3 Most Popular ways to finance any Product when you are short of Funds

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It sometimes happens that you need to buy a product but you are short of funds. Earlier people used to turn to their family and friends wherein they used to take a loan. However, there are many options through which you can fund this shortage and the most popular of these are explained below:-

  1. Credit Card

Most credit cards have a billing cycle of 1 Month i.e. you can use your Credit Card today to purchase any product and then you would be required to repay this amount to your Credit Card issuer after 30 days.

This is a very good option to finance your purchases when you have a temporary shortage which is for less than 30 days. This is because your Credit Card issuer would not charge you for any interest or penalty for the first 30 days (in some cases it may even extend to 50 days).

However, if you don’t repay this amount within the above mentioned period, then they will start levying interest on late payment. And this interest would be a very hefty amount. They may also give you the option to convert this amount into an EMI. However, even if they convert it into an EMI – they would still charge interest on this amount.

The interest charged by Credit Companies on amount outstanding is a very huge amount and therefore, it is never advisable to opt for financing your purchases through a Credit Card if you don’t intent to repay the amount in a very short span of time.

  1. Personal Loans

Several Banks and NBFC’s are also willing to help you in funding your shortage by offering you a Personal Loan. These Loans can be used for any purpose and you are not required to mention the reason why you intent to avail these loans.

The Interest Rate charged on Personal Loans is much lesser than the Interest Rate charged on Credit Card outstanding bills. Moreover, Personal Loans can also be availed for a much higher amount as compared to Credit Card Loans.

  1. Consumer Durable Loans

A new form of financing which has emerged in the recent past and is getting very popular in India is a Consumer Durable Loan. A Consumer Durable Loan is basically a Loan which is taken for the purpose of funding the shortage at the time of buying any household item.

This Loan can be availed for a wide range of household products ranging from household necessities like a Washing Machine to Luxury Gadgets like a high end apple smart phone.

The amount of Loan and Tenure of the Loan varies for each lender depending on the type of product purchased. The Consumer Durable Loan could vary from a few thousand rupees to a few lakh rupees.

Which type of Financing should you opt for?

There is no standard answer to this question as the best type of financing would vary from product to product and also from person to person.

If the requirement is for a smaller amount and is for less than 1 month – Credit Card option may work out to be the best.

However, if either the requirement is for a slightly bigger amount or is for more than 1 month – Personal Loan and Consumer Durable Loan would work out to be a better loan as not only would you be able to avail a higher loan but you would also be able to secure this loan at a much lower rate of interest.

Before opting for any of these schemes – you should also check if the seller of the product is offering any Consumer Durable Loan at 0% Interest. In some cases, the seller offers a consumer durable loan at 0% Interest under the Subvention scheme and the buyer is not required to pay any additional amount as Interest.

Karan is CA by Qualification with the rare distinction of being awarded All India Rank 22. He is also the founder of this website and loves to help people with their Tax Queries.