Festive buying: Should I purchase consumer appliances like laptops, ACs, microwaves on personal loans?

Should I buy consumer appliances like refrigerators, ACs, and washing machines on personal loans or credit cards, or NBFC platforms? My question is: does it make sense to use personal loans for depreciating assets like appliances, or should they be reserved only for emergencies? How should one balance convenience with long-term financial health?

Advice by Dev Patel, Quantitative Research Analyst at 1 Finance

It's generally not advisable to use personal loans or NBFC platforms to buy consumer appliances such as refrigerators, air conditioners, and washing machines. While credit has become easily accessible through personal loans, credit card loans, NBFC platforms, No Cost EMIs, and ”Buy Now, Pay Later" (BNPL) options; that doesn't mean you should take on debt for these purchases. Such expenses should be planned for in advance. Spontaneous purchases often lead to seeking last minute, instant credit, which isn't free. Instant credit via personal loans or NBFCs typically comes with high-interest rates, ranging from 12% to over 30%, and often includes rigid prepayment or foreclosure terms with a 3%-5% penalty.

Purchasing consumer appliances on a credit card is less discouraged, as you can earn rewards and instant cashback. However, this requires the discipline of making timely repayments before the due date. Converting these large purchases into a credit card loan is not recommended. Aside from processing fees, credit card loans attract an 18% GST on the interest component. Additionally, credit card loans levy foreclosure charges of 3%-5% (+18% GST on the penalty) while some may not allow for foreclosure.

Personal loans and other forms of credit shouldn't be your primary source of emergency funds. The thumb rule for an emergency fund is to have a liquid corpus equivalent to six months of your expenses and EMIs, though the actual amount can vary based on your financial situations and life circumstances. To balance convenience with financial well-being, it's wise to consult with an unbiased, qualified financial advisor who will not mis-sell you instant loans but help you plan for such expenses and emergencies beforehand

No-cost EMIs on credit cards

No-cost EMI schemes are gaining immense popularity in India, particularly during the festive season, as consumers flock to buy premium products without paying the full price upfront. The facility allows customers to split large purchases into convenient monthly instalments without explicitly bearing interest, making high-value items appear more affordable.

E-commerce giants like Amazon and Flipkart, along with retail chains, have tied up with leading banks such as HDFC Bank, SBI, and ICICI Bank to push these offers. On the surface, no-cost EMIs look attractive, but financial experts caution that the “no-cost” tag can be misleading. In reality, the interest is often absorbed by merchants or built into the product’s price. Additionally, some banks levy processing fees of 1–3%, further eroding the benefit.

The Reserve Bank of India (RBI) has also flagged concerns, warning that such schemes may violate fair pricing norms by disguising hidden charges.

While advantages include smaller, manageable payments, quick approval, and flexible repayment options, the drawbacks are equally significant—hidden costs, risk of overspending, and potential damage to one’s credit score if payments are missed.

In short, no-cost EMIs can be useful for funding big-ticket purchases, but only if consumers read the fine print and borrow responsibly.