Bargaining for your loan
Don’t we all love to haggle? So, there’s nothing wrong in getting yourself a good deal while negotiating a home loan - the biggest ‘buy’ of a lifetime
The word bargain in the thesaurus gives us results that give its usage as both a noun and a verb. Each word, having positive as well as not-so-positive connotations. Yet, as Indians, we never feel satisfied with any purchase unless there is a bit of bargaining. Be it with the local vegetable vendor or the electronic goods salesperson. The sale is complete only after we are done with our share of bargaining.
What about the probably the biggest purchase of our life; the housing loan? Do we bargain enough to squeeze out the best deal? Probably yes, probably no. For some firsttime buyers the anxiety and eagerness to get the first house might mean a lesser inclination to bargain. For those who do bargain, the rigid stance of the lenders leads to accepting defeat soon.
(We are referring to the housing loan as ‘the purchase’ and not the house for the reason that the house is considered purchased only after the last EMI has been paid. A loan on the other hand is considered ‘purchased’ the moment we sign on the dotted line).
Come to think of it, the difference between a 10% and 10.25% loan for R20 lakh over 20 years will result in a differential outflow of over R85,000. So why not haggle over it?
What’s the easiest?
Probably the easiest part of the home loan for which you can bargain is the processing fee component. The fee varies from lender to lender, but the decision to reduce the fees can be taken even by the local sales manager and hence it is easy to get a good rate and sometimes even a waiver. The best part of this bargain is that you can feel the satisfaction of having saved immediately. 1% on a 18 lakh loan is R18000 saved!
What about interest rate?
The biggest expense for us in any loan, irrespective of the amount being borrowed, is the rate of interest that we get on the loan. To get a good deal on this we could follow these strategies
You can use online loan comparator tools to find out the various rates that are being offered by lenders, which will help you in obtaining a thorough comparison of many lenders and give you an indicative interest rate pricing for them.
Given the current interest rate scenario and tough competition, most lenders quote just their best rates. Hence, getting a discount on the actual interest rate quoted by the lender is not going to be very easy as the maximum leeway that the sales team will have is between 0.25 to 0.5%. But then, as discussed earlier, this could mean a saving of over R85,000 in the long run.
A good way to get this discount is to try to apply for the loan during the month-end or quarter-end, when most of the sales teams will be under pressure for performing and might show a little leniency to get your account.
Employees of big corporates are given some extra discounts on loans provided their company has a tie-up with the lender. Enquire with your employer of any such scheme and utiliae it to the maximum.
Better EMI/interest rate based on financials
Although this cannot be considered bargaining, a little bit of effort from your side to shore up your financials can help In getting a better rate as well as a better tenure. Some of the things that can be done to achieve this are: Getting a co-borrower, getting a guarantor, adding your father or spouse with a good income as co-borrower etc.
A word of caution
Many lenders who are trying to increase their business aggressively as they are new to the field may offer you very competitive rates. However, it would be wise on your part to clarify that there are no riders attached and do a check on their service levels and other associated charges.
It is always advisable to go with a lender who has clocked runs on the board rather than a new player just for getting better rates.