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Is Personal Loan A Good Idea To Finance A Top-Notch Smartphone?
Buying a high-end smartphone is a dream for many. It is not only an item of fancy, but the top-notch smartphones come with advanced features that can help you in your academic or professional pursuits. Be it photography or photo-editing, videography or video editing, audio recording, or gaming, a high-end smartphone offers an edge over any regular smartphone. However, most of these high-end smartphones start from a basic range of Rs. 75000. This is a huge expense that can strain your budget or drain your savings. This is where a personal loan or online mobile finance can help you. These loan options come with several attractive features like low interest-rate, flexible tenure, easy documentation, and pre-payment option, which makes them one of the most commonly availed loans.
 

Is a personal loan for a mobile phone a good option?

 
Personal loans are a great financing option, especially for products like mobile phones or laptops where the loan availed is a small amount as compared to a car loan or home loan. However, even though the loan amount is small, you must ensure that you have a proper repayment plan in place. Here are some advantages of using a personal loan to finance a top-notch smartphone.
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Unsecured loan

Mobile loans are available without collateral. You just need a good credit profile and a consistent flow of regular income to be eligible for this loan. Parents can also apply for a mobile loan for students which may come at subsidized interest rates. This financing tool is a much better option than pledging your valuable assets for a loan.
 

Flexible tenure

Choosing a longer loan term will increase the amount of interest payable. On the other hand, if you choose a shorter term, your EMI will rise, putting a strain on your finances. Personal loans for mobile phones are available with flexible repayment terms. It means you have the freedom to choose the tenure that is best for you, with no restrictions imposed by the lender. 
 
Refer to the table to understand the impact of repayment tenure on EMI and interest payable.
 
 
                                                                           Repayment Tenure
Parameters 1 Year 2 Years 3 Years 4 Years 5 Years
Loan amount Rs 80,000 Rs 80,000 Rs 80,000 Rs 80,000 Rs 80,000
Interest rate 12% 12% 12% 12% 12%
EML Rs 7,108 Rs 3,766 Rs 2,657 Rs 2,107 Rs 1,780
Interest payable Rs 5,295 Rs 10,381 Rs 15,657 Rs 21,122 Rs 26,773
Total payable Rs 85,295 Rs 90,381 Rs 95,657 Rs 1,01,122 Rs 1,06,773
 
You can see from the table above how the repayment tenure affects your total cost of the product. Hence, it is recommended that you first assess your financial situation before deciding how long you want to keep your loan account open.
 

Minimal paperwork

Previously, regardless of the loan amount, traditional lenders required you to provide a lengthy list of documents in order to secure a loan. Not only that, but after you submit your documents, you must fill out multiple application forms with similar information which made the loan application process lengthy and tedious. Even after completing all the necessary steps, there is no guarantee that the loan will be approved. Well with online mobile finance, all you need is to submit your KYC proof, an income certificate, and a scanned photograph.
 

Quick approval

Who says getting a personal loan takes weeks? Today's lenders use advanced machine learning and artificial intelligence technologies to assess the credit risk associated with your profile. This technology enables you to receive instant approval within minutes after submitting your loan application.
 

Prepayment option

The longer the tenure, the more interest you end up paying. Like in the above example, the borrower ended up paying Rs 1,06,773 for a phone worth Rs. 80000. So, if you have the capacity to pay your loan amount before the term of your loan which can be 2 years or 5 years, a personal loan allows you to do so. You can foreclose your mobile loan after paying the first twelve months of EMI regularly. But please note that pre-closure of a loan carries a penalty.
 

Improves credit score

If you are someone who has never used a loan then your credit score is reflected as ‘NA’. In such cases, opting for a mobile loan online is a smart idea. With minimum documentation needed, it is easy to apply. The loan amount is usually small which makes your repayment plan more feasible. Once you get the funds in your account, make sure to pay your EMIs on time. Closing a loan without missing any EMIs will significantly improve your credit score. This will also help you avail a larger loan in future.
 

What other options are there for mobile finance?

 
Apart from a personal loan, you can finance your smartphone using a credit card or a consumer durable loan. The specifics of these loan products are listed below. 
 
  • Credit card

    Credit cards do not charge interest if the amount borrowed is repaid on time. The credit limit offered by this debt product is determined by your monthly income and credit score. The disadvantage of using a credit card is that if you use more than 30% of the available limit, your credit score will suffer. In addition to that, if you miss an EMI, the lender will charge you a hefty monthly interest rate which is around 2-3% of the unpaid amount.
     
  • Consumer durable loan

    This loan product can assist you in financing advanced smartphones, electronic gadgets, or home appliances. It is also an easy-to-avail instant finance option. However, the disadvantage of this loan product is that it is only available for a shorter repayment period and has higher processing fees. 
     
Also Read: A Step-by-step Guide to Getting Unsecured Personal Loans


To conclude


Personal loan for mobile phones allows you to purchase   your favorite smartphone in the market without having price as a constraint. However, before applying for mobile finance, you should review your credit history and make sure that you have a solid repayment plan in place. Also, make sure to calculate your EMIs smartly so that it does not strain your monthly budget.  Before moving ahead with your loan application, don’t forget to check if you are meeting the personal loan eligibility criteria


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Did You Know

Disbursement

The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.

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