Cash crunch on Diwali shopping? Check out interest-free options to meet expenses

• Buy now pay later fintechs may lend you a couple of thousands interest-free
• If more money needed, borrow from lending fintechs
• These platforms also offer cashbacks and discounts from merchant partners
• The credit limit depends on the credit assessment by fintechs
• Payment after due date attracts penalty; on further delay account gets blocked
• Be careful against fraud as you apply for loan from a fintech  

Prolonged lockdown, subsequent restrictions on movement and self-precaution may have prevented many from their usual shopping this year, the festivities around Diwali are now making them go back to their long-held shopping list. While some people have enough savings, others may fall short of funds. So, what are the best options to fund your shopping list?

Some people do resort to bank credit cards to purchase items during festivals. But, not all are eligible for it. If you have to buy Diwali gifts, home decor or clothes etc, but low on cash for a short duration, there are fintech players to offer you a credit line. Discounts and cashbacks are added advantages as you transact through fintech platforms.

"During this month the expenses go up and budget constraints happen. There comes the need for the balancing of budget. We help our users to buy now and pay later after 15 days or so. We also give cashbacks, while our merchant partners such as Zomato, BigBasket, Koovs and Curefit offer discounts. There could be 5-20 per cent discount via merchants," says Nityanand Sharma, CEO and Co-founder of Simpl Technologies.

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Simpl, Lazypay, ZestMoney and FlexPay are some of the options that let you buy now and pay later. However, these options will mostly come with a credit line of a few thousand depending on your creditworthiness. If you have to buy something more expensive, you may have to reach out to lending fintechs such as MoneyTap, LoanTap, InCred etc.

"If you are looking for liquidity support for a relatively short time of 30-45 days, you should prefer to buy now pay later. These loans give you the flexibility to decide whether or not to avail a loan at the end of the interest-free credit period. However, if the customer is clear that he will need funds for a longer period of time, then he should compare the two schemes and opt for the one which has a lower effective interest rate and favourable loan terms," says Shalini Gupta, Chief Strategy Officer, MyLoanCare.

How does it work?

When you sign up on these platforms, they check your credit-worthiness based on their credit assessment tools and assign you a credit limit. For example, Simpl uses mobile data that they receive from the downloader app and the merchants. "As you download Simpl, we would know your location and what phone you have along with other behavioural data. Based on this we assign you a credit line of Rs 2000-3000 to start with and as you build your impression, your credit limit goes up," says Sharma of Simpl.

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LazyPay uses analytics to understand a consumer's background, get insights on their purchase behaviour and determine affluence levels. "Combined with strong analytics, technology and risk management capabilities, we provide small-ticket credit for purchases ranging from Rs 500 to Rs 9,999," says Anup Agrawal, Business Head, LazyPay.

Although there is no interest rate on the credit, you may have to pay a penalty if you make delayed payments. "The billing happens once in every 15 days, that is, on first and fifteenth of the month. We give them five-day buffer period, beyond which they have to pay Rs 100 penalty. If the payment doesn't come, we block the account after 10 days. The account gets blocked permanently after 30 days," says Sharma of Simpl. The repayment period for LazyPay customers is 15 days. In case of an inability to repay, the users will be charged a penalty fee of Rs 10 every day, says Agrawal. "If there is a considerable delay in payment, the customer will not be able to apply for another credit line with us."

Moneytap's Credit Line product offers as low as Rs 3,000 loan or as high as up to Rs 5 lakh with flexible EMIs of 2-36 months. "We offer credit line starting from 13 per cent up to 24 per cent per annum (or 1.08-2 per cent per month). If a customer misses their payment on the 5th of every month, they are expected to pay a nominal fixed late payment charge and additional interest for the number of days they are late for as per the industry norms," says Anuj Kacker, cofounder, MoneyTap.

Discounts and offers

MoneyTap has a festive reward for its loyal customers who have a good credit history and who have been on the platform for a long time. It increases their credit limit and re-offer them lower rates of interest.

Besides, their easy financing options like zero-interest loans, credit cards, personal loans, and consumer financing options (like 'No Cost EMI' at e-commerce sites) work well for festive gifts like consumer durables, latest gadgets or home decor. "We are catering to our customers across Tier I, II, III cities and even those who are absolutely new to credit," says Kacker of MoneyTap.

LazyPay has several festive offers across categories such as food, travel, health etc. "Rs 75 cashback on Swiggy and Zomato, 15 per cent discount on AbhiBus for bus tickets to travel, or flat Rs 50 cashback on Dunzo, to name a few," says Agarwal.

Take caution

With so many schemes floating around from various fintech platforms, you need to make a judicious comparison among available options. "It is important to compare key loan terms such as effective interest rate, prepayment penalty, lock-in period before you decide to take a particular loan as these factors together affect your all-inclusive cost of taking a loan. Further, many fintech platforms offer loans on behalf of their lending partner banks and NBFCs. Ensure that you know which partner bank or NBFC is offering the loan to check the reputation and avoid any post-service issues. As per RBI guidelines, it is now mandatory for banks and NBFCs to disclose a list of their fintech platforms with whom they have partnered for giving out loans," says Gupta of Myloancare.

Besides, you need to be careful of the fraudulent payment and login links which prompt you to provide your bank details. "Be sure that you follow the basic e-commerce safety guidelines of not sharing your OTP or password with any outsider and not clicking on any payment or login link, which you don't recognise," Gupta adds.