Celebrate the festive season with our personal loan, goes the catch line of a leading private sector bank.

Some public sector banks have a better idea. To add fizz to the festive season, they have gone one step ahead and have started offering festival loans that are easier on the pocket.

The State Bank of India (SBI) and some of its associate banks, including State Bank of Saurashtra, State Bank of Travancore and State Bank of Patiala, offer festival loans along with other banks such as Bank of Baroda (BoB) and Punjab and Sind Bank.

While bank officials clarify that the festival loan is just a variant of a personal loan, the eligibility criteria are simpler and the cost is lower. However, on the flip side, the loan size is smaller and the repayment period is shorter than that for personal loans.

'It is extremely convenient for people who want a small loan, can repay early but do not want to pay interest at the exorbitant rates levied by most banks,? they say.

Let?s make a comparison of the various features of these loans. For most private sector banks, the interest rate on personal loan varies anywhere between 12 to almost 30 per cent, depending on the income, repayment capacity and negotiation with the branches.

For SBI, the interest rate on personal loan is 12.75 per cent, while that for festival advances is 11.25 per cent. In the case of BoB, the interest rate on a festival loan is 11 per cent compared with 12 per cent for personal loans.

Festival loans are given for amounts as low as Rs 5,000, which is not possible in the case of personal loans where the minimum amount starts at Rs 25,000. Thus, it is beneficial for a person who does not want a large sum as loan and a stiff interest rate.

However, the maximum amount one can borrow as festival advance is limited to Rs 50,000. The loan amount sanctioned by the SBI is four times the net monthly income of an individual. Personal loans are longer term offers with a repayment tenure of up to 48 months. Festival loans are restricted to 12 months (10 months for BoB).

Another cost advantage comes in the amount of processing fees charged. On personal loans, the major private sector banks charge 2 per cent as processing fee.

SBI charges 1 per cent as processing fee on personal loans, but a flat Rs 100 for festival loans, irrespective of the quantum of loan. Although this amounts to 2 per cent of Rs 5,000 which is the lowest limit, it reduces as the loan amount gets higher and is just 0.2 per cent for Rs 50,000.

Another feature is that festival loans do not entail any prepayment charges. An individual can pay off the entire or a part of the loan whenever he has surplus funds. Prepayment of a personal loan does not attract any penalty if it is SBI, but other banks charge a fee of up to 5 per cent.

The SBI loan can be used for any kind of festival related expenses throughout the year. Bank officials clarify that individuals can interpret the purpose of the loan based on their needs and even an individual celebration, like a birthday or a marriage anniversary also qualifies for such a loan.

However, banks offer special interest rate rebates during common festivals, while at other times, the rate is at par with their personal loans. The BoB loan is more flexible since it can be used for any purpose, except speculation.

So, with banks helping you, go and splurge, and make the most of this and every festive season.