Online loan shopping sites make borrowing easier

From the Hindustan Times

Did you know that Internet sites offering loans help you getting a better deal from the banks offering you loans? Loan Web sites can help you get home loans, personal loans, auto loans and credit cards.

An individual aspiring to a loan product can log on to websites such as apnaloan.com, deal4loans.com, and loanraja.com. The sites offer articles and newsletters that help in making an informed choice.

Some loan websites also offer EMI (equated monthly instalment) calculators or information on negotiating tips.

The loan sites on the Internet also offer contact points from different banks that add to the negotiating power of the applicant.

"We offer a platform to consumers to compare interest rates, that really helps in getting lower interest rates from banks,” says Amar Goyal of loanraja.com

All banks do not offer loans to all applicants. Depending on the applicant’s profile, which includes whether the applicant is salaried or a self-employed individual, whether he has an outstanding loan, his credit limits with credit cards, if he has any, and a number of other factors are considered by banks before starting a negotiating deal with an applicants.

Typically a loan Web site matches the profile of the applicant with 10 to 15 banks. The profile may match with only 4 or 5 banks and the applicant may finally be negotiating with 2 to 3 banks for a competitive interest rate.

The process of applying for the loan is simple. One only needs to fill up the online application form.

Harsh Roongta of apnaloan.com says, "We call up the consumer with 10 minutes of filling up the online forms for the loan.”

Deal4loans.com has chat sessions for specific loan products with different banks. The applicants can chat with the bank or the direct selling agent of the bank regarding a particular loan type. The calendar for chats appears on the website.

Wribhu Tyagi, CEO, Deal4loans.com says, "We realized that a lot of applicants are apprehensive about filling an online form containing personal details. But they are still comfortable with the Internet as a channel and are used to chat as an application”.

Banks associated with live chat sessions include HDFC, UTI, Citibank, Standard Chartered, ICICI, IDBI and HSBC.

ICICI extends festive loan offer to meet target

From The Business Standard ICICI Bank, the largest retail lender in the country, has extended its festive offer of low interest rates on retail loans in order to meet its target of 20 per cent retail credit growth in 2007-08, down from around 40 per cent growth recorded in the past two years.

“We are still closely watching the competition. The programme (festive loan offers) is still on,” said V Vaidyanathan, executive director, ICICI Bank.

The bank had first said on October 10 that the offers would be on till the end of October and then extended it till Diwali.

The bank has not set any deadline for the offer, unlike competitor State Bank of India, the country’s largest bank, whose low interest rate offer will end in December.

ICICI Bank’s retail advances grew by 22 per cent by September-end. Incremental growth in retail advances was about 13 per cent at Rs 9,000 crore.

ICICI Bank’s advances portfolio increased by 33 per cent to Rs 2,07,121 crore in the same period, while the advances of the bank’s international branches increased 146 per cent to Rs 36,994 crore.

Vaidyanathan, speaking on the sidelines of an SME seminar, said, “In the third and fourth quarters, we expect credit to pick up. Retail book should grow at 20 per cent. Corporate is doing very well in India.”

He said ICICI Bank added about 1 million SME customers in the last four-five years. The SMEs financed by the bank are growing faster than many large corporates.

The bank’s efforts at extending reach to the small and medium enterprises segment led to its SME advances book increasing by 56 per cent to Rs 5,205 crore as on September 30, 2007 from Rs 3,326 crore a year earlier.

Concerned over the high level of defaults in the project finance portfolio of banks, the Reserve Bank of India (RBI)

From sify.com

Along with growing awareness about the importance of education to succeed in a knowledge economy, the cost of quality education, too, is growing fast.


Happily for the students, though, more parents are willing to bear that extra cost to fund their higher education.

The importance of education loan cannot be understated, given that it is the most cost-effective means of funding education if you are unable to get a full scholarship or do not have a generous aunt or uncle willing to sponsor your education.

Indeed, a large number of students, especially those pursuing professional courses in the country or abroad, are availing of education loans.

Going by latest data from the RBI, education loans disbursed by banks rose 51 per cent to Rs 15,000 crore in 2006-07 from Rs 9,962 crore the previous year. The following are a few points you need to check while applying for a study loan.

