HDFC Bank Personal Loan - Rates, Negotiation tips
Thursday, 24. December 2009, 10:46:42
Based on my experiences with HDFC Bank personal loan DSAs. In today's trend (Dec 2009) HDFC bank personal loans can be sourced at 14.5% pa interest rate. The maximum is 16.5%. The processing charges are 2.5%. Prepayment / Preclosure charges are 2 to 5% of the outstanding amount. Loan is provided on a Fixed ROI, Diminishing balance method. So preclosure during the first half of the loan tenure is always considered best.
Personal Loans are there to help our immediate purchase/finance requirements. Going on a trip? building or extending a part of your home? domestic appliance purchase? Personal loans are one of the avenues through which you can get money quickly.
Personal Loan <= Credit Card
The obvious truth is Personal loan is similar to Credit card purchase, except that the rate of interest is less. Normally Personal loans in India are offered at the rate of 11% to 18% per annum. Depending upon the tenure, loan amount and banks the Rate of interest varies.
So do not think Personal loan as easy money or it does not blows a hole in your pocket. Actually it is a lesser evil than credit card loans.
Some basics of Personal Loan
- Personal Loans differ from other loans because it is offered on the basis of your salary income or business income.
- There is no physical security needed. No jewels, No shares, No lands, No houses. It is offered purely based on the review of your salary and your credit worthiness.
- Since personal loans does not require any securities, it is not offered to everyone who applies for such loan. The decision remains at the sole discretion of the DSA and the Bank.
- And important point - Personal Loans carry high rate of interest compared to other type of loans.
So who are these DSA?
DSA or Direct Sales Associates are the private companies who does the sourcing, verification work at the primary level. They call potentials, collect requirements and pass qualifying applicants to the Bank. So DSA's are pretty much low level officials who mostly work on phone calls and Application form collection, money collections etc.
Before you start
Before jumping ahead calling any agents or banks, do some research online. Check websites like apnaloan.com and other sites and find out the maximum and minimum range of interest rates offered by banks. Mostly nationalized banks offer lowest rates, while commercial banks like ICICI, HDFC levies higher interest rates.
Then finalize how much money you would need, and the tenure (loan period) you might require to repay. The fundamental tip is - borrow less money, and pay it as quick as possible. So your loan amount should not exceed your requirements and the tenure should be as short as possible.
How to Start?
Remember, Personal loans are always offered on the trust worthiness of your financial profile. So it is better to start with a banking concern with which you have a long time relation. Starting with your bank is the best way, always. Do not fall for some blind offers or calls from unknown or non-reliable sources.
Call your Phone banking and register for a Personal Loan. Or, if your bank has a website supporting online application, then use that. In the next few day, you will receive a call from the local DSA. They will start by saying "I am so-so, calling from <your> bank". Actually, bank never calls their customers. So the caller is no one but the DSA tele-caller.
Also, parallely apply for loan at some other websites too. Make a note of all registrations and corresponding bank's interest rates in a paper. Within the next few days, you will receive phone calls from all DSA's.
What information they commonly ask?
For a salaried person, the question mostly revolve around
1. Your net salary (take-home)
2. Your employer details, employment duration etc
3. How much money needed, duration of loan etc
What happens then?
Once these information are collected, they run their validation process and give you the results. Mostly they maintain a checklist of companies according to the profile. If your company is in the list, the processing time will get shorter.
Negotiating
Based on the company profile and salary you get, they usually have a "below X / above X" rule. The X is a benchmark salary limit. If your net salary is below this benchmark then a certain set of charges, interest rates apply. If net salary is above this benchmark then another set of charges, interest rates apply.
If your credentials are good , then the agent usually starts with a high interest rate. Most people who are aware of negotiation option start negotiating well and get a good deal. Others or newbies usually fall for the higher interest rate. And DSA agents will try hard to maintain their stance for higher interest rates. Because if they settle for low interest rates, their commission will be reduced. Who will be ready to lose their precious commission? Try to judge the tele-caller and find out if she/he is dominating. Usually their tones are always commanding.
During the first call, provide them only the basic information they need and ask them what will be their best offer to you. Definitely they will not give their best offer, but will give you the high interest rate package. Just note it down along with the name of the caller and say "Okay. Thanks for the information. I've pinged couple of DSA's too. I will choose the one who gives me a better offer." and hang up. Dont even wait to listen what they say. :-)
Immediately, they will call you again and say that, it is a best offer and surely they will process it within next 3 days or even 48 hours! The best reply is - "Well, Thanks for the speedy process offer. I am not in a hurry anyway. Let me go through all offers from DSAs and pick the one that make me happy". The next question will be "Sir. Shall I call you back tomorrow?". Pretend to think for a second and reply "Call me next week" and hang up. No need to be polite.
