Im no loan advisor, I neither claim that I know everything about banks, interest calculations etc , but one thing I know for sure is that Private banks such as HSBC, Standard Charted, HDFC(except for home loans), Citibank and others, they all have only one thing in common. Promise to give quick loans to people and make most out of it.
People tend to believe the banks and go blindly with whatever they say. So they overlook so many things while going in for a loan or indulging in some transaction with the private banks.
The private banks say that they will process the loan request fast and promise to get your loans sanctioned within a day or tow. I’ll tell you that this a myth. In reality, the actual process of verification and sanction of the loans take somewhere between 7 days to 15 days, except in the case of pre-approved loans.
So what to do if you need a loan. Answer is simple, please look up to some nationalised banks such as Canara Bank, Syndicate bank etc. The reason for me to mention these two in specific is that I have taken personal loans from these two banks on 2 different situations.
What you need to get Loans from Nationalised Banks?
Thses banks give loans only to their customers. Which means you need to have atleast a savings bank a/c with the bank. After that you can apply for the loan. The process is simple, you need to produce only the income proof and some photographs+ some post dated cheques. As far as I know there are no verifications and processing fee with nationalised banks. Moreover, in most cases there are no pre-closure charges.
So its always good to open a savings bank a/c with a near by nationalised bank of your locality, even if you are not in need of a loan now. Decent amount of transaction in that a/c will help when you are in need for a loan.
*Advantages of taking loans from nationalised banks:
No processing fee
No verification in most of the cases, as the customer already having a relation with the bank
No pre-closure charges in most cases.
Peace of mind. No unwarranted calls from the bank to top up the loan etc.
In case, you are not able to avail loans from the nationalised banks, then what are the things that you need to look at and get clarified before choosing a private bank
- First and foremost, get to know the interest rates clearly.
For example when you enquire with the representative of the bank, he/she will say the interest rate is just, 9%. It may look very attractive, because you would have heard about loans being availed at much higher interest rates like 14% or 15%. But there is a catch. Here we need to understand about two types of interst rates, The first is the Fixed or Flat rate and the second one being the Dimnishing rate.
When the rep says, 9%, ask him whether that is a flat or diminishing rate. Most of the times it will be a flat rate, which means its almost 18% when converted to dimnishing(this is only an approx figure)
If you are not able to determine how much is the exact interest rate, ask them for the EMI value.
For example if you are taking a loan of Rs.1, 00, 000 for 3 years, the bank may say that the interest rate is 15%(say dimnishing rate), which may not be true always. So ask for the Emi amount to be paid.
If they give you the emi amount, you can use the simple "Excel Template" available with MS Office(C:\Program Files\Microsoft Office\Templates\1033\Loan Amortization.xlt) to determine the exact rate of interest.
It will also give you a clear picture of how your loan is amortised.
If not use the tools available in the internet such as https://carwale.com/Resources/UsefulTools/calculateEmi.aspx .
Bargain on the rate of interest. If you bargain well, you have a chance of reducing your interest rate by 2% to 3%, or atleast by 1% in the worst case. Please dont feel shy to negotiate.
Generally, the private banks charge, 2% as processing fee. You can again bargain here and demand, to waive off this fee. Even if they dont waive off completely, they will reduce it to 1%.
Please dont show your desperation to get the loan. If you do so, they may not come down on the interest rates. Please remember the banks also have targets and they will compramise on their profit margins.
Understand the terms and conditions for pre-closure.
Make sure that you keep track of your emi and please be aware of the loan closure date. As soon as you repay the loan, make sure you get the close out letter and NOC from the bank.
Friends, I have written this review from my experiences. I could have missed out lot of points, please feel free to send them as your comments and correct me if there’s any wrong information.
Good Luck.