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Festive Sales: Easy Credit Can Lead to Debt Traps, Warn Experts
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Moneycontrol•01-10-2026, 17:52
Festive Sales: Easy Credit Can Lead to Debt Traps, Warn Experts
- •Festive sales offer deep discounts, instant loans, and no-cost EMI options, making expensive purchases seem affordable, but can quickly stretch household budgets.
- •Consumers should calculate their total EMI-to-income ratio, including all existing and proposed EMIs; if it exceeds 35-40% of take-home pay, the purchase is likely unaffordable.
- •Stress-test finances by assessing ability to make payments if income drops by 20% or unexpected expenses arise, and maintain an emergency fund covering at least six months of expenses.
- •Multiple small EMIs can collectively become a significant burden; watch for signs like paying only minimum credit card dues or using credit for routine expenses.
- •No-cost EMIs may still involve interest offset by merchant discounts, GST on interest, and processing fees; compare total EMI outflow with upfront cash discounts.
Key Questions Answered
According to financial experts, a borrower's total EMI-to-income ratio, which includes home and car loans, credit card EMIs, and any new proposed EMI, should not cross 35 to 40 percent of their monthly take-home pay.
Warning signs include paying only the minimum due on credit cards, taking out a new personal loan or card to service old debt, using credit for routine expenses like groceries and rent, missing payments, and watching credit scores fall.
No-cost EMIs are not always entirely free. Card-based no-cost schemes can involve hidden interest offset through merchant discounts, while processing fees and GST may still apply on the interest component.
