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

HT Estates - - Property Classifieds - Ad­hil Shetty

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.


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