TNN | Apr 25, 2016, 06.05 AM IST | Times of India
Surat: Police arrested a disabled person, who has an MBA degree, and his wife for allegedly running a bank finance assistance service racket and duping at least 26 people to the tune of over Rs10 lakh here on Saturday. The accused charged heavy commission from loan seekers to help them apply to financial institutions and when their applications were rejected, they refused to refund the money. The accused did not enter into any written agreement with his victims.
Source : http://goo.gl/ZHFdmF
HARSH ROONGTA | Tue, 29 Mar 2016-09:22am | dna
Shrinking interest rate margins have made several lenders to insert hidden charges to increase their margins by stealth.
The home loan industry has come a long way from the time when the only charges that you had to watch out for were the processing charges taken under various heads and pre-payment charges. Regulation has ensured that there are no pre-payment charges and competition has ensured that there is a greater degree of transparency around the processing fee, legal fee, valuation fee or technical charges. Competition has also ensured that there is hardly any difference in the interest rates charged by various home loan lenders. Unfortunately, the shrinking interest rate margins have made several lenders to insert hidden charges to increase this margin by stealth.
Here is a list of these charges:
Charge interest on the loan which is disbursed late – This is a common practice. The lender prepares a cheque, but it is not to be handed over till certain documents are received from the borrower and/or the seller. These documents normally may take a few days to a few weeks, and meanwhile, the interest meter is ticking for the borrower. This is not as small as it looks. On a loan of Rs 1 crore, the interest @9.50% works out to Rs 2,600 daily.
The cost of a 10-day delay in handing over the cheque (which is pretty common) means an additional cost of Rs 26,000 or 0.26% of the loan amount. You should negotiate with the lender that you will only pay interest from the day the cheque is actually handed over to the seller and not from the date mentioned on the cheque.
Advancing the EMI payment date – The EMI amount is calculated assuming that the payment will be made at the end of 30 days from the date of disbursement. If this EMI is paid earlier than 30 days, the cost becomes much higher than the stated cost. An example will illustrate this. If the disbursement is made on February 15, 2016, and the EMI is payable on the first of every month then typically you should pay interest equivalent to 15 days’ interest (from February 15, 2016, to March 1, 2016) and the EMI should start from April 1, 2016, only. However, most lenders will start off the EMI from March 1, 201, and still charge you for a full month’s interest. Again, the difference is not as small as it sounds. 15 days’ extra interest for a Rs 1 crore loan @9.50% works out to Rs 39,000 or 0.39% of the loan amount. Again, you can negotiate with the lender to make sure that this additional hidden interest is not charged to you. Unlike the first point which is easily understood, this point is technical and the lender can run loops through the borrower while explaining how the EMI is calculated.
Forcing borrowers to buy expensive insurance products – Lenders have tied up with life and general insurance companies to provide life, disability and property insurance to borrowers and they force you to take these policies. The lenders earn fat commissions on the sale of these insurance policies and even though officially not permitted, they force the borrowers to sign up for these policies. It is a good practise to have such type of insurance policies when you take a loan, but the problem is that the policies being hawked by the lenders are hugely overpriced, reflecting the captive base of borrowers and the fat commissions for the lender inbuilt in such policies. To avoid having to pay for these overpriced policies, you can negotiate with the lender that you will buy these policies on your own. In all probability, you will get the exact same policy from the same insurance provider as what the lender is pushing at a fraction of the cost that the lender will charge.
Forcing borrowers to take a credit card or some other add-on products – In most cases this is offered for free while not stating that it is free only for the first year and would have an annual fee every year after that. You can easily negotiate your way out of this one.
Whilst these are the “extra” charges that lenders take from borrowers, there is a charge that they are unfairly accused of taking. For example, in Maharashtra, you have to pay a stamp duty of 0.20% of the loan amount on the document creating the security in favour of the lender. It is obvious that this charge will be recovered from the borrower (it is also mentioned in the loan agreement as recoverable from the borrower), but I have heard many borrowers complain that this is a hidden charge sprung upon them. This document is in favour of the borrower as it is conclusive proof that documents have been handed over to the lender. This is extremely useful when the loan period ends because there have been increasing the number of cases where the lenders have misplaced the title deeds and claim that these were never deposited with them in the first place. A stamped and registered document will prevent the lender from making any such claims.
In this new age, the lenders depend on the borrowers lack of attention to slip in the extra charges. It makes eminent sense for the borrowers to take the help of professionals to help them navigate through this process. The fee payable to such professionals will be more than made up by the savings in these “extra” charges.
