It’s that time of the year again. The festival season is just about beginning. Indian festivals are all about dressing up, decorating one’s home, meeting friends and family and exchanging sweets and gifts. While we prepare for the upcoming festivities and gear up to enjoy all the fun and frolic, it’s important to remember not to overspend.  

Here are some ways you can manage your finances wisely during this festive season:

1. Set a budget in advance- It is advisable to set a part of the household annual budget for festival expenses. You should have an estimate of your monthly expenses and based on the money left over from your monthly expenses, prepare the festival budget for entertainment, presents, home décor, etc. Once you have a budget you are in control of how much to spend and if need be, can always scale back.

•  Prioritize your spending- During the festive season, it is natural to want to buy new things, gifts or things for the home. It is important to prioritize. Make a list of the things you want to buy or do. Depending on your budget then prioritize your expenses. Non-essential purchases can wait. It is important to remember that we cannot always have the best of both worlds. A little bit of adjustment does prove prudent in the long run.

• Look for offers and discounts- Most brands and e-commerce portals have special sales, offers during the festive season. These could be in the form of heavy discounts, cash back offers, zero cost EMI’s etc. While it is a great idea to use these, one must be careful as to not purchase things that one does not need.

• Avoid shopping on credit- It is preferable to avoid shopping on credit. However if you do need to use your credit card, make sure you don’t overspend. Whatever amount you use on your credit card should be available in your bank account before your bill is due. During this period there are a host of personal loan offers available for buying appliances, gadgets and a variety of other things. Like credit card financing, personal loans should be the last resort when making any purchases. Remember, even zero-equated monthly instalment (EMI) purchases need to be paid off in a regular manner, and failure to pay on time could land you in a debt trap.  

• Don’t compete/compare- Sometimes as humans we all have a tendency to compare ourselves to our peers. It is important to remember that each family/ person has a different income and priorities. By comparing oneself with others and how they live their life, one is only bound to get in a debt trap and be miserable. Live your life based on what you can afford and not for others.

Conclusion

Festivals are meant to be a joyful time and not one of financial burden. If you do not want to spend the months after the festivities in worrying about loans and insufficient bank balance, spend wisely during the festival season. A little bit of financial discipline will go a long way in being stress free.

Loans and revolving lines of credit are two different ways that individuals and businesses borrow money from lenders. Understanding the difference between the two is critical in being able to decide which is the right one for your situation and how it will affect your credit in the long- term. 

A revolving line of credit is a type of credit that can be used repeatedly up to the approved limit until the account is open and the payments are regular and on time. Unlike a loan, the borrower has continuous and repeated access to the line of credit while it is active.

A term loan on the other hand is a non-revolving line of credit, which means the borrower has access to the entire funds only at one time and subsequently pays the principal and interest as per the monthly payment schedule.

Revolving Line of Credit versus Non- Revolving Line of Credit or Traditional Loans

Revolving Line of Credit	Traditional Loan
Preset borrowing limit which the borrower can access any time, pay back and borrow again.	Borrower has access to the entire amount approved in one lump sum.
Credit can be used for any purpose.	A loan is usually taken for a specific purpose like purchase of a car or home or education.
A RLOC tends to have a higher rate of interest than a traditional loan.	Interest rates tend to be lower.
Interest is charged only on the amount withdrawn.	Interest is charged on the lumpsum amount whether used or not from the start of the loan.
Typically used for smaller expenses if a tight cash flow situation arises.	Mostly used for large purchases like a home or car.
An RLOC typically doesn’t need a collateral, especially if the account holder has a good history of business txn and creditworthiness.	Loans can be secured or unsecured. Secured loans may come with lower interest rates but need collateral.

How do I know which product is better for me?

When shopping for credit, it is important to consider your unique situation- your needs, financial goals, ability to pay back etc. You will also want to compare interest rates, additional fee and repayment terms. 

If you need money for a large purchase such as equipment or real estate, a term loan maybe the best option for you. On the other hand, if you need access to funds for working capital or to pay salaries for example, a revolving line of credit would be a better option. 

Conclusion

An RLOC (overdraft) facility is a flexible credit line linked to a business month on month, allowing for short-term borrowing and repayments, while a loan provides a lump-sum amount for specific purposes, repaid in fixed installments over a defined period. The choice between the two depends on the individuals’ financial needs, situation, and preferences. 

Both types of credit can be useful depending on the situation. Make sure you choose the option that is best suited for your purpose. Whether you choose revolving or nonrevolving credit, carefully consider the terms and borrowing cost and stick to the repayment agreement so you do not hurt your credit score. 

MyShubhLife provides loans as well as effective plans of revolving line of credit that can be availed by customers from our partner companies depending on their requirements (Fino Payments Bank, PineLabs, MobiKwik, Spice Money and Easy Pay). There is a daily and a weekly revolving line of credit that can range from Rs.3000 – Rs. 5,00,000 to be utilized for your needs. 

Log on to www.myshubhlife.com or download the MyShubhLife app to know more. 

Personal loans are a quick way to cover large and sometimes unforeseen expenses. Borrowers apply for personal loans for various reasons such as wedding expenses, medical emergencies, home renovations or an educational fee requirement. When an applicant applies for a loan, like any other form of credit, a lender will typically check the applicant’s credit worthiness by looking at the credit history and credit score. 

What if you have never taken a loan or don’t have a credit card? This means you probably don’t have any credit history. 

What is Credit History?

Credit history is the record of loans taken and repaid by a person. Every time you avail of any credit like a loan or use your credit card, a record of your transactions is maintained. This includes the type of loan/ credit you took, the number of repayments made, whether the repayments were made on time etc. It is essentially a record of all the details on how you have managed your credit. Whether it is how many credit cards you have, what type of loans have you taken or whether you pay your bills on time. 

Companies collect information about your credit cards, transactions, bill payments and loans from the credit bureaus. This information is then put together to create your credit report. It is this record that is verified and looked at when you apply for a loan. 

What if one is in need of a loan but has no credit history? Fret not! The good news is there are still options. While maintaining a healthy credit score is important, not having a credit history or credit score is not necessarily a deterrent in getting a loan. 

What does it mean to have no credit history? 

When a person applies for a loan, lenders check their history to find out previous loan repayments records to assess whether the applicant is capable of making loan repayments. This helps the lender to gauge the applicant’s eligibility. 

Having no credit history means that a person has never been in the formal credit system before. It means that their day to day transactions are done in cash. 

 Although having no credit history makes applying for a loan difficult, it is not impossible. Thanks to developments in technology and alternate data available, lenders are no longer reliant on traditional lending practices. However, it is in an individual’s best interest to use digital banking to do every day transactions and build a credit history. 

Here are some important steps one can take to build credit history:

1. Open a bank account if you don’t already have one.
2. Pay your utility and household bills on time from your bank account.
3. Open an FD in a bank. 
4. Apply for a credit card once eligible.
5. Use your credit card judiciously but regularly. 
6. Make timely and full payments on your credit card. 

Why is Credit History Important?

Having a credit history makes it easier for an individual to get a loan or credit card. The longer your credit history, the more accurate lenders can be in determining the level of risk they take on when lending to you. 

Be patient. Credit history is not built in a day. Make sure you are regular with your payments and pay the total amount due every month before the due date. With perseverance and discipline, it is possible to build and maintain a healthy credit score. If you wish to build and have a good credit score, make sure you use credit responsibly and appropriately.