Muthoot Group to enter home loan segment

Kerala based Muthoot Pappachan Group (MPG) has announced to enter the home loan segment. The group will provide home loans under Muthoot Housing Finance that will operate as a 100 percent subsidiary of Muthoot Fincorp. Initially the the company plans to open 25 branches in the the suburban areas of Ahemdabad, Bangalore, Chennai and Mumbai.

The company plans to target the middle class customers with a monthly income ranging between Rs 3-10 lakh. The company will provide home loans between 3 to 10 lakh with a repayment period of a maximum of 15 years.

The company will charge a high interest rate of 15-15 percent as compared to the interest rate that the bank offers that generally ranges around 1-12 percent. Due to this reason most of the customers with the company are likely to constitute of the people that find it hard to get loans at the banks.

The Executive Director of Muthoot Fincorp Ltd. Mr. Thomas George Muthoot said “We will cross-sell home loans to the one million-odd customers of Muthoot Fincorp. Majority of Muthoot Fincorps customers have availed themselves of gold loans and they present an excellent opportunity to cross-sell.”

How new age bank evaluates borrower

Every one has a home that he dreams about. But in the present day situation it is very difficult for a common man to even think about having a home of his own choice due to the soaring property rates. It is very hard for a common man to arrange for all the funds required from his own resources. Home loans are a blessing for such people.

But there are a few things that a customer must understand before he applies for the loan. When a customer approaches a bank for home loan the first thing that the banks do is they evaluate the customer on the basis of his eligibility i.e. how much the trustworthy the customer is?

So before a customer approaches a bank he must self evaluate himself whether he fits in certain criteria’s that the banks look for. The first thing that the bank will do is that they will try to evaluate the customer according to his repayment capacity in order to check whether the customer will be able to pay the loans on time. The bank will take in to consideration your personal credit income documents, education, experience.

The banks calculate the loan eligibility of a customer through FOIR (Fixed Obligations to Income Ratio). Most of the banks take FOIR up to 45-50 percent of the monthly income of the customer. Banks considers that a customer requires around 50% of his monthly income to meet his personal expenses and rest 45-50% includes all his fixed obligations that also include the home loan. All these factors play decisive role in determining the loan amount as well as the home loan rate to be charged to the borrower.

The older banks still takes in to account the past record and the relationship of the borrower with the bank to sanction loan.