Source : http://goo.gl/ImwYEb
Priya Nair | Mumbai Feb 01, 2016 10:40 PM IST | Business Standard
Banks and housing finance companies often have campaigns where they waive processing fees in a bid to increase their home loan portfolios. Currently, banks like State Bank of India, Bank of India, Union Bank of India and Dena Bank have waived processing fees on home loans till March 31. But, it need not always be cheaper than a loan where you have to pay processing fees, points out Gaurav Gupta, of Myloancare.in.
“Sometimes charges such as technical fees, legal fees, valuation fees all put together can add up to more than processing fees. And if processing fees have been waived, you may still have to pay other fees. As against this another lender that charges processing fees, but not other fees, may be cheaper,’’ he says.
Legal fees or advocate fees are charged for property search and the title investigation report. Valuation fees are charged for valuation report. In many cases, these are not refundable because the lender has incurred charges for providing these services.
Some lenders charge a separate login fee that may be non-refundable. While some others may deduct it from the processing fee. In some cases the lender may take the cheque upfront but does not encash it unless the loan is approved.
“Many customers are wary of paying processing fees upfront, in case the loan application gets rejected. It may happen if the particular project is not approved by the lender. It could also happen in case of resale property, where the bank gets a negative report about the property. In such cases, the customer may have to forego the processing fees,’’ Gupta points out.
Processing fees are usually charged as a percentage of the loan amount, usually 0.5-1 per cent, or a minimum fixed amount, whichever is higher. So, if you are availing a loan of Rs 50 lakh, the processing fees will be in the range of Rs 25,000-50,000. In some cases, lenders offer a capping on processing fees for salaried borrowers and this may vary based on the city.
“These are not usually disclosed on lenders’ websites and customers get to know of them only when they approach the lender for the loan,’’ says Gupta.
Login fees can be as high as Rs 4,000-10,000, but may be adjusted against the processing fee if loan is approved.
Adhil Shetty, chief executive officer (CEO), Bankbazaar.com says customers are willing to pay higher interest rates if they get a waiver on processing fees. “If customers are not sure whether their loan will be approved, they feel it is better not to pay the processing fees upfront,’’ he says.
Other factors to consider is the turnaround time for the loan to get sanctioned or if the lender is willing to offer a higher loan amount or a longer loan tenure. “If, for instance, there is cut-off date for making the payment to the builder, but the lender is slow with disbursal, then you will lose the chance to buy the property. In such cases a lender that offers faster service may help more than one that waives off processing fees,’’ Shetty says.
Source : http://goo.gl/3HgEaQ
SUKANYA KUMAR Founder & Director, RetailLending.com | Nov 04, 2015, 05.20 PM | Source: Moneycontrol.com
Home loans attract interest. However, there are many other fees a borrower has to pay. Here is a curtain raiser.
“Apart from the interest rate burden on home loan, what all are the other fees that I will need to pay?” The common query almost all borrowers will ask. Here’s a list to make sure you do not get a ‘surprise’ later.
Application fee: Banks take a minimal fee to cover their preliminary expenses towards home, office verification etc. This can range between Rs 1000/- to Rs 5000/- depending upon the lender.
Processing fee: This is a fee charged by the lender to service the cost of the credit appraisal. This fee can be ranging from Rs 10,000/- upto as high as 1% of the loan amount depending upon (i) Profile of the borrower, (ii) Product that you choose, (iii) Income sufficiency in available documents, (iv) Profession of the borrower, etc.
Administrative fee: This fee is not applicable for many. However, sometimes this fee could be higher than the processing fee. Some lenders split the processing fee into two parts. The one taken post sanction of the loan is called admin fee.
Legal fee: Most lenders engage external law-firms to scrutinise the legal documents of the borrowers. Generally lenders absorb this cost in the processing fee itself. But some PSU lenders take the fee separately from the borrowers.
Technical evaluation fee: For properties which are of high value (depends on lender to lender as to which value they consider as high), there are two valuations done for higher caution. The lower of the two valuations is considered for the lending. Fees if not absorbed by the lender, is collected from the borrower by some PSU lenders.
Franking fee on the sale agreement: In some states of India, there is a stamp duty payable on the property agreement with the builder or seller. This used to be a flat fee of Rs 200/- earlier but now been revised to 0.1% of the property cost subject to a maximum of Rs 20,000/-. The good news is, in those states which follow this, allow adjusting the amounts with the final property registration deed upon submission of the agreement in which the fee was paid to the Sub-registrar’s office.
