Beg, Borrow or Loan - Finance for Hi Fi
| by AV Max
The trouble of keeping up with the times in the world of Hi-fi is that many of us can’t spare their savings as often especially during rising inflation and tax troubles. But when you read a review insisting that you beg, borrow or steal money and own this system, it’s hard to resist for the true audiophile. So, what should you do? Just give up on your passion for hi-end home-entertainment solutions or push it on the back burner. Not really, as there is definitely no need to curb your desires and you can very well own those ‘it’ purchases as non-banking financial companies like Bajaj Finserv Lending have ventured into the category of ‘high-end music solutions’. We caught up with Devang Mody, President, Consumer Business, Bajaj Finserv to know more about it.
Do you provide finances to all kinds of electronic products, particularly home-theatre products?
Of course, we do. Around six months back we decided to enter into category wherein we expanded our “Lifestyle Home Solutions” category and included Hi-fi music systems to it. The idea emanated from our intention to capture the entire “Lifestyle” category. We want to be your one-stop-solution for all your lifestyle wants.
We know that though there is enough desire for hi-end products, it does not actually convert into actual sale due to rising cost. Demand for products like hi-end music systems is constantly on the rise and so are their prices. This is where we will bail you out through our ‘0% consumer finance option’.
What is ‘0% finance option’?
0% financing in simple terms means borrowing money (here, buying products) for free. One does not have to pay any interest on the principal of the loan amount. 0% interest finance works on spot approval with minimum documentation and fast processing.
Today, 0% finance holds an over 11% share in the total consumer durables industry. Out of the total sales of over Rs 36,850 crore annually, over Rs 4,053 crores are bought on 0% interest finance. While the industry is growing at 9% Y-O-Y, 0% interest finance is growing at a much higher rate.
How does it work?
Ours is a B2B (Business to Business) to B2C (Business To Consumer) structure, wherein we tie-up with retailers and manufacturers for a fixed interest rate. A consumer can avail loans on various Hi-fi music systems by paying a very small processing fee. The benefits of these tie-ups are then passed on to the customers in the form of 0% interest finance. Thus it is the manufacturer who actually bears the cost of loans i.e. the interest. At the same time, these arrangements are beneficial to the manufacturers as such schemes enable them to promote their product more effectively. All the customer needs to do is choose their desired product and approach the in-store representative for loan approval. The customer will have to fill up a simple application form, provide KYC proof (salary slips or any other income proof, ID/address proof) to avail the loan.
What are the maximum and minimum loan amounts and what are the interest rates?
A consumer can avail loans ranging from Rs 7,500 to Rs 5,00,000 and above on various audio systems. While a consumer will get spot approval for loan—upto Rs 3 lakh to Rs 5 lakh, approval for loan above Rs 5 lakh may take a week or so. The consumer will have to pay 20-30% per cent of actual cost of the product. As far as interest rate is concerned, it all depends on how much the retailer wants to bear. This is because we will be paying to the retailer on behalf of the consumer.
As you said, Bajaj will be paying to the retailer, whom and how does the loan applicant payback?
We allow consumer to choose from a range of loan tenors, varying from 12 to 18 months. This brings down the cost of ownership and also helps the customer to upgrade. For example, if a person had a budget of Rs 1,00,000, in case of a cash-down option, he would have managed to get a Marantz and Boston Acoustics (CD-Amp combo with bookshelf speakers). With 0% interest consumer durable loan, he can now trade up to a Denon and Dali (CD-Amp combo with floorstanding speakers) for around Rs 1,50,000 and bridge the gap with the 0% interest consumer durable loan. What’s more? He may choose to pay down an even lesser amount than Rs 1,00,000 as the down payment and keep the rest as his savings. Once you make the down payment, the remaining amount is divided into equal monthly installments (EMI), through ECS facility from your desired bank account.
Can you name the retailers who you have a tie-up with?
Currently, we have a tie-up with ProFx Entertainment. Through them we have been providing finance to the consumers who are keen to buy hi-end audio systems. Thus, 0% interest loans benefit the manufacturer’s, dealers and consumers equally by not only increasing purchase through increased footfalls but also helping consumers in pre-empting the purchase of expensive products which they would have forgone or delayed for availability of cash. We are in discussion with other retailers as well and will soon have many more tie-ups.
Besides Profx, have you tied up with any other Hi-Fi distributor?
As I already told you, we wanted to get into customer centric diverse finance options. We didn’t want to limit ourselves to only certain lifestyle products. With ProFX, we have stepped into Hi-end music solutions arena. More such partnerships are into the final stages of discussions. The audio visual industry is one of the fastest growing industries. With changing socio-economic gamut, the customers aspire to enhance their lifestyles. So, it was a natural move on our part.
Owing to RBI regulations, many banks have stopped providing loans for consumer products. What way has Bajaj found to deal with it?
The RBI regulations with respect to providing loans for Consumer products was specifically for banks due to the advent of base rate regime. RBI has not defined base rate for NBFC sector and therefore are not affected with it. It is also a fact that most players did not find the business lucrative due to the high volumes and lower ticket size leading higher Opex. Such businesses require innovations in processes & operations which we have been to able to implement successfully.
How would this 0% finance affect the customer’s credit score?
The 0% finance is a loan to customer just like they would take a personal loan or housing loan. We take similar credit exposure on the customer, only at a smaller value. The installment payment history is sent to the credit bureau, which analyses the input and adjusts the credit score of the customer. Customer credit score improves if customer services any loan without defaults. Hence, in case of consumer loan, if customer services loan without defaults, the score stands to improve.
Does Bajaj consider my credit score before approving my loan?
We consider the credit score of the customer before approving the loan. The credit score is a reflection of customer’s behavior towards financing and provides inputs on his prudence. Most of our customers, who apply for loan, are in the score range required by us. Also this is the stance taken by nearly all financiers and we would advise customers to pay regularly to keep their score high.