Other loan options also exist. Says Adhil Shetty, CEO, BankBazaar: “Traditionally, credit cards have enabled users to opt for purchasing products on EMIs at no extra cost or documentation through an EMI on-call or EMI options offered by specific merchants. Today, you have the option of an EMI card as well. The EMI card is a pre-approved loan where the EMI starts only after you have used the card to buy a product.”
Source: MB Wealth Solutions
Should one break an existing fixed deposit or units of mutual funds? Says certified financial planner Nirreen Mamaji: “Redeeming an investment could be a bad strategy since the mutual fund units may have been purchased at lower NAVs. By not staying invested you might lose out on further gains.” Long-term returns from equity mutual funds can be above 10 per cent. Similarly, breaking an FD that pays 8 per cent to get a discount worth 5 per cent may not be worthwhile. On the other hand, if you withdraw money from a savings account, which pays 3 per cent, to earn a lumpsum discount of 5 per cent, that could be a good decision.
In some cases, it makes sense to go for a no-cost EMI if that means you don’t have to break an investment, even if you have to forgo the small discount available on lumpsum payment. Thus, a cost-benefit analysis needs to be done before choosing an option.
Experts have two suggestions regarding taking a loan to make a purchase. One, when you take a loan, there are always costs attached, though they may be hidden. Says Bengaluru-based financial expert Mrin Agrawal: “It is always better to save and buy a product instead of taking a loan. There is always an interest component in a loan though it maybe camouflaged.” And two, experts are currently advising against all forms of debt. Says M. Barve, a Mumbai-based financial advisor: “In a time like this, when the markets are tanking, the economy is slowing down and jobs are at risk, taking on additional debt should be avoided.”