Repayment options

Like for all other loans, you have to pay interest on education loans, too. But, unlike other loans, education loan provides the option of a moratorium period or a ‘repayment holiday’, which means, the borrower can suspend repayment of the loan till the education course for which the loan was taken is completed.

An education loan typically has three repayment options:

1. Education loan with repayment moratorium: Many banks stipulate repayment within 1 year of completing the course or six months of getting a job, whichever is earlier.

2. Interest alone is paid during the course period: After completion of the course of study, you start paying the actual EMI (principal and interest).

3. Repaying through EMI immediately after loan disbursement: In this case, you could get the loan at an interest rate lower by about 1 per cent. The repayment conditions vary from bank to bank. So, talk to as many banks as possible to get the repayment option that suits your requirements.

Interest rates

Interest rate on education loan is lower than on a personal loan, but slightly higher than a home loan. Some banks offer a ‘fixed’ rate of interest, while others offer ‘floating’ rate of interest.

If the difference between fixed and floating rate is only about 1 per cent, it is advisable to opt for fixed rate as education loans have shorter repayment tenures of 5-7 years.

Many banks do not offer a genuine fixed interest rate where the interest rate would remain fixed for the full tenure of the loan. They offer a fixed rate loan with a reset clause.

This means, the bank will have the right to revise rates after 2 or 3 years, or whenever the bank feels it necessary to raise interest rate. So, make sure you take a genuine fixed rate loan.

If it is a fixed rate with a reset clause, a floating rate may be a better option.

The choice between a fixed and floating rate is dependent on the risk appetite of a loan taker. If you are risk-averse and do not want to face the prospect of your EMI or repayment tenure shooting up in the event of an upward movement of interest rate, then you should go for a genuine fixed rate education loan.

However, if you feel interest rate will go down during the loan tenure and are willing to take a risk on that count, you can opt for a floating rate loan.

Many banks have special schemes for girl students. Some even offer 1 per cent lower interest rate for girl students.

Processing fee

Many banks do not charge a processing fee for education loan. So, if your bank asks for a processing fee, you might be able to persuade the bank to waive it.

Prepayment fee

Again, in almost all cases, banks allow foreclosure or pre-payment of the education loan without charging a penalty if the borrower makes the payment from his own sources.

Banks charge a pre-payment penalty (usually up to 2 per cent of the loan amount) if the loan is transferred to another bank.

Expenses covered by study loan

The amount of education loan sanctioned is in relation to the expenses that you will incur wile pursuing the course. The most common expenses covered include:

1. Fees payable to college/school/hostel

2. Exam/library/laboratory fees

3. Purchase of books/uniforms

4. Caution deposit/ building fund/ refundable deposit

5. Travel expenses/ passage money for studies abroad

You might have to incur costs besides these in course of your study, like those of instruments, laptops and other aids.

Some banks, like SBI, also offer loans up to Rs 50,000 for two-wheelers as part of education loans.

Banks provide about 80-90 per cent of the cost of education as education loan. But, the important factor to check here are the education expenses recognised by your lender.

If a part of your education (course fee, for e.g.) is funded through a scholarship, you could still get a loan to cover the balance expenditure.

In such cases, most banks include the scholarship amount as part of the total cost of education. This way, you could end up financing the entire cost of your education through loans and scholarships.

It is always advisable to check with as many banks as possible before finalising your lender to get the best deal.

Banks play ‘safe’ on farmer loans

From The Telegraph

Oct. 15: Janglun Tuboi, a Kuki farmer from Manja Twinomphai, applied for a Kisan Credit Card in February.

Eight months have elapsed and Tuboi is still doing the rounds of the bank with no sign of his short-term loan being sanctioned.

The farmer now plans to take a loan of Rs 5,000 from a local self-help group on a monthly interest rate of three per cent.

“I think getting a Kisan Credit Card is not an easy task for those who do not boast of a strong financial background. They (the bank authority) are not interested in issuing a Kisan Credit Card in my name as I am poor,” Tuboi said.

If Tuboi is to be believed, most banks in Karbi Anglong provide loans only to those who have accounts with them.

