Written by Roshani Zaidi
When I was studying and working at the same time to pay my semester fee, I would almost always just save enough every quarter to be able to just pay my fee by due date. This was mostly due to my excessive shopping habits. Once though, I fell short of some funds. Now, I had the liberty of going to my father to ask for the money but I enjoyed my newfound independence so I decided to apply for personal loan. Personal Loan was the obvious choice especially when it was the only option offered to me by the sales representative. I did get the loan and that too for six times the amount that I needed. I used only the amount I needed and started paying off for the full amount of loan that I was issued (read again: SIX TIMES). Little did I know then, that I could easily have opted for Running Finance and only paid for the amount I used.
I realized, after I started banking, that one needs to have complete knowledge of products before choosing what suits his/her requirements. It is not just the rates and prices that matter, it is also the suitability. Are we being offered all products? Is there anything that can benefit better? Do I need credit card or personal loan? Or maybe a Running Finance or a similar facility secured by my savings.
Say a person needs some 100,000 to meet some immediate cash gap like paying utilities or a child’s admission fee and he gets a loan for 200,000. If he has opted for a running Finance Facility, he will only be paying back the interest on the 100,000 he used and only for the period this money is utilized for. The moment all money is paid the interest stops being charged. Running finance, also called revolving facility, is a good option as a back up cash flow arrangement that can be kept for a long period to meet urgent cash needs. The best part is that the funds stay in the account as and when needed till the maturity of the loan, which is usually somewhere around 1 to 3 years.
If you are a shopaholic like myself, and want to go on a shopping spree at the end of the month when you are low on budget, Credit Card is the best option as you don’t pay any interest on used funds as long you pay all outstanding by payment date.
Personal Loan is more suitable if the person needs the full amount of money and wants to pay back in installments for the term of the loan.
Of course, when one is busy with work, home, and hobbies; there is little time to look for and compare every feature of the variety of financial solutions offered by the many banks in Pakistan. Most banks have learned staff to help choose the Loan Product to fit your financial requirement but they can only provide you information of their particular brand only.
Internet is a great source of information if taken from a credible source. Always visit Banks’ official website to know about product features and rates. Bank comparison websites also show a variety of products offered by many credible banks along with repayment/ installments, product features, and even documentation.