When you want to apply for a loan, the first advice you will usually get is to find a lender with a lower interest rate. The lenders fulfill your financial needs by lending you the loan, but they also need profit. So, they charge an interest rate for the loan. Your EMI is calculated based on the interest rate and loan tenure. For the first few years, most of your EMI will be towards the loan interest to cover lender risk. So, if it is possible to find zero-interest personal loans in India, you must go for it.
Ideally, you don’t have to pay any interest for the amount of money you borrow. You will pay back only the principal amount. While this sounds exciting, such types of loans are not common in India. Let’s dig deeper into zero-interest personal loans and possibilities for Indian borrowers.
Are zero-interest Personal Loans Charged at 0% Interest?
The personal loans that come with a zero-interest clause are low-ticket loans that are offered to digital customers to meet their cash needs. Generally, lenders extend credit to borrowers and allow them to repay the loan in quick, zero-interest installments. NBFCs offer such types of products because traditional banks do not want to deal with the risks involved.
The NBFCs allow you to apply for a zero-interest loan online. Generally, this loan is offered at the time of purchase to buy any item of your choice without worrying about having cash in hand. You can choose the financing option offered by the lender to pay for the purchase now and pay back the borrowed amount later.
Depending on the lender, you can avail zero-interest personal loans ranging from Rs. 1500 to Rs. 10,000. Generally, lenders will disburse the money to your digital wallet or bank account to expedite the process. The application for such loans involves only a few clicks, and documents are verified online. Customers who are already registered on the lender’s platform are considered pre-approved based on their financial history. Some of the pros and cons of availing of zero-interest loans are:
| Pros | Cons |
| Cheaper than high-interest credit cardsInstant approvalBetter negotiation through lender comparisonAfford things you want sooner rather than later | Must have a good credit ratingOption available only for limited productsCauses you to take more financial riskNot reading the fine print will result in losing money |
Zero-Interest Personal Loan Caveats
The idea of getting personal loans without interest is enticing for everyone. However, such a loan product has numerous clauses that you must pay attention to. Otherwise, you will end up burying yourself in a pile of debt, affecting your financial health.
Personal loans without interest are only offered for certain types of purchases, which can vary from furniture to electronics to restaurant bills. Such offers are limited by the platforms you choose for shopping. Also, these shopping platforms have tie-ups with only one or two NBFCs, which will limit your loan options. Using a loan comparison website to look for non-traditional banks offering zero-interest loans can help you save money in the long run.
The lenders have different eligibility requirements to offer a loan without interest. Generally, borrowers with excellent credit scores are more likely to secure such loans. The existing loans, your monthly salary, and your bank account statements all significantly determine your eligibility. As lenders take a significant risk in lending money to you without interest, they will have several vetting parameters.
Even though the loans are zero-interest, it doesn’t mean that the total loan cost will be lower than that of standard personal loans. Lenders charge different types of processing charges, fees, etc, to lend you money. In that case, you may have to borrow more than you require to cover the expenses.
These zero-interest loans have strict repayment policies. Missing even a single payment or defaulting on the loan entirely can result in severe penalties that can run into exorbitant amounts. Unless you have substantial financial health, taking out loans with zero interest is not a good idea because you cannot miss any payment.
Predatory lenders can easily lure borrowers with the promise of zero-interest personal loans. Before you submit your loan application, ensure that you read the terms and conditions thoroughly.
Zero-Interest Loan Eligibility and Requirements
The eligibility requirements for zero-interest loans change from one lender to another. Generally, you must be:
- An Indian citizen
- Must be between 21 and 65 years of age
- Must have a stable income
- Must provide proof of income
- Must provide identity proof like driving license, Aadhar card, PAN card, etc.
- Must meet the monthly income requirement
NBFCs have loose requirements for personal loan eligibility. If you qualify for such loans, it is a much better option compared to other types of personal loans or credit cards. You can support yourself financially and buy the things you need using such loans. However, you must be diligent in repaying the loan and following the repayment schedule. Remember that such loans are only offered for minor cash emergencies, and so the repayment schedule extends only for a few months.
Conclusion
Many lenders use zero-interest personal loans to attract shoppers who shop impulsively and look for quick cash loans. If you are responsible, you can manage these loans effectively, and sometimes it is better than owning a credit card. However, you must be cautious here, reading all the fine print and understanding the terms and conditions before you accept the cash.
The best way to find the right lender for you is to use a loan comparison website or app. Instead of rushing to apply with the first lender who offers zero-interest personal loans, take your time to compare different lenders, their repayment plans, charges, and fees. This will allow you to find the right lender to meet your quick cash needs and be financially responsible at the same time.
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