“Generally, banks prefer to give credit cards only to salaried persons to avoid the hassle of debt recovery.”

The irony is that the majority of banks refuse Kisan Credit Cards to the very people for whom these are meant: farmers.

A source in the National Bank for Agriculture and Rural Development said banks in Karbi Anglong were far short of the target for disbursal of the Kisan Credit Cards.

The few credit cards that are issued by banks are done so in violation of the guidelines stipulated by the government, the source added.

The annual target for Kisan Credit Cards is 7,320, but only 3,158 and 3,350 cards were issued during 2005-06 and 2006-07 .

As many as seven banks, including the Langpi Dihangi Rural Bank and Assam Cooperative Apex Bank, have branches in Karbi Anglong. Langpi Dihangi Rural Bank has 34 branches, followed by State Bank of India, which has 11 branches in the district.

Central Bank of India, Uco Bank and Apex Bank have two branches each. United Bank of India and Union Bank of India have a solitary branch each.

“The performance of Langpi Dihangi Rural Bank is relatively satisfactory. It issued more than 2,000 credit cards during the last fiscal. The Tumpreng branch of Union Bank and the Diphu branch of Central Bank of India are at the bottom of the list with two and three credit cards issued during that period,” the Nabard source said.

Officials of the district administration and Nabard met last week in Diphu and decided to crack the whip on banks that have been reluctant to issue Kisan Credit Cards.

“We plan to compel the banks to fulfil their targets,” one of the officials said.

“Banks can increase the number of Kisan Credit Card accounts, but the entire system needs to be monitored to ensure that farmers reap the benefits.”

Personal loans can cost less

From Sify India

Have you ever wondered why you need to pay an interest of 16-25 per cent on personal loans, when interest on home loans in only 10-14 per cent?


The justification that loan issuers give for these high interest rates charged on personal loans is that there is no need to specify the purpose for which the loan is required. That is, however, not really the case.

The interest rates on personal loans are much higher, mainly because there is no collateral, i.e. the bank does not have anything to sell off and reclaim the loan in case a borrower defaults. Hence, defaults tend to be more common in the case of a personal loan.

The risk of default is built into the interest rate being charged by the bank. So, individuals who repay the personal loan effectively end up paying for those who don't.

In a home loan, if the borrower defaults, the bank can sell the house and claim its portion of the funds. Similarly, in case of a car loan, the car can be recovered and sold. Having said that, there are ways in which a borrower can take a loan, use it for personal purposes and avoid paying an interest as high as that placed on personal loans.

One such way is to take a loan against a fixed deposit (FD). Ratnesh Kumar, manager of retail banking at Axis Bank, says, “When one takes a loan against an FD of a bank, the bank can liquidate the FD in case the borrower defaults.”

Given this, the rate of interest charged on a loan against an FD is in the range of 9-12 per cent. This is less than the interest rate charged on personal loans. Hence, if you have a fixed deposit and you do not wish to break it, you can use it to get a loan from a bank.

Murali Natrajan, head of consumer bank at Standard Chartered, says, “It also raises a question: 'if I have the money then why do I need a loan’. But such loans can be taken if the borrower doesn’t want to break the FD and pay penalty on premature withdrawal.”

All loans offered against a collateral turn out to be cheaper than a personal loan. Therefore, show the bank that you’re not a defaulter. Tender a security, which the bank knows it can claim if need be. Banks will willingly give you a lower rate, as they are assured that you will pay off the loan to recover the security tendered. Such loans can be asked for by tendering LIC policies, National Savings Certificate (NSC), RBI Bonds, gold jewellery, fixed deposits, shares and debentures and some even accept mutual funds as security. “When one asks for a loan against an NSC certificate, the bank will send it to the post office from where it is issued. The post office will mark it in their books and confirm the NSC,” says Kumar of Axis Bank.
Along with the lower interest rate, the processing charges for loans against security (up to 0.5 per cent of the loan amount) are low as compared with that of a personal loan (1-2 per cent of the loan amount). Then why, in spite of the low rates offered, are such loans unpopular? The fact is that banks are not actively promoting such loans. “Such products were popular even when banks were not offering personal loans,” says Natrajan. Maybe its time, they made a comeback.