Enjoy peace of mind with preapproved loans

The home loan market is on a high, there are a lot of lenders available in the market to cater to the financial requirements of people. There is a lot of competition and that’s why to lure more and more customers they introduce new and attractive schemes. One out of them is preapproved home loans.

Now a person can get a home loan even before he has finalized the property that he wants to buy it. The application procedure is more or less the same as for a normal loan; but the loan is disbursed only when the property has been finalized.

Here also the repayment capacity, monthly income and the credit background of the borrower holds the key to the loan. With this loan some terms and conditions are also applicable. This type of loan has a validity period that can differ from one lender to another in which the borrower needs to finalize the property that he wants to purchase.

A spokesman from HDFC bank said "There is no typical period within which the loan seeker is required to avail of the disbursement. However, we keep the file open for six months and if the applicant does not act within this period, we send reminders to the individual."

The borrower will be charged with the interest rate applicable at the time sanctioning of loan. Such loan can definitely give mental peace to the borrower as home loan can be really tricky some times. The other good thing with such loans is that the processing time is less than normal loans.

The Executive Vice President, retail assets, Kotak Mahindra Bank, Mr. Kamlesh Rao said "In the event of the borrower (with a pre approved home loan) finding it difficult to take a decision, the bank may direct him to the right kind of project. Thus, if both the loan as well as the project is pre-approved, the processing will be much shorter."

Way out to pre-payment penalty

To lure more and more customers, the home lenders have come up with a lot of home loan schemes, offering the customers a lot of options. Apart from adding new customers, due to rising competition the lenders are taking necessary steps to discourage borrower to switch loan.

To discourage such trends the banks levy pre-payment penalty. This is the penalty that a borrower is levied with if he wants to repay the loan before the original loan duration. A lot of banks have even have hiked the amount levied as pre-payment penalty in order to minimize the loss caused to pre- payment of the loan.

The best way out of this situation is that a borrower can go for a loan scheme where there is no penalty on pre-payment or if avoiding penalty is not possible then a borrower can look for a loan with least possible penalty.

Fixed or floating , which rate to go for?

If a choice is give to a person who does not have much of knowledge about home loans between fixed and floating interest rates given the present day situation in which the interest rates are soaring then at a first go he might give a thought to the fixed rate scheme. But is it is so, are the interest rates under fixed loan scheme really fixed?

The answer to that question is no. The banks generally reset the fixed interest rates offered to the customers in after every 2 or 3 years, depending on the market situation. Apart from that, the interest rates under the fixed rate scheme are far much costlier than the interest rates under floating rate scheme.

Talking about the floating interest rate scheme, they are very volatile in nature specially in the times that we live in. the rate of interest are on a constant high and each time there is a hike in the interest rate the burden of EMI on a borrower increases.

There is very little that a customer could possibly do about all this but he sure is left with a few options. Like if a borrower feels that he will not be able to afford such high EMIs then he can request the bank to increase the loan term or if a borrower can also prepay the loan. However if the borrower is prepaying the loan amount other than his own sources then most of the banks levy prepayment penalty on the customer.

Whatever the case might be, floating or teaser loan scheme is a far better option than the fixed interest rate scheme.

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.

Axis bank takes branch count to 5 in Vizag

The third largest lender in the country Axis bank has opened fifth branch in Vizag at Gopalapatnam. The mail focus of the branch will be on consumer banking and on the retail segment.
The bank that currently comprises of 1,192 branches and 5,590 ATMs has recently signed an agreement with Indian Army. The bank enjoys huge customer base of more than one crore.

SBOP extends special home and car loan scheme

State Bank of Patiala has announced extension of its concessional home loan rate scheme under and 'Ezee Car Loan Scheme' under which it is offering 8 per cent, till December 31 this year.

A spokesman at the head office informed under the House Loan Scheme, the bank is offering fixed rate of 8 per cent for the 1st year and 9 percent for 2nd and 3rd year thereafter the prevailing base rate will be applicable. The maximum tenure of the loan is 25 years.

He said under its Ezee Car Loan Scheme for new cars, bank is offering fixed rate of 8 percent for the 1st year and 10 per cent for 2nd and 3rd year, thereafter the prevailing base rate will be applicable. For this maximum tenure is 7 years.

Under these special schemes bank will not charge any prepayment penalty if the borrower want to pre-pay the loan at the time of reset.

He told, the special schemes on home and car loan have been extended to make possible house /car loan available at affordable rates to general public.