Franking Fee on the loan agreement: Some states in India do not have it at all, some have 0.1%-0.2% of the loan amount being payable. For example, if you are taking a 1.50 crores loan, then the stamp charges payable is Rs 30,000/- in Maharashtra & Karnataka.
Intimation of registration: Intimation to the sub-registrar’s office is a new introduction of process in Maharashtra. Generally, this is not done by any other state as of now. Though the cost is very low, only Rs 1300/-, but to visit the SRO and doing it is tedious.
Notary: If you are an NRI, then all your KYC and the POA (power of attorney) you are executing, depending on the bank’s requirement, needs to be notarised by the Indian Embassy or a local Notary available abroad.
Adjudication: If you are the POA-holder of an NRI, then the notarised POA needs to be adjudicated here in India before submission to the lender for starting to process the Home Loan application.
Indemnity: This is the way you safe-keep the interest of the lender. the documents reads that if there is any issue because of unavailability of the said document, the sole responsibility is on the borrower and that the borrower indemnifies that the cost of such risk will be completely borne by the borrower and not the lender. There could be indemnification required for many aspects in your borrowing. For example, if the builder is yet to receive some minor approval from authority or the property tax is yet to be paid completely by the seller or the ‘Khata’ (in Karnataka) is not yet transferred in the seller’s name though the deed is registered in his name or the OC (occupancy certificate) is yet to be received by the builder, then the borrower needs to indemnify the lender. There is stamp fee of a few hundred rupees (depending upon the State) and a notarisation may also be required.
Mandatory fire insurance: Most lenders who are having a wing of bankassurance insist on this. There is a debate whether this can be forced on a borrower, but we are not here to judge that. This is just a list of expenses a borrower might incur.
Documentation fee: For getting the loan agreement signed, getting the ECS mandate activated or a few other formalities, few lenders still do charge this fee. This is generally nominal, say Rs 500/- to Rs 2000/- approximately. Note: All fees attract a service tax amount of additional 14% levied on the fee amount.
Source : http://goo.gl/T5trZq
Top up loans have costs such as processing fee and in takeover cases foreclosure charges of previous home loan. Top up loan need not necessarily offer tax sops.
Adhil Shetty, Bankbazaar.com | Source : MoneyControl.com
Ravi, an IT professional received a call from a bank offering a home loan. When Ravi told that he already had a home loan with a different bank, the caller suggested a loan transfer to their bank, with an offer of an additional Rs 10 lakh as top up loan.
The offer seemed lucrative for Ravi who was eyeing a new sedan and was looking to fund his buy. His existing bank had offered him a car loan at an interest rate of 11.5%. Hoping to save on his interest outgo, he had approached his existing bank for a top up loan to fund his car buy, only to be offered a top up loan of Rs 5 lakh at 10.5%.
The top up loan offer from the new bank sounded attractive for Ravi, as they not only offered to takeover his existing loan at 10.25% but also offered a higher top of loan of 10 lakhs, which would be sufficient for his car purchase.
All in all, Ravi’s problems appeared to be solved. But, is it really? Let’s take a closer look.
Understanding ‘Top-up’ loans
Top up loans are offered only to existing home loan borrowers with a good repayment track record. Top up loans work on the basic principle that since you have started reducing your outstanding loan amount by repaying it, a margin money by way of a top up can be added to your loan account. The amount taken as top up loan can be used for any purpose like wedding expenses, medical expenses, car purchase, or any other.
If you are transferring your existing home loan to a new bank, they will also offer you a top up loan, provided you have a good track record with the other bank.
Now let’s run the numbers in Ravi’s case.
The math in Ravi’s case
In Ravi’s case, his existing home loan was at a fixed interest rate of 10.5%. The new bank offered him a takeover, plus a top up loan of Rs 10 lakh at 10.25%. Ravi who was in need of money didn’t think twice on hearing the offer. But, let’s do the math.
Ravi’s current principal outstanding was Rs 38 lakhs. As it was a fixed rate loan, he had to pay 2% of the outstanding as pre-closure fee, which comes to around Rs.76,000. Now, the new bank charged Ravi a processing fee of 1%, i.e., around Rs.48,000. So altogether, he paid around Rs.1.24 lakhs for the transfer.
What Ravi did not realize was that the difference in the interest rate was only marginal, i.e., 0.25%. So, the additional expense he incurred during the switching process in fact exceeded the amount he saved on interest outgo, which was around Rs. 1 lakh.
