Wedding loans, anyone?

Exploring new avenues for credit growth, finance companies seem to have landed an enterprising model of offering wedding loans. As the marriage season rings in, customers too are queuing up for theseloans to ensure the pomp for the dream event of their loved ones.
Non-banking finance companies (NBFCs) like Tata Capital have taken the lead in introducing a new category of loans specifically for weddings. These loans, much like your personal loans, are short -term unsecured loans with an average ticket size of anything from Rs 1 lakh to Rs 15 lakh, based on your borrowing capacity.
"The wedding loan market is in the nascent stage in the country," says SKV Srinivasan, executive director, retail, IDBI Bank. However, the potential is huge. "The wedding loan market in Mumbai alone is estimated to be around Rs 500 crore to Rs 700 crore," says Srinivasan.
Despite the huge market for wedding loans in the country, until recently, they were not treated as a separate category of loans.
Traditionally, banks and NBFCs would offer personal loans that could be used for any purpose. Typically, personal loans are mainly used for emergencies like illness or to arrange for the cash component during a home purchase, or at times, for home repairs or for events like weddings. Of all these reasons for taking a personal loan, weddings top it by far, says Anuradha Rao, CGM, personal banking, SBI.
"Of our personal loan portfolio of Rs 40,000 crore, a significant portion would be used to finance wedding expenses," says Rao. "Typically, for persons who are 50 and above, the main reason for taking a personal loan is the wedding of their children," she adds.
"Getting married is a key milestone in an individual's life and is one of the main reasons for taking a personal loan. Recognizing this need, Tata Capital crafted the Wedding Loan product to provide prospective brides and grooms with the ability to finance their dream wedding, to make his or her wedding even more special," says Govind Sankaranarayanan, COO, retail business & housing finance, Tata Capital. The wedding loan is available at an interest rate between 13%-19%, depending on the borrower's eligibility.
The wedding loan was launched in the first week of October through an association with the movie Shaandaar as its story revolved around a wedding. "We received a good initial response for our Wedding Loans product,'' says Sankaranarayanan.
Increasingly, weddings are like a three to five day gala event. "At Rs 20 lakh for an average wedding, India is more expensive,'' says Suresh Sadagopan, founder, Ladder7 Financial Advisories.
Wedding loans help in meeting only a part of the wedding expenses. The huge spends for a wedding require long-term financial planning. "If your child is young, then the investment horizon is 15 year plus for a wedding fund. The investment pattern in saving for a wedding is no different than if you were saving for your retirement,'' points out Arvind Rao, chartered accountant.
"We have seen people using SIP to create a corpus for the long term. Besides, they also invest in Gold Mutual Funds and Gold ETFs thorugh SIP so as to accumulate gold for the marriage of their children,'' says Himanshu Vyapak, deputy CEO, Reliance Capital Assets Management.

"If a person invests Rs 10,000 through monthly SIPs for 15 years, he would end up investing a total of Rs 18 lakhs. This would grow to Rs 63 lakhs if one had invested in Nifty and even more if one invests in an active fund,'' points out Vyapak.