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Consumer durable loans and rural markets

The rural consumer durable market was roughly 35 per cent of the overall $10-billion market in 2014-15 and has been growing every year. This, in turn, will boost the consumer durable lending business in the rural regions as people would want to embrace technological advancements, yet not eat into their life savings, writes Devang Mody, President, Consumer Business, Bajaj Finance
Consumer durable loans and rural markets

The Indian market has come a long way over the last decade. From lifestyle to consumer durables, the number of new, innovative products hitting the market is at an all-time high. The rural markets aren’t left far behind in the race with rural consumers aspiring to purchase branded, high quality products in turn making this market the new hub of consumer durables in the country. Today, rural India accounts more than 50 per cent of India’s GDP and is bigger than the urban market. Businesses expect rural markets to grow faster than the urban consumer markets. In fact, a recent study has established that rural consumers are better networked and have a tendency to proactively seek information via multitude sources so as to be better informed while making purchase decisions.

Foray into rural market
So how’s the consumer durable business making foray into more than 6,50,000 villages comprising India’s hinterlands? The rural consumer durable market was roughly 35 per cent of the overall $10-billion market in 2014-15 and has been growing every year. With the government of India now allocating over Rs. 8,200 crore for rural development, these markets will observe an upward trend. The demand for consumer durables such as refrigerators, two-wheelers and consumer electronic goods will further rise as the government is making strategies to capitalise considerably in rural electrification. Also, the wider reach of media and telecommunication services is providing information to rural consumers and influencing their purchase decisions. Hence, rural consumers are now evolving towards a broader notion of value provided by products and services; involving additional aspects of price combined with utility, aesthetics and features, and not just low prices.

With the government’s ‘Digital India’ initiative gaining momentum, we can now expect consumers in rural India to embrace online purchases and drive consumption digitally. This necessarily translates into more aspiring individuals wanting to purchase smartphones and computers leading them to stretch their budgets for such buys. This, in turn, will boost the consumer durable lending business in the rural regions of the country as people would want to embrace technological advancements, yet not eat into their life savings. However, this brings us to the most crucial question, are they well informed about what consumer durable loans can be availed for and how can they get the best deal in the market? Doubtful!

Let’s figure out the basics of a Consumer Durable Loan and its different types, along with some tips to help you make the most out of your durable purchase.

What is a Consumer Durable Loan?
A Consumer Durable Loan is a revolutionary financing option available to individuals who are looking to improve their lifestyle without compromising on their savings.

At present, there are three main types of Consumer Durable Loans available.

Durable Finance provides finance to cater your consumer durable needs like the purchase of ACs, refrigerators, LED TVs, microwave ovens, washing machines and other household products.

Digital Finance helps you purchase smartphones, tablets, computers, laptops and other digital products.

Lifestyle Finance helps you purchase household items like furniture, fitness equipment, modular kitchen, watches, and much more.

Choosing the best option
Almost every retailer you visit has a variety of payment options available. While some offer you an EMI financing option, others expect you to pay upfront. Your mode of payment also has a direct effect on your finances for at least a few subsequent months.

If you choose to opt for consumer durable finance to fund your purchase, here are some of the key things you should be looking out for.

● Services offered
You will have to conduct an extensive research to find a financial institution that offers you a loan with benefits like instant approvals, minimal documentation and prompt service. The lender you are opting for needs to be proactive and should respond to your queries within a period of two days.

● Rate of interest
You should always be mindful of the rate of interest on the loan you are getting. So, before accepting the offer that comes your way, make sure to get quotations from 4-5 different lenders and compare the interest rates offered by each of them. This will help you choose a lender who offers the lowest rate of interest, thereby saving you a considerable amount of money which would otherwise be spent on paying interest.

● Tenure of the loan
The ability to repay a loan differs from person to person and the obligations they’re required to take care of. This is why you should check for the minimum and maximum tenure options of a loan before taking one. Some institutions offer fixed tenure loans, which can range from 3 months to 24 months. However, you need to consider your repayment strategy before choosing a tenure.

● Down payment
Before you finance your purchase with a consumer durable loan, you are expected to pay a certain amount of money as down payment, after which the lender covers the rest of the cost. Determine the amount you can pay as down payment. Generally, you are required to pay 10 per cent to 25 per cent of the total loan amount as down payment, but there are financial institutions that offer a zero down payment option too.

● Buy the right product
Use a consumer durable loan only for procuring durables that will keep you satiated for at least 2-3 years, as consumer durables come with a high cost of replacement. Take for instance the case of electronics, their value depreciates faster and their resale value is quite low. This is why you should carefully consider your decision before buying a durable product because you can’t replace the product time and again.

● Time Matters
It is essential that you clarify the due dates and the EMI amount that you’ll have to pay, from the retailer. This will help you manage your expenses better.

If chosen wisely, a Consumer Durable Loan works out to be less expensive and is a much safer option for your finances as it doesn’t come with the high-interest rate of a credit card or a Personal Loan.

Author: Devang Mody, President, Consumer Business, Bajaj Finance

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The Changing Face of Rural India