Here are few things you should know before taking up a top up loan.
A lucrative top up loan offer may lead to a bad loan take over: A top up loan offer along with a takeover may sound lucrative, but weigh the deal after calculating the possible charges associated with it.
No tax advantage: You will get a tax advantage for a top up loan only if you use the loan amount exclusively for repair, renovation and construction activity of the home. Otherwise top up loans are loans with no tax sops, unlike a home loan.
Charges for the loan: Banks charge a processing fee to facilitate top up loans. For customers who are shifting their home loans from a different bank, the processing fee is applicable for the takeover as well as the top up amount. Also, most top up loans are offered at 0.5-1.0% higher interest rates than a usual home loan.
No say in property price appreciation: Most banks offer top up loans in accordance with the amount of money which is reduced by the outstanding amount of the home loan through repayment. Even if the property price witnesses an increase in price index, the quantum of top up loan may not be increased by the bank. Many customers who wait for top up loans realize this at a later stage.
Banks have the final call: While top up loans may have their benefits and are even considered superior to personal loans, banks are the final authority in approving or rejecting any top up loan plan. Even if you receive a deal from the tele-sales person, the final call on approving your loan lies with the credit department.
The Bottom Line: Even if you may not need a loan, the prospect of an easily approved loan where the funds can be used in any way is far too alluring for many borrowers. So, if you think the persuasive telesales representative who is asking you to consider a loan takeover by offering you a top up loan is doing you a favor, ask the right questions, analyze the deal end to end, and then take a final decision.
Harsh Roongta | Tuesday, 2 June 2015 – 6:55am IST | Agency: dna | From the print edition
In recent times the major issue faced by home loan consumers is the tendency of the lenders to keep their interest rates high even as they welcome new home loan consumers with much lower interest rates.
In the last decade when experts addressed home loan consumers they asked them to avoid lenders who took EMIs on a monthly basis but calculated interest on annual basis. Competition soon put a stop to this consumer unfriendly practice. In recent times the major issue faced by home loan consumers is the tendency of the lenders to keep their interest rates high even as they welcome new home loan consumers with much lower interest rates. Ironically, they may not have to envy the new home loan consumer too much as he could be paying much higher than he bargained for.
In a shocking incident a home loan consumer bought to my notice a pernicious practice of charging steep processing fees hidden away in the first EMI. This consumers’ real life example is given in the box below. The consumer was being charged interest for the full month in the first EMI even though only 16 days had passed between the disbursement date and the first EMI payment date. He was paying an additional amount (0.41 % of the loan amount in his case) over and above the contracted interest amount. This was also contrary to the loan agreement entered into between the lender and the consumer. This particular consumer did not ignore it. He spoke to a few of his other friends who had borrowed from the same bank and realised that the bank was overcharging interest on a systematic basis rather than just in his isolated case. In fact, the overcharging was much more in other cases because home loan disbursement are bunched around the month end and the EMIs tend to be payable in the first 10 days of the month and hence the overcharging is much higher than the 14 days of interest as in his case. He has not received any response from the bank officials to his written complaints.
Many senior officials of the bank visited him and verbally offered to make good the overcharged amount to him but he wanted the facts to be put in writing to him so that he could take up the matter on a systemic basis rather than for his isolated case. The bank officials were unwilling to offer anything in writing. He also wrote to RBI but did not receive any response. This practice is not in accordance with the lenders own loan agreement with the borrowers and is a clear case of overcharging. Since this bank lends more than Rs 20,000 crore of home loans every year the additional amount charged can be as high as Rs 100 crore per annum if 0.50% overcharge is assumed on an average. The impact of this kind of overcharging on car loans and unsecured personal loans and all other EMI loan products disbursed by the bank could also be similarly high.
Only a detailed investigation can conclude if this consumers’ case (and those of his couple of friends whom he has spoken to) is a one-off case or is a system-wide problem within that bank. It clearly does not seem to be an industry wide practice from my preliminary chats with the major players in the industry. To their credit, major public sector banks have always touted their daily rests basis of interest calculation. And thus by definition do not follow this kind of practice.
RBI’s grievance redressal mechanisms do not help since by design they only help solve a specific consumer’s grievance and these systems do not look at systemic issues such as the one highlighted above. Meanwhile, this consumer is not taking this lying down and has now filed a public interest litigation in the Bombay High Court against the RBI for permitting this practice to continue.
