Getting married? Don’t do it on credit
MUMBAI: The wedding season is about to start this week. Besides the celebration, wedding also means expenses.
“The wedding season starts from November. This time, February is going to be a busy wedding month,” said Sandeep Lodha, founder and chief executive officer, Weddingz.in, an online wedding platform, which recently got acquired by Oyo. According to Lodha, the number of guests at a wedding reception has been declining. “We are seeing this trend for the past three-and-a-half years. People are now spending more on quality and not on quantity. When we started the business, there were people with a guest list of 500-600 people. Now that has come down to 300350 people. Hence, smaller halls are doing more business than bigger ones,” said Lodha.
However, the fall in number of guest doesn’t mean the costs have come down. “Though the guest list is declining, money is being spent on quality. Also, the number of functions has increased. In the old times, people would organise a sangeet at home and a reception at a hotel. But now, there are bachelorette parties, bachelor parties, cocktail parties, mehendi parties along with sangeet and receptions,” said Lodha.
Wedding is an extravagant affair. While some fund their weddings with their investments, some take help from their family or opt for loans.
COST OF TAKING A LOAN
To fund your wedding expense, you can get loan either from a bank or a non-banking finance company (NBFC). There are broadly two types of loans—secured and unsecured loans. An unsecured loan is a personal loan where you don’t have to provide a security. Many financial institutions also label it as wedding loans. Wedding loans are nothing but personal loans. The interest rate ranges between 12% and 24% per annum depending on the bank, your credit score, eligibility, income, tenure and the loan amount. You can get a loan for up to seven years and the amount can go up to ₹15 lakh. You also have to pay a processing fee of around 0.5%-3% of the loan amount. You many also have to shell out other administrative charges.
In case of a secured loan, you will have to provide a collateral in the form of your property or gold. You can also get loan against your investment. However, the amount will depend on the loan to value ratio and on the financial institution. The interest rate will be lower than a personal loan. It can range between 11% and 16% per annum. You will have to pay other charges such as a processing fee and administrative cost.
Some also put the expense on their credit card. You have the option to convert the cost into EMI where the interest rate would range between 16-22% per annum. However, if you default on the payment of the credit card amount, your interest rate can range between 24%-44% of the credit card outstanding.
SHOULD YOU TAKE CREDIT?
Financial planners don’t recommend taking a loan for weddings. Ideally, you should start saving and investing for your wedding needs in advance. To begin with, get a rough idea of the kind of wedding you want. Ask your friends and family for an estimate cost. Then start saving and investing. Depending on your risk appetite and duration of the investment, opt for a mix of equity and debt instruments. If it is a long-term goal, you can park your money in equity. If it is a short-term goal, go for liquid, short-term or ultra-short term funds. Also avoid taking money from other funds such as retirement corpus.