Consumer durable loans have become the main gateway to formal credit for new borrowers. They accounted for 45.5 per cent of loan originations by volume among new-to-credit (NTC) borrowers in the first quarter of financial year 2026-27 (Q1 FY27), according to CRIF Highmark’s September 2026 edition of the How India Lends report. Their speed and easy availability are useful for first-time borrowers, but what they end up paying can at times be higher than the advertised cost.
Why first-time borrowers use them
Consumer durable loans give even NTC borrowers access to formal borrowing. “Low ticket sizes and minimal documentation allow lenders to sanction loans using basic know-your-customer (KYC) information for borrowers with no repayment history,” says Harsh Grover, co-founder, LoansJagat. By repaying these small loans on time, such borrowers can build a credit history.
Point-of-sale availability gives borrowers instant credit right after they have finalised a purchase.
However, these loans have a few downsides as well. A low EMI may ultimately prove uneconomical if a long tenure raises the overall interest cost. Furthermore, a single missed instalment can have a pronounced effect on the credit score of a borrower with a limited credit history.
Understand zero-cost claim
Many consumer durable loans are offered as zero-cost equated monthly instalment (EMI) schemes. Here the borrower pays no interest. “The manufacturer, merchant or platform subsidises the interest at the time of purchase,” says Santosh Agarwal, chief executive officer (CEO), Paisabazaar.
But there is no guarantee that the transaction carries no extra cost. “A no-cost EMI offer may recover the interest through a processing fee or an absorbed discount,” says Grover.
Check full borrowing cost
Interest rates on consumer durable loans vary widely across lenders, products and promotional schemes. “Rates can range from single digits for short-tenure loans to around 20 per cent or more for certain products,” says Agarwal.
The interest rate is only one part of the cost. “Borrowers should check processing fees, convenience charges, applicable taxes and prepayment or foreclosure charges because these can materially raise the actual cost,” adds Agarwal.
Do not rely on the advertised offer alone. Agrawal suggests comparing the annual percentage rate, total amount payable and all other applicable costs disclosed in the key fact statement (KFS).
Review the loan agreement for pre-closure lock-in periods and early-settlement penalties. “This will help borrowers determine whether pre-closure is an economically viable option,” says Abhishek Kumar, Securities and Exchange Board of India (Sebi)-registered investment adviser and founder, SahajMoney.com. Also check late-payment fees, penal interest rates and bounce charges.
In case of a zero-cost EMI offer, check whether the interest cost is built into the sale price. Also determine whether selecting the scheme means giving up a cash discount, exchange bonus or festival price reduction available on a full-payment purchase.
“Calculate the net effective cost by comparing the full cash price with the zero-cost EMI price,” says Kumar.
Verify lender
Run basic checks on the lender before accepting the offer. “Ensure that it is a Reserve Bank of India-registered bank or non-banking financial company,” says Kumar.
Limit the data that the lender can access. “Ensure that digital consent covers only data necessary for underwriting rather than the full device or contact list,” says Kumar.
Check the amount, frequency and validity period of the electronic National Automated Clearing House (e-NACH) or auto-debit mandate. These details should match the agreed EMI schedule and loan tenure.
Should you borrow?
A consumer durable loan may suit a first-time borrower who wants to establish a credit file. “Financing may be suitable when an EMI scheme is genuinely interest-free and does not recover the cost through discounts or fees. It may also be suitable for an essential purchase when paying cash would leave too little emergency cushion,” says Grover.
Paying upfront or postponing the purchase may be wiser when a no-cost EMI offer hides costs through processing fees or foregone discounts. The same applies when the purchase is discretionary or likely to lose value quickly, or when it would push the borrower’s existing EMIs close to the safe repayment ceiling.
Keep debt within limits
Total EMIs across all loans should not exceed 40 per cent of monthly take-home income. Count every existing EMI and the proposed EMI when applying this limit, and use net take-home income rather than gross income in this calculation.
“NTC borrowers should treat 40 per cent as the upper limit rather than a target,” says Grover. Enough headroom should be maintained for regular expenses, rent, insurance premiums and surprise expenses.
Avoid taking a second consumer durable loan before repaying a substantial portion of the first.
Act quickly after failed debit
After the lender notifies you of an upcoming debit attempt, make sure the account has enough money. If the auto-debit fails, pay manually within 24 to 48 hours and inform the lender proactively. “Clearing dues before the next credit-bureau reporting cycle may limit fees and damage to the credit score,” says Grover.
Request a waiver for a one-off failure. If you cannot meet the EMI obligation, submit a restructuring request in writing. Early action and continued communication with the lender can make such a situation easier to manage.
