As technology is on the go, this vibrant part of the world, a to-be-expected truth would be that the gadgets keep getting better. Humans will often need frequent upgrades of different things, be it a fridge that keeps running in the kitchen or a phone which is tucked away in the pocket. Maxime Lamp was the first to install a refrigeration system in 1852. Since the first person who invented a bright idea to preserve foodstuff from perishing using a modern cold device was Maxime Lamp, this marks a great milestone in the history of the cold chain. However, food habits, living conditions, and technology are the three factors affecting the growth of the refrigerator market. The development of nuclear families and life getting less difficult in metropolitan areas are the other two factors affecting the growth of the market (Berry, “Domestic Refrigerators,” 1956).
Now you must be thinking that the writer has gone mad by adding the sentence before this one, and there, my dear readers, is an example of train-of-thought writing! The refrigerator runs around the clock and the food remains fresh in the kitchen. I mean, isn’t it clear that a refrigerator up and down in the arrangement of the subject is still the subject? Okay then, let’s go for a more formal word and choose throughout. This way, our sentences will still be easy to the readers and sound less repetitive.
The Emergence of Consumer Financing in India
The past decade has seen the consumer credit industry reach unprecedented levels of growth in the country. CRIF High Mark’s report for the year 2023 portrays a climb of 27% annually in the category of loans being taken out for purchasing consumer durables, which is a sign that a major chunk of the Indian middle class is now seeking to buy assets within their short-term income limits though via flexible financing of electronic products and lifestyles. Small-ticket consumer loans are personal loans that are given to the customers by the lenders according to their card data. This type of loan is given by the board of banks that approves the loan to the person and sees that the funds are available when the loan terms are accepted by the borrower and certified. (Padia & Parikh, 2001) The other two reasons that have resulted in the growth of the refrigerator demand are the increase in nuclear families and the increased purchasing capacity of people in urban areas (Berry, “Domestic Refrigerators,” 1956).
It’s important to realize that the popularity of engaging in a long-term financial commitment using the cash coming in monthly, stems from the various features attached to it. Here, flexibility is as significant as convenience and accessibility in driving consumers towards a different financial decision-making approach. The study aims to identify the driving factors that result in the demand for credit from financial institutions in the context of Bangladesh. The driving factor that resulted in an increase in the demand for television and refrigerator in the fridge market was the implementation of smaller and cheaper units. … This product encourages consumers to leave their financial providers and come to use this product. (Hossamp, Rahman & Karim, 2017).
Determine Your Actual Requirement
Before you proceed to finance your next purchase, you should take a break and examine your needs thoroughly. Do you really need the product, or it is just a want? There is so much difference between the two. Taking a refrigerator on EMI because your present one is energy-inefficient and, thus, drawing higher electricity costs is a logical, direct, and honest argument. But if you go for a recent model of a phone because of no more reasons than a new phone is available, it will not make the same sense.
In a lot of Indian families, particularly those with an average income, it is a must to have the list of essentials on the top rather than a wishlist. As an example, a married couple with one child may not be able to do without a bigger, temperature-zone fridge for the storage of baby food, milk products, and vegetables for the Wholesome Week Plan. Thus, the purchase of a fridge on EMI would only be considered as a luxury expense if the couple were to qualify the fridge as a family item and not a luxury.
Evaluate the Whole Cost – Taking into Account the Monthly Instalment, and the Add-on Cost
Suppose you find a deal of just ₹1,999/month which is very appealing to you. However, how much is it going to cost you in total, and not only the amount paid monthly? The most popular mistake people fall into is the lack of consideration of the final repayment sum. Some credit offers look like the interest charged is zero, but they may contain other fees and charges, processing fees, or even those that are balloon interest which stealthily escalate the total cost of the product.
Imagine that you come across an EMI offer to fund for a 12-month period a smartphone having a price of ₹24,000. What seems to be not very expensive (₹2,000 per month) at first glance may quite probably not be the real case. 18% interest is quite a nice added value on the initial 24,000 price but then, it turns out that the final amount is almost ₹27,000 which is 13% more expensive than at the beginning.
Realizing the true amount of something is essential, particularly when it comes to handling several EMIs within the budget, e.g., home appliances, phones, furniture, and even a two-wheeler. The idea of it is a life change and not a debt sentence.
Match EMI Payments to Your Budgeting Figures
Budget in the term of an income service as well-planned financial management and control are essential. Prior to committing to any EMI, list your regular expenses, set savings targets, and make the right choice. Any more than 40% of your net income earmarked for EMIs is not recommended by the professional community. At greater amounts, you risk running out of safety margin for the unforeseen issues which might occur (level of the risk is substantial).
Well, your net monthly salary is ₹45,000. If you’re already repaying ₹8,000 (for example, for a bike, and a personal loan) adding an additional ₹3,000 for the fridge on EMI may take you to the limit of your financial strength. Then it would be better to use a cheaper model or to wait for a few months before the purchase.
Do also remember not to violate tenures as situations like having (finish the sentence on behalf of the client) and so on can lead to a quick transition from order to pandemonium. A staggered approach, though it would demand the process to run for some time prior to getting the outcomes/satisfaction, it assures you of the expected results, without fail!
Assess the Next Best Alternative Cost
Every EMI payment has a product of its own and uses up your money flow — thus you will be unable to use it in other areas. Imagine the other things that you were passing (going without). You need to think about whether you are postponing the payment of the health insurance premium. Is there a point at which you think that the school fee was not really necessary? Or have you used the emergency cash?
Opportunity cost is rarely pointed out in the EMI conversation, but it needs to receive more attention. The ₹2,500 you spend monthly on a smartphone on EMI could have gone into a mutual fund SIP or a fixed deposit for future security. There’s nothing wrong with upgrading — just make sure you’re not doing so at the expense of something more critical.
Final Thoughts: Upgrade with Intention, Not Impulse
Actually, going into debt to get whatever it may be that you seek is not wrong at all. In fact, if done properly, it can be the right financial decision to make due to it being completely beneficial. The bottom line is to be intentional about this process. Whether you are thinking of an installment plan to buy a refrigerator or a mobile device to be involved in current work situations, make sure that your choice has elements of practicality, foresight, and planning intact.
Consider EMI as an enabler rather than a seducer. It should be used as a tool to concretize your plans, and never the reverse that will dictate your lifestyle for you. In times where consumerism is portrayed in a very positive light, your power is the one that is humble, in that it lies in choices which are well-thought, are known from information available and in line with what one holds dear.
Unsure about the next upgrade? When it comes to a home or mobile upgrade, in place of the basic question, “Can I make this payment per month?” you should ask, “Does this option become a strength or weaken my life?”
With only that small change in thinking, the whole upgrade thing will seem like the best option you have ever made in your life.