I am not sure if the courts will entertain this petition but I earnestly hope that the issue will gain enough traction so that the top management of the concerned bank or the regulator is forced to take notice and take remedial steps. As consumers you should take care to double check the interest and principal breakup of your first EMI to ensure that you are not paying more than what you bargained for.
The writer is director, ApnaPaisa.com
His home loan of Rs 1.55 crore was disbursed on April 24, 2014. As per the agreement the EMI date was fixed as the 10th of every month and @ 10.50% p.a. the EMI for 180 months was Rs 1,71,337. Logically he should have paid only the interest amount for the first 16 days (from April 24, 2014 to May 10, 2014) amounting to Rs 71,342 (being Rs 1,55,00,000 * 10.50%/365 * 16 days) and then the regular EMI payments of Rs 1,71,337 should have begun on June 10, 2014. Instead to his shock and surprise the entire EMI of Rs 1,71,337 was debited on May 10, 2014 and furthermore when he checked his statement of account he realised that the interest has been charged for an entire month i.e. Rs 1,35,625/- (being Rs. 1,55,00,000 *10.50%/12) and only the balance amount of Rs 35,712 (being EMI of Rs. 1,71,337/- minus interest of Rs 1,35,625/-) was adjusted against the principal loan outstanding. This effectively meant he had paid extra interest of Rs 64,283/- or 0.41% of the loan amount).
By Sangita Mehta, ET Bureau | 13 May, 2015, 10.48AM IST | Economic Times
A bank’s facilities typically come loaded. For the unsuspecting customer, it could just be a question of filling out a fixed deposit form or being granted a home loan. But there are some entrapments the bank will slip in that you need to be aware of, says Sangita Mehta.
HOME LOAN: Double Trouble
Watch out: When you apply for a home loan, the bank will sell you property insurance — which covers damage to property — and mortgage protection term insurance, which covers the loan in the event of the borrower’s death
What you should know: The housing society may already have property insurance. You don’t have to opt for an insurer the bank has a tie-up with. Ensure the premium is not clubbed with the loan, in which case, you will have to pay interest
CREDIT CARD: Take it or Leave it
Watch out: Banks often sell credit cards with the promise that for the first year, they will not charge any fee and the customer can discontinue it from the second year. However, at the end of the second year, the card company sends an innocuous mail stating they will renew the card for a fee unless the customer explicitly rejects it.
What you should know: The Reserve Bank of India has banned banks from giving such negative options. Customers should ideally use the credit card of a bank they do not have a savings bank with. In case of a dispute, banks often debit money from the borrower’s account
DEPOSITS: Auto Route
Watch out: When you’re opening a fixed deposit, watch out for ‘auto renewal’ in the fine print
What you should know: If you do not opt for auto renewal, the money is transferred to the savings account after maturity, where the bank offers about 4% interest as against 7-9% on FDs. You may forget to renew the deposit and the bank won’t remind you. When you tick that ‘auto renewal’ box, the bank cannot charge you a penalty on premature withdrawal of the deposit
ATM, CYBER FRAUD: Cry ‘Thief’
Watch out: If you find a fraudulent transaction in your account, immediately notify the bank
What you should know: If you are the unfortunate victim of an ATM or e-transaction fraud, watch out: the bank is liable to prove its innocence. If the bank is not notified, the maximum loss to you is `10,000 Postnotifi cation, the customer is not liable to bear any cost
LOCKER FACILITY: Keep your Freedom
Watch out: Banks put a price tag on a ‘scarce’ commodity like the bank locker
What you should know: Your bank may ask you to invest in fi xed deposits or mutual funds or even third party insurance, with the bank locker, even though they are not allowed to to do so by the RBI. You anyway need to pay an annual rental
PERSONAL LOANS: Don’t Rush to Pre-pay
Watch out: Banks have stiff conditions on prepayment of personal loans
What you should know: The RBI has mandated banks to not charge a penalty for pre-payment of a home loan if the interest is on a floating rate. But the rule does not apply for other personal loans. Some banks charge as much as 5-10% on pre-payment of loans. Some banks don’t even permit you to repay the loan for the fi rst six months or one year
PROCESSING FEES: No Free Lunches
Watch out for: For every home loan, auto loan and personal loan, banks charge a processing fee, which can be steep
What you should know: This fee is mostly at the discretion of the bank and can be as high as 1 percentage point, which itself will infl ate your outgo. If any bank says they have a lower rate, ensure the processing fee is also low.
Source : http://goo.gl/r0S6eK