Banks and finance companies are trying to gain business by offering lower interest rates. But you, as a borrower, need to look at other aspects as well, before moving your loan from one bank to another. Here are the six things you must consider
“You can transfer your high-cost home loan from any other bank to our bank and not only save on interest but also avail a higher loan amount” is the pitch from one of well-known banks. Most of us would definitely be tempted to go in for such a transfer. And why shouldn’t we? For the double benefit that is being provided, why would anybody not avail such an opportunity and that too when interest rates are so high? But stop and think. Is it all so simple? Should I actually go a step ahead to find the details? The answer is “yes, you should” and here is WHY and WHAT you should look at.
Technically called “takeover of loan”, transferring a loan means approaching a bank and asking it to issue a loan amount that is the outstanding amount with the current bank, repaying to the current bank and continuing the loan with the new bank. You will benefit from the lower interest rates or lower EMIs. And the bank? It gains new business. But, is the interest rate or a lesser EMI the only consideration? Not really. Here are six important factors that help you take the final decisions:
Although the new bank tries to attract you by reducing your monthly EMI and giving you a longer span to repay (increasing your tenure), you should be clear that such facilities increase the total amount you pay to the bank because the interest keeps on adding to the outstanding loan amount. If you are paying higher EMIs with your current bank, compare the total outgo for both banks and then take a decision. If you are not hard-pressed for cash, you should prefer staying with your bank, pay a larger EMI and finish off your loan as soon as possible to save all the money you would overpay, by opting for a longer tenure.
Take into consideration the processing fee, stamp duty, legal charges, valuation fee, technical charges and other allied charges that your new bank would charge and compare it with the benefit in terms of reduced interest rates. Is there a net benefit or a net loss?
For some banks, processing fee is a percentage of the total loan amount, while for others, it depends upon whether you are salaried or run a business. Still others have a fixed amount, uniform for all. If the bank calculates it on the basis of the outstanding amount, calculate it in rupee terms to find the cost. Also, your existing bank may jack up the costs of closure of accounts if it finds out that yours is a case of takeover. One of the complainants in an online complaint forum talks about how the bank officials refused his request to charge the interest rate on floating basis and insisted for recovery on a fixed rate of interest if the customer opted for takeover. They wanted the customer to pay at fixed interest rates, much higher than the floating rates applicable.
If you have already repaid a huge chunk of your loan, do not offer the complete original collateral to your new bank. Why would you want to give a security which is double the amount of your loan outstanding? You would use it to take a separate loan instead, if the need arises. Offer your new bank a lesser amount of collateral. And if the bank still insists on the same, negotiate for lessening the interest rate further.
When you take a loan, banks generally require you to open a savings account and route your money through that account. In case it does so, find out the charges applied and the facilities provided to you. For example, a Canara Bank education loan account does not accept EMIs through net banking. HDFC net banking allows you to make NEFT only 24-hours after you have submitted the request, the first time.
You should consider such provisions and your requirements before taking the final decision. Also, if your current bank is the one where you do all your banking, you become a premium customer for them; know a lot of their staff, are well-versed with their processes and may also be given services faster than others in queue. These softer aspects go a long way for ease of use and comfort banking, and should be thought about before foregoing them.
Before signing on the dotted line, you MUST read all terms and conditions of both banks. Some banks include buying insurance from specific company or depositing a certain amount in fixed deposits or opening a number of saving accounts for self as well as family, etc. Read the “terms and conditions” part of the sanction letter and understand the pros and cons of such conditions.
Attracting customers by offering them frills with loans is a fad. Free credit card and personal accident insurance tops the list of offers. Before falling for these, analyse whether you really need them and ask for more information about terms and conditions governing them. A well-known friend was sold a ‘free’ credit card. He woke up the next year only to realise that the card was free only for one year. That is the extent of mis-selling being done.
Do not fall for an interest rate, or benefit, that is only marginally better. After all banks are into the business of lending. Why would one want to give you loans at a lower interest rate and lose profits when others in the market are earning a higher rate of interest? In your best interest, it is good to be suspicious and ask and consider all the issues mentioned above.
Nifty may be headed for a 5% move from the current levels
The market settled in the positive on better-than-expected quarterly earnings from blue chips like Larsen & Toubro, HDFC and TCS. Although the Nifty moved in the same range as of Friday, it ended in the positive, helping the index close above its 20 day moving average. We may now see the Nifty heading for a 5% move from the current levels. The National Stock Exchange (NSE) saw a volume of 51.33 crore shares and an advance decline ratio of 840:915.
The market opened in the negative tracking weak cues from the Asian markets, which were subdued in morning trade following a fall in the US markets on Friday on disappointing earnings reports from companies like General Electric and McDonald’s.
The Nifty opened at 5,668, down 16 points, and the Sensex also started off 16 points lower at 18,666. Metal, auto, fast moving consumer goods and oil & gas stocks were at the receiving end in initial trade.
