immediately.
Any person who wishes to make a huge purchase should consider a personal loan. It is an unsecured loan and the rate of interest applicable is usually higher as opposed to the other loans like a vehicle loan, gold loan, home loan, and more. The rate of interest on this kind of loan varies from one lender to another and is subject to the applicants’ earning capacity, relationship with the lenders, history of credit repayment, and more. In the event of an emergency, the personal loan seems to be a useful option. The only problem is that it is a high-cost loan.
The loan that is opted against your insurance policy also gets instant approval and the rates of interest are lower as opposed to that on a personal loan. In this case, the collateral value of the plan remains constant across the tenure of the loan. It can be issued by the insurance provider or the bank. It should be kept in mind that the rate of interest on loan against your term or life insurance policy is based on the amount of premium and the number of the insurance premium paid.
The financial advisors say that the alternative options for personal loans in UAE can be a loan against property, bank overdraft, loan against investments (mutual funds, shares, FDs, gold, insurance plans). Before you opt for any of the above options, you must consult the financial advisor or planner who will assist them in taking the correct decision on the basis of the entire financial condition.