This post is more out of personal experience – a struggle with a loan taken from a Housing Finance Company. There are many Housing Finance Companies that appear to offer loans at very attractive rates, even better than the Nationalized Banks and Private Banks. Some popular Housing Finance Companies include LIC Housing Finance Company (LIC HFL), Repco Home Finance, Reliance Home Finance etc. This post is only to caution you on the challenges that you are likely to face with such companies, and not against any one in particular.
Unlike with loans availed with Banks which are linked with an RBI set threshold (called the BPLR or similar rates), the housing finance companies have their own basis of setting the interest rates. Inevitably once the first year or so of your loan is completed, the rate keeps increasing. Whenever there is an increase, the new rates are auto applied. Whereas when an occasional rate reduction occurs, you are expected to pay charges to reset the loan rate. You can compare your interest rate with the advertisements for new customers – there will be a blatant difference of 3-4 percentage points. This and many other aspects of the loan are not in favour of the borrower. Moral of the story – even if there are some initial hiccups when availing a loan with a nationalized bank, try not to choose the easier route of loans from Housing Finance Companies.
About the Author
