October 10, 2012 / 12:54 IST
Runjhun Noopur
Akosha is an online consumer forum
A teary eyed, very pregnant wife accepts keys to her new house from a beaming husband. A booming voice over declares how XYZ Bank can gift you such precious moments through its ‘very attractive’ home loan schemes.
A predictable prototype of scores of advertisements that clearly and most unabashedly cash on the emotions that any average Indian usually attaches to the fact of owning a house. What these ads don’t tell you is that it takes only moments to turn this momentous occasion into a horrendous one, if one is not careful while opting for the home loan scheme.
Transactions that involve banks are pretty tricky. For more insight, see
4 Things You Must Know About Your Banking Transactions. There are plenty of ‘imaginative’ ways your home loan scheme and the bank providing it can mess with your life and happiness. Going by home loan related complaints that we get at Akosha, most of the banks are pretty generous in exploiting these opportunities.
Sifting through these complaints, we realized that several of these troubles can be avoided only if the consumer exercised abundant caution and was forewarned of possible downsides. Here is a lowdown on a couple of such issues.
The Interest Rate Conundrum- Interest rates are by far the most troublesome aspect of any home loan scheme. You may opt for the fixed rate of interest because it is usually the feel good scheme that banks have to offer and going by the inflation rate, if it does not change for next couple of years, you are in a win-win situation. The trouble arises when the bank drastically cuts down the interest rates under some new, attractive scheme soon after you have opted for the fixed rate and you are left with a sinking feeling of a loss that is intangible and yet so real. In most such cases, any re-negotiation cannot convince the bank to pass you the benefits of the new scheme.
Pragnesh, a consumer who had approached Akosha with a similar issue against SBI, had opted for a loan that charged interest at the rate of 12.5%. Soon after, the bank came up with a scheme that offered loan at an interest rate of around 8 % in the first year increasing up to 10% in the subsequent years. Despite multiple negotiations and request to refinance the existing loan at cheaper interest rates, the bank refused to pass down the benefits of the new scheme.
The bank isn’t entirely in the wrong and policy is always a valid defense. If it isn’t allowed as per their policy, they wouldn’t do it. Pragnesh was plain unlucky. The only way to avoid such issues is to carefully weigh the downsides of the scheme before opting for it. Opt for floating rates but be very careful because if the floating rates do not give you the benefit of the decreased rate of interests (which they don’t in several instances), the whole purpose is defeated. Take all possibilities into account and choose your scheme wisely.
Misinformation Mess- Prahlad, a consumer from Bangalore, increased his EMI. But the bank officials failed to inform him that he was entitled to a reduced interest rate of 10.5% available for the existing customers and kept charging him at the rate of 13.5%. 2 years later, when Prahlad came to know of the discrepancy, he sought explanation. The officials did accept the mistake but refused to reimburse the difference.
It is not just about the new offers or entitlements, sometimes things as simple as whether or not a consumer is entitled to the refund of processing fee if the loan amount is not sanctioned gets lost in the misinformation web. In most cases, the fee is non-refundable. But if you are informed verbally that it is refundable even in passing, make sure you get in writing in order to avoid any further issues.
As far as new offers/schemes and avoiding a situation similar to Prahlad is concerned, we honestly don’t know if there is any certain measure to avoid it. All you can do it be vigilant, check your bank’s website carefully, read all the documents and pray fervently for good luck.
The Fine Print Troubles- The only way to avoid this is to read and read again. And not just read, understand. Because if you don’t, you may find yourself with a scheme with fixed rate of interest that can actually be revised upwards every two years but never downwards or a floating rate scheme which does not pass on the benefits of decreased rates.
The catch lies in the fine print and if you are looking for possible trouble areas- that should be the starting point. Also, ask plenty of questions. You may not get all the answers but it still goes a long way in clarifying a lot of possible issues.
The issues listed above are in no way exclusive. Home loan schemes are more or less a necessity—a fact which inevitably makes consumers much more vulnerable and consequently multiplies the need to be extremely careful. Read every document carefully, consult other people and take second opinions if required. Most importantly, take a far-sighted approach—that is one sure way to get past the avoidable hassles.