Once you get enough calls from DSAs and recorded the details, go through and check it against the online websites. Mostly you will find the offers are on the costlier side.
Within 2 or 3 days you will receive calls asking you about the status. Now it is your turn to play. Ask them better discounts. Discount in interest rate is priority no:1. Waiver of processing charges will be a jackpot but it is rare. Tell them that you are an existing customer of the bank, and you have the right to get a discounted package rather than a default retail package.
Tell them that their interest rates are high and you are considering another DSA who offered a better package. Unless they offer a good discount of rate of interest and procesing charges you will pick the other one. When they ask you how much their competitor offers, tell them the lowest offer you found in the internet. The negotiation starts. Tell them that if they give the best offer you will go with them, or else the competitor DSA gets the business. Once you speak like this, the tele-caller will understand he/she is not talking to some common man and you are a tough negotiator. Usually, the next call will be from the manager of the team with reduced interest rates and better packages. Again tell him you are not in a hurry and will take time until their deal makes you happy.
Carry on for a total of 6 or 7 calls max. After that you will definitely get a good offer and pick the best one.
Things to note
- Never show that you are urgently in need of money
- Take your time
- If they dont agree, then cut the call immediately with a "Thanks. Bye".
- Make the calls to DSAs in the second half of the month. Because second half of the month is always busy to complete their target. You get a competitive edge.
- Whenever they say it is not possible - say "yes it is possible. You can do it."
- Call them by their name. Dont continue a call without names.
- Make sure you tell them that you will finalize the deal for the best offer.
- Do not tell abrupt lies. For example, dont say "Another DSA is offering me 10% interest" while the lowest market rate is 13%. THey are in business, and so they too know the market well.
- Marginal lies are okay. "Another DSA is offering me close to 13.5%" while the lowest market rate is 13% is fine.
The free insurance offer
Totally useless option that will benefit the bank in case something happens to you. Typically this insurance is a security implied, to cover the loan amount and not to cover you. For example if the applicant dies, the insurance money will go to the bank, and not to the applicant's family. If the applicant is stupid enough, the DSA will even impose that insurance charges on him. So better dont fall for the insurance gimmick.
Personal Loans are there to help our immediate purchase/finance requirements. Going on a trip? building or extending a part of your home? domestic appliance purchase? Personal loans are one of the avenues through which you can get money quickly.
Personal Loan <= Credit Card
The obvious truth is Personal loan is similar to Credit card purchase, except that the rate of interest is less. Normally Personal loans in India are offered at the rate of 11% to 18% per annum. Depending upon the tenure, loan amount and banks the Rate of interest varies.
So do not think Personal loan as easy money or it does not blows a hole in your pocket. Actually it is a lesser evil than credit card loans.
Some basics of Personal Loan
- Personal Loans differ from other loans because it is offered on the basis of your salary income or business income.
- There is no physical security needed. No jewels, No shares, No lands, No houses. It is offered purely based on the review of your salary and your credit worthiness.
- Since personal loans does not require any securities, it is not offered to everyone who applies for such loan. The decision remains at the sole discretion of the DSA and the Bank.
- And important point - Personal Loans carry high rate of interest compared to other type of loans.
So who are these DSA?
DSA or Direct Sales Associates are the private companies who does the sourcing, verification work at the primary level. They call potentials, collect requirements and pass qualifying applicants to the Bank. So DSA's are pretty much low level officials who mostly work on phone calls and Application form collection, money collections etc.
Before you start
Before jumping ahead calling any agents or banks, do some research online. Check websites like apnaloan.com and other sites and find out the maximum and minimum range of interest rates offered by banks. Mostly nationalized banks offer lowest rates, while commercial banks like ICICI, HDFC levies higher interest rates.
Then finalize how much money you would need, and the tenure (loan period) you might require to repay. The fundamental tip is - borrow less money, and pay it as quick as possible. So your loan amount should not exceed your requirements and the tenure should be as short as possible.
How to Start?
Remember, Personal loans are always offered on the trust worthiness of your financial profile. So it is better to start with a banking concern with which you have a long time relation. Starting with your bank is the best way, always. Do not fall for some blind offers or calls from unknown or non-reliable sources.
