Planning a big fat Indian wedding? Here is what you should keep in mind while opting for loan

If there is a market in India that is recession proof, it is the big Indian wedding market. According to a KPMG report, the industry was estimated to be around $40-50 billion in 2018 and continues to grow rapidly at a rate of 25-30 % annually. It is currently driven by high-profile planners and aspirations of the youth. The report stated that a luxury wedding in India could cost anywhere between Rs 2 crore to Rs 25 crore. In most cases, it is not possible to pull off a big fat Indian wedding without opting for a loan. Even if you are planning not-so-big-a-wedding, chances are you might end up borrowing money. This where most people make a mistake by miscalculating the finances or by being ignorant. 

Aditya Kumar, Founder & CEO Qbera.com told Zee Business Online whether it’s the venue, guest list, menu, attire or jewelry, everyone wants their special day to be perfect. "But amid the hurly-burly of a ‘grand’ wedding, we often overlook an important aspect: the finances. Yes, your wedding can burn a hole in your pocket if you end up overlooking the financial aspect. While wedding loans can be a good option, it certainly requires a degree of planning," Kumar said. 

How to finance the big fat Indian wedding?

Kumar explains that you should start by preparing a budget and sticking to it. "Even before you apply for a loan, it is really important to have a budget ready. Once the funds are disbursed, make it a point to ensure that you stick to this budget," he said. Doing this will make sure that your expenses are under control.

Once you know how much money is needed to fund the wedding, you can opt for a loan. Sandeep Bhardwaj, Chief Sales Officer, Angel Broking Ltd told Zee Business Online, "Most banks offer personal loans for various requirements including to meet wedding expenses for someone in the family."

What factors to keep in mind

Repayment Ability - While you may want to have a grand wedding, it is equally important to make sure that the loan amount doesn't affect your finances in the long run. Kumar suggested that you should check your repayment ability before opting for the loan. "Everyone wants their wedding to be special. But there’s absolutely no point in applying for a loan that’ll be a major hitch in the long run. So, check your monthly salary, consider your expenses, and only apply for the loan if you can clear your debts on time," he said. 

Don't use credit cards - It seem a good idea, but using credit cards to fund your wedding may come back to haunt you. "Avoid funding all your wedding purchases with credit cards since they come at a cost of nearly 35% per annum if not repaid on time and the costs can compound rapidly over time. It is also a negative mark on your credit score and may impact your future borrowings," Bhardwaj warned.

Reduce tenure - One of the best ways to limit the expenses is by reducing the tenure. Bhardwaj explained that since personal loans are high cost loans, try to keep the tenure as low as possible. "Longer term loans may look optically attractive due to lower EMIs but they entail higher interest payouts. Try and repay wedding loans in a period of 1-2 years at the maximum," he said.

Kumar was of a similar opinion and said, "Longer tenures go hand in hand with a higher interest payment. So, while choosing a wedding loan, always opt for the shortest available tenure."

Keep interest rates under check - Kumar explained that some borrowers are tempted by lower interest rates which are fixed rates and often translate to much higher rates under the reducing balance rate structure. "Very often, unsuspecting couples get lured by lenders claiming to offer the lowest rates in the market, deeming them to be economical. These are usually fixed rates that translate to much higher rates under the reducing balance rate structure (note: the reducing balance rate is the real rate that reflects the real cost of borrowing). So, while zeroing in on a loan, know your real rate of interest!" he said.

Take loan against assets - An alternative to personal loan would be taking loan against security of assets offered. "A better way to approach loans for weddings would be to take loan against security of assets offered. For example, you can get a loan against your equity, mutual fund holdings or gold at a much lower cost than personal loans," Bhardwaj said.