Everything in life is negotiable, as any good corporate lawyer will tell you. This axiom is just as applicable to home loans as to anything else.
So what are they things you can do to get the best deal from your lender? Let us discuss a few.
All rates are negotiable
Bankers will typically talk about ‘base rates’, ‘floating rates’, ‘Bank PLR’ and ‘RBI directives’. Remember that, as long as you are not demanding something completely unrealistic, it’s worth asking for. RBI does not actually set the rates, and Banks have considerable discretion in the matter. So if your eligible for a large-ticket loan, especially in the 75 lakhs – plus range, try hard to bargain, and do not be afraid to pit lenders against one another – if HDFC is offering a lower rate than ICICI , tell ICICI to try and match it, and then see if both can match even lower rates by someone else.
Processing fees are also negotiable
Whether or not the Bank goes very low on the interest rate, try to lower the processing fee. This is especially so in case of a loan for a new flat from a prestigious builder. So if that is the case for you, do try and get the fee lowered as much as you can!
Try for group bargaining
If you are part of a group of colleagues or friends buying flats in the same building or housing complex, try to hunt for a loan together. It gives you the power of group bargaining, since it is attractive for the lender to service multiple loans together. You should definitely try and bargain for lower processing fees (since the Bank’s expense should be split among all of you) as well as for a lower rate.
Check your CIBIL score
Banks decide your loan eligibility based on your credit score, which is maintained by CIBIL, India’s main credit scoring agency. CIBIL allows you to access your own credit score (for a nominal fee) and it is definitely worth getting it. If your CIBIL score is high (more than 750), definitely try and pull your interest rate lower by using this information with the Bank. If it is above 800, even better!
Opt for co-borrowers and guarantors
For a young person, sometimes it is easy to be intimidated by Bankers and also feel your own income does not allow you to negotiate with the lenders. But if one of your parents or elder siblings who has a good credit standing or personal wealth is willing to stand as a guarantor or co-borrower with you, your ability to negotiate is considerably enhanced. Similarly if you are married, an earning spouse signing as co-borrower increases your eligibility as well as gives you bargaining power
Approach banks close to disbursement date
If you are negotiating without a definite disbursement date in mind, lenders will typically not take you very seriously (unfortunate but true). They have their own targets and are more interested in cases where a large disbursement can be made very quickly as compared to long-term, staggered disbursements.
Try to start negotiating near the end of a quarter
Inside secret from the banking world – all branches have very stiff targets and they are pretty desperate by the end of every quarter (June 30, September 30, December 31, and above all, March 31). If your requirement of funds is coming close to these dates, push your lender hard for a better deal. They need to disburse money to you almost as much as you need them to lend it to you! So a little clever timing of your loan requirement and you might get a once-in-a-lifetime deal.
So good luck, and happy loan-hunting!