Call your Phone banking and register for a Personal Loan. Or, if your bank has a website supporting online application, then use that. In the next few day, you will receive a call from the local DSA. They will start by saying "I am so-so, calling from <your> bank". Actually, bank never calls their customers. So the caller is no one but the DSA tele-caller.
Also, parallely apply for loan at some other websites too. Make a note of all registrations and corresponding bank's interest rates in a paper. Within the next few days, you will receive phone calls from all DSA's.
What information they commonly ask?
For a salaried person, the question mostly revolve around
1. Your net salary (take-home)
2. Your employer details, employment duration etc
3. How much money needed, duration of loan etc
What happens then?
Once these information are collected, they run their validation process and give you the results. Mostly they maintain a checklist of companies according to the profile. If your company is in the list, the processing time will get shorter.
Negotiating
Based on the company profile and salary you get, they usually have a "below X / above X" rule. The X is a benchmark salary limit. If your net salary is below this benchmark then a certain set of charges, interest rates apply. If net salary is above this benchmark then another set of charges, interest rates apply.
If your credentials are good , then the agent usually starts with a high interest rate. Most people who are aware of negotiation option start negotiating well and get a good deal. Others or newbies usually fall for the higher interest rate. And DSA agents will try hard to maintain their stance for higher interest rates. Because if they settle for low interest rates, their commission will be reduced. Who will be ready to lose their precious commission? Try to judge the tele-caller and find out if she/he is dominating. Usually their tones are always commanding.
During the first call, provide them only the basic information they need and ask them what will be their best offer to you. Definitely they will not give their best offer, but will give you the high interest rate package. Just note it down along with the name of the caller and say "Okay. Thanks for the information. I've pinged couple of DSA's too. I will choose the one who gives me a better offer." and hang up. Dont even wait to listen what they say. :-)
Immediately, they will call you again and say that, it is a best offer and surely they will process it within next 3 days or even 48 hours! The best reply is - "Well, Thanks for the speedy process offer. I am not in a hurry anyway. Let me go through all offers from DSAs and pick the one that make me happy". The next question will be "Sir. Shall I call you back tomorrow?". Pretend to think for a second and reply "Call me next week" and hang up. No need to be polite.
Once you get enough calls from DSAs and recorded the details, go through and check it against the online websites. Mostly you will find the offers are on the costlier side.
Within 2 or 3 days you will receive calls asking you about the status. Now it is your turn to play. Ask them better discounts. Discount in interest rate is priority no:1. Waiver of processing charges will be a jackpot but it is rare. Tell them that you are an existing customer of the bank, and you have the right to get a discounted package rather than a default retail package.
Tell them that their interest rates are high and you are considering another DSA who offered a better package. Unless they offer a good discount of rate of interest and procesing charges you will pick the other one. When they ask you how much their competitor offers, tell them the lowest offer you found in the internet. The negotiation starts. Tell them that if they give the best offer you will go with them, or else the competitor DSA gets the business. Once you speak like this, the tele-caller will understand he/she is not talking to some common man and you are a tough negotiator. Usually, the next call will be from the manager of the team with reduced interest rates and better packages. Again tell him you are not in a hurry and will take time until their deal makes you happy.
Carry on for a total of 6 or 7 calls max. After that you will definitely get a good offer and pick the best one.
Things to note
- Never show that you are urgently in need of money
- Take your time
- If they dont agree, then cut the call immediately with a "Thanks. Bye".
- Make the calls to DSAs in the second half of the month. Because second half of the month is always busy to complete their target. You get a competitive edge.
- Whenever they say it is not possible - say "yes it is possible. You can do it."
- Call them by their name. Dont continue a call without names.
- Make sure you tell them that you will finalize the deal for the best offer.
- Do not tell abrupt lies. For example, dont say "Another DSA is offering me 10% interest" while the lowest market rate is 13%. THey are in business, and so they too know the market well.
- Marginal lies are okay. "Another DSA is offering me close to 13.5%" while the lowest market rate is 13% is fine.
The free insurance offer
Totally useless option that will benefit the bank in case something happens to you. Typically this insurance is a security implied, to cover the loan amount and not to cover you. For example if the applicant dies, the insurance money will go to the bank, and not to the applicant's family. If the applicant is stupid enough, the DSA will even impose that insurance charges on him. So better dont fall for the insurance gimmick.
WIDGETIZE