The October-December festive season brings expenses across clothing, electronics, travel and gifting. Credit cards, personal loans and pay-later products allow consumers to spread payments over time, but smaller instalments can also influence spending decisions and add to future financial commitments.
The key is to assess not just whether a monthly instalment appears affordable, but also the total cost of the purchase and its impact on the household budget.
Bhargav Errangi, founder of fintech and commerce platform POP, said splitting a ₹3,000 purchase into three instalments of ₹1,000 could help younger consumers manage festive shopping alongside everyday expenses. However, smaller payments may also encourage consumers to consider more expensive products or increase the size of their purchases.
The distinction, he said, is whether payment flexibility helps consumers complete a planned purchase or pushes them beyond their original budget.
How to assess EMI affordability
Kundan Shahi, founder of loan repayment and settlement platform Zavo, said consumers should account for overlapping instalments and existing financial commitments before opting for credit. Several individually manageable payments can add up to a substantial monthly outflow.
Mahesh Shukla, founder and CEO of fintech company PayMe, suggested keeping total monthly EMIs, including existing loan repayments, within 40-50% of take-home income, with a lower limit for those with irregular earnings or dependants. This is a rule of thumb, rather than a universal affordability threshold.
Consumers should also consider essential expenses, savings and income stability before taking on fresh repayments.
What should consumers check before opting for EMI payments?
- Total cost: Check the interest rate, processing fees and other applicable charges, rather than comparing only monthly instalments.
- Repayment tenure: A longer tenure may reduce the EMI but increase the total interest paid.
- Existing obligations: Include current loan EMIs, credit card dues and other recurring expenses.
- Payment terms: Check instalment dates, late-payment charges and the consequences of missed payments.
- Future income: Ensure repayments remain manageable even if expected income is delayed or irregular.
Credit cards, personal loans and pay-later products have different repayment terms. Paying the full credit card bill by the due date generally helps avoid interest on ordinary retail purchases, subject to the card’s terms. Revolving a balance or converting a purchase into an EMI can involve interest and charges.
Shahi said consumers should assess their repayment capacity and credit profile before borrowing, while Errangi emphasised the importance of understanding the complete payment schedule before making a purchase.
Ultimately, payment flexibility can help distribute festive expenses over time, but it does not reduce the underlying purchase cost.
Consumers should ensure that repayments do not compromise essential spending or create financial pressure in the months after the festive season.