How to choose the right lender for us? Nowadays we all know how lenders are so eager to give us loan. They all claim that they are ready to serve you. But in reality it is different. Hence, let us undrstand of how to chose the right lender for yourself.
Gone are the days when banking used to be intimidating and banks used to pride themselves on maintaining high walls between themselves and the customers and throw a bunch of jargon and paperwork for any banking related issue. In this day and age of digital disruption, banking has gone through a sea change and banks must comprehend the needs of the customer. Banks must act as a facilitator and a solution provider to each and every financial need of a customer and build a relationship and its own capabilities in manner so as to provide for his future financial needs.
Needless to say that in this situation, you the customer are indeed the king as you are in a position to make the choice of the right lender according to your needs. Especially if you have made an attempt to increase your CIBIL score, and have a credit score of 800 (out of 900) and above you are at a vantage point. Making the right choice as far as a lender is concerned has assumed immense significance in this day and age when our lives revolve around credit.
If you are availing of a credit line you are willy-nilly entering into a long term contract with your lender and thus it is necessary that you are on the same page so that you do not receive any nasty surprises later. So here ae five tips to choose the right lender for yourself.
How to choose the right lender for US?
Factors to consider for choosing a lender
Look beyond interest rates
It is ironical that in India, while selecting a loan product such as a home loan, a customer tends to look for interest rates as the base criteria makes the selection based only the interest rates that the lender may be offering. But as a consumer it is highly important for you to bear in mind, that the best interest rates may not always mean the best service standards. There are many other parameters that should be part of your evaluation process. As a customer, you must also be clear about the fee structure that the lender shall be charging you. If a lender is not being upfront about the various fees that it intends to charge or is evasive when asked about fees it is a clear indication to stay away.
The after sales service
You may think that with a loan product, the after sales service does not really matter, but that is where you are wrong. Whether it is an easy personal loan that you have availed of from the lender or a low interest rate credit card, the after sales service is of high relevance to you. The responsiveness to customer queries and standards to serve them after the sales has been done is of pivotal importance, as you may wish to foreclose a loan or may run into financial trouble that may force you to alter the repayment clause on your original agreement. Before deciding upon the right lender it is important for you to assess how willing the lender is to keep the communication channels open after the product has been sold. Modes of communication, TATs, services available through self- help on online account etc can be a few factors that can make consumer’s life easy post disbursal of loan.
The product suite and advisory role
A bank or a lender these days must be capable of offering a full range of financial services. While seeking out the right lender, do not have a myopic view and concentrate on low interest rates on the home loan, auto loan or personal loan product that you are opting for at the time being. Do enquire if your prospective lender is equipped to support your other financial ambition and is ready to step into an advisory role to help you chalk out a financial path and help you with the right investment products along the way. This way you would be able to leverage the relationship more effectively and get the services from one financial institution.
Loyalty benefits
Once again you credit score will determine whether or not you are creditworthy enough for the lender. If you have made a conscious attempt to improve CIBIL score your lender will certainly want to hold on to you than go through the trouble of looking for new customers in lieu of your loyalty. In such cases ask your lender what your loyalty means to it and whether you are eligible for discounts if you bought other financial products from them. The idea is to find out what kind of value added services a lender is willing to provide overall if you pledge loyalty to them.
The reputation of the lender
Lastly, but not the least, in this modern day age of hyper- connectivity, it is easy to check out the reputation of the lender online. There are various online forums that can lead you to real customers who can testify about their experiences and give you an objective opinion. It is also a good idea to have a face to face interaction with friends and relatives who may have recently availed of a loan product from the bank and his or her level of satisfaction with the service standards of the bank. Usually a larger institution that has a considerable experience in the business turns out to be the reputable in the business.
A little curiosity can go a long way in deciding whether or not a lender is right for you. So exercise your rights as a customer and make a right choice as far as your lender is concerned.
Note-This is the guest post by Mr. Arun Ramamurthy – Director Credit Sudhaar and Co-author of “Unlock the Power of your Credit Score”.
Disclaimer-BasuNivesh is in no way asociated with author or his firm. This post is purely for knowledge sharing purpose. We have not received any monetory benefit from the author or from his company to publish this post.
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Santhosh
Thanks Basavaraju for sharing a great information! keep posting…
Basavaraj Tonagatti
Santosh-Pleasure 🙂
Amit Sharma
Hi, very informative article.
I am 28 years old and I am searching for good investment options. I just came to know about peer to peer lending as an emerging platform in India and wanted your views on that.
Basavaraj Tonagatti
Amit-It is more riskier. Do at your own risk.
amit
A friend of mine invested a certain sum from some online platform ( http://www.loankuber.com ) and he earned some great return through it, since it’s a new concept, he hasn’t withdrawn his principle amount yet, so dont know much about the repayment of the principle, but the rate of interest is surely pretty amazing!
Can you please tell me what are the risks associated with it?
Basavaraj Tonagatti
Amit-Higher the return HIGHER THE RISK. First understand on which basis they are collecting money and how they are providing such high returns.
Anup Kulkarni
Dear Basu,
You are simply great. You have deep positive attitude towards any type of comments.
Basavaraj Tonagatti
Anup-Pleasure 🙂
jatinder gupta
If any body does not like any article then why we are using harsh words why take personal here .
Basavaraj Tonagatti
Jatinder-It’s alright 🙂 It is their individual opinion and we have to accept it.
Pradeep
Lets be frank, no bank is trying to impress its potential borrower these days. Nobody reduce their interest rates despite your high CIBIL score. In fact the PSB managers don’t even have any time to sit and negotiate these things with you let alone entertain reduction in rates or wavering of any fee.
Financial planning with the lender? Now I get it, this article is aimed at HNIs who are the ones which the banks will want to woo as their customers and ready to put them on a negotiating table.
As for NBFC’s we know their customer friendliness ends the day you get the loan. All of them including the biggest one don’t reduce rates for existing borrowers when rates go down. Only reason people go to them is the scrutiny of loan application is much more relaxed.
Banks slightly do better on interest rates but they don’t care much in terms of after-sales. RBI enforces most rules on them and they have no choice but to follow them.
Just go for best interest rates if you are highly credit-worthy, else your options are limited to the lesser lenders with higher rates
Basavaraj Tonagatti
Pradeep-Banks not in hurry to sell you a product called LOAN??? Check your facts. They are looking for a guy who are ready to be in trap for next 20-30 years in the name of home loan or any other type of long term loan.
Pradeep
Basu, I think you are referring to personal loans which banks and their agents sell by telephone. Home Loans doesn’t come very easy especially from the ‘reputed’ banks in the industry. They ensure everything is in order before sanctioning the loan and no negotiations on the interest rates. Of course there are some HFLs like LIC Housing who trap you for home loans with less scrutiny and initially lower fixed interest rates.
But as I said before, if you are creditworthy, you could get loans from the better reputed banks that offer lower interest rates. Else you have no option but to choose the HFLs like LIC Housