Buying a Laptop on EMI with a Limited Credit Card: A Comprehensive Guide
Many of us find ourselves in a situation where we want to purchase a laptop significantly higher than our credit card limit. For example, you have a credit card limit of 20,000 but you are interested in purchasing a laptop priced at 70,000. This article will guide you through the process of making such a purchase through Equated Monthly Installments (EMI) and highlight important considerations you need to keep in mind.
Understanding Your Credit Limit
Despite having a credit limit of 20,000, you can still make a large purchase like a laptop worth 70,000 through EMI. However, this involves a few critical steps. The initial requirement is to ensure that your credit card issuer is willing to allow you to exceed your credit limit. Additionally, you need to have sufficient available credit to cover the amount you wish to spend.
Exploring the EMI Option
Many credit card companies offer an EMI option for purchases that go beyond your card limit. This is designed to allow you to pay for a larger item over several months, spreading the cost and making the payment more manageable. To take advantage of this, you should check with your bank to confirm that it offers the EMI option and if this specific purchase is eligible for such financing.
Down Payment Considerations
Some credit card issuers might require a down payment for large purchases. This means you will need to pay part of the total cost upfront to proceed with the purchase. It is essential to inquire about the down payment requirements before proceeding with the EMI arrangements.
Approval Process and Credit Worthiness
The bank will evaluate your creditworthiness as part of the EMI approval process. They will check your credit score and payment history to determine if you qualify for the extended payment option. Maintaining a positive credit score and a good payment history will increase your chances of approval.
Exploring Alternative Financing Options
If your credit card cannot handle the required purchase amount, consider alternative financing options. You could apply for a consumer durable loan from reputable financial institutions such as Bajaj Finance, IDFC First Bank, HDFC Bank, Home Credit, or other similar entities. These loans typically offer zero-cost EMIs, making them an attractive alternative.
What Happens When You Make an EMI Purchase
When you make an EMI purchase using your credit card, the entire transaction amount is initially debited to your account. After a certain period, the initial amount is reversed, and you are only charged the down payment. Several factors come into play during the EMI process:
Principal amount (the original purchase price minus the down payment)Interest component (charged on the remaining amount)18% GST (Goods and Services Tax) on the interest componentAfter the billing cycle, you will be charged:
Principal amountInterest component18% GST on interest componentOverutilization of Your Credit Card
Even if you are able to make the purchase, it is important to avoid overutilizing your credit card. Exceeding your credit limit regularly can adversely affect your credit score and lead to higher interest rates and penalties. In the given example, if your credit card limit is 60,000 and you try to make a purchase of 66,000, your card may get declined. Alternatively, you can increase your credit limit by contacting your bank, but this is not always an option or may come with additional fees.
Conclusion
In conclusion, while it is possible to buy a laptop worth 70,000 on EMI with a credit card limit of 20,000, there are several important considerations to keep in mind. Ensure you have the necessary available credit, consider exploring EMI options, and be prepared to make a down payment. Additionally, evaluate alternative financing options and ensure your credit score remains healthy to maintain a good financial standing.