The market touched its intraday low in early trade itself. The Nifty fell to 5,658 and the Sensex went back to 18,601 at their lows. However, bargain hunting at the lows pushed the benchmarks higher in subsequent trade.
The indices ventured into the green around 11.00am on buying support from blue chips like Reliance Industries, ICICI Bank, Bharti Airtel and Larsen & Toubro. The benchmarks continued to stay in the green in noon trade as optimism continued with companies like engineering giant Larsen & Toubro and mortgage lender HDFC posting in-line results.
The gains enabled the benchmarks hit their intraday highs in the last hour of trade wherein the Nifty stood at 5,722 and the Sensex climbed to 18,809.
The market settled marginally off the lows. The Nifty closed 33 points (0.58%) up at 5,717 and the Sensex finished at 18,793, up 111 points (0.59%) over its previous close.
The broader markets settled on a mixed note. The BSE Mid-cap index fell 0.10% whereas the BSE Small-cap index rose 0.31%.
The top sectoral gainers were BSE Capital Goods (up 1.30%); BSE Healthcare (up 1.07%); BSE Bankex (up 1%); BSE IT (up 0.84%) and BSE TECk (up 0.74%). The main losers were BSE Fast Moving Consumer Goods (down 0.51%); BSE Consumer Durables (down 0.46%); BSE Auto (down 0.18%); BSE Metal (down 0.08%) and BSE PSU (down 0.01%).
Twenty of the 30 stocks on the Sensex closed in the positive. The key gainers were TCS (up 2.26%); Larsen & Toubro (up 2.17%); Bharti Airtel (up 1.91%); NTPC (up 1.74%) and HDFC Bank (up 1.73%). The major losers were Jindal Steel (down 1.52%); ITC (down 1.24%); Sterlite Industries (down 1.15%); Hero MotoCorp (down 1.01%) and Tata Motors (down 0.86%).
The top two A Group gainers on the BSE were—Emami (up 6.37%) and Jaiprakash Power Ventures (up 5.64%).
The top two A Group losers on the BSE were—Exide Industries (down 3.94%) and Coromandel International (down 2.55%).
The top two B Group gainers on the BSE were—Bharat Agri Fert & Realty (up 20%) and Somany Ceramics (up 19.99%).
The top two B Group losers on the BSE were—Foundry Fuel Products (down 19.96%) and Jaihind Projects (down 13.57%).
Out of the 50 stocks listed on the Nifty, 33stocks settled in the positive. The top gainers were Jaiprakash Associates (up 2.62%); L&T (up 2.27%); TCS (up 2.26%); NTPC (up 2.10%) and Bharti Airtel (up 1.93%). Bank of Baroda (down 2.06%); Jindal Steel (down 1.99%); Hero MotoCorp (down 1.675); ITC (down 1.61%) and Ambuja Cement (down 1.43%) were the major laggards on the index.
Markets in Asia settled mixed as some benchmarks were weighed down by a 10.3% fall in Japanese exports in September and lacklustre earning reports from the US over the weekend.
The Shanghai Composite gained 0.21%; the Hang Seng climbed 0.68%; the Jakarta Composite advanced 0.23% and the Nikkei 225 rose 0.09%. On the other hand, the KLSE Composite declined 0.26%; the Straits Times shed 0.11%; the Seoul Composite fell 0.12% and the Taiwan Weighted lost 0.48%.
At the time of writing, two of the three the key European indices were in the positive and the US stock futures were trading higher.
Back home, institutional investors—both foreign and domestic—were net buyers in the equities segment on Friday. Foreign institutional investors pumped in Rs80.11 crore into stocks and domestic investors brought in Rs112.05 crore.
L&T Finance Holdings (LTFH) today said it has acquired FamilyCredit, an auto finance company, from its French parent for Rs120 crore. The acquisition will consolidate LTFH’s presence in auto financing business in India. The stock fell 0.09% to close at Rs54.10 on the NSE.
Rain CII Carbon LLC, a wholly-owned step-down subsidiary of Rain Commodities has agreed to acquire Rutgers NV, a Belgium-headquartered coal tar pitch manufacturer. The Indian company executed share purchase agreement with Triton to acquire 100% stake in Rutgers for gross enterprise value of 702 million euros. Rain Commodities tanked 6.46% to settle at Rs40.55 on the NSE.
Electrical equipment maker Havells India is eyeing generating revenues of Rs7,500 crore this fiscal. Besides expanding its distribution network, the company plans to increase exclusive outlets to over 200 by the end of this financial year, raking up revenues of Rs750 crore. The stock closed 0.45% lower at Rs647.50 on the NSE.
L&T's second quarter net profit rose 42%, while total revenues increased to Rs13,525 crore from Rs11,564 crore a year ago