This article has been written by FinShiksha, a firm specializing in financial education for students who want to build a career in finance. They can be reached at https://finshiksha.com and @finshiksha on Twitter
We all know that credit is an important part of personal finance. You can read more about ‘Why you need to start using CREDIT in your finances‘. However, you may be still wondering, what are the best credit options available to me?
Well, don’t worry!
We have that covered, with some of the most commonly used personal credit products that cater to your different requirements.
It is a line of credit from which you can borrow money at any time, up to your credit limit.
Let’s say your credit card limit is Rs. 100,000 and in a month, you used Rs. 20,000. So, now you are only liable to pay Rs. 20,000. Once you pay the amount your limit is restored to Rs. 100,000 which you can use again.
So, how much interest rate is charged? Anywhere between 24% to 36% annually (which translates to 2% to 3% per month).
Does this mean I can spend any amount of money using credit cards? No, every credit card comes with a limit which is decided by the bank issuing the credit card. The limit is based on the customer’s income, previous payment history (if any), financials, etc. The bank basically checks your ability to repay and then sets the limit.
So what can I use a credit card for? Practically anything. One can use it for buying a burger for Rs. 50 to buying a TV worth Rs. 5 lakhs. Although, the approval process is longer and requires some paperwork. The payment process is also longer since it involves entering lengthy card details for every payment you make.
Well, what if I need a bigger loan than what a credit card has to offer. Is it possible?
Yes, it is.
A personal loan is a fixed loan given as a lumpsum which you repay in equal installments for a predetermined period of time.
But, what about interest rates, are they high like credit cards? No. Personal loans charge anywhere between 12% to 18% annually.
So, what purpose can I use it for? This is best suited for one-time bulk payment, like wedding, home renovation, kids’ education, etc. Simply put, personal loans are used for a specific purpose and not to buy small ticket size items. And ofcourse, the paperwork is quite substantial.
Is there anything that is faster, easier and involves lesser paperwork?
Definitely! This is where digital credit comes in.
This is one of the latest technologies in the lending universe. It works similar to credit cards but helps in faster transactions without the customer having to carry anything.
Let’s take an example of ePayLater, which works on a similar premise. You can create an account with ePayLater by providing some basic personal details and PAN number. ePayLater then processes your data to assign you a credit limit.
That’s GREAT! How can I use it? Say you want to book an airline ticket but don’t have enough balance to make a payment. You can make a quick payment using ePayLater credit and pay later at your convenience. Here, ePayLater gives you 14 days to settle your dues. So practically this is a free online credit available for 14 days without any interest.
What about the interest rate? Like personal loans and credit cards, late payment will incur an interest to you.
Sounds interesting! Where all can I use this online credit? You can use ePayLater credit to make online purchases like booking a railway ticket on IRCTC, shopping on Flipkart / Amazon, booking a movie ticket or even ordering food online. You can also use this credit to shop at any offline store by scanning a Bharat QR code and making a payment.
So, now that you are all updated with the credit options at your disposal, why not give digital credit a shot?
Experience the power of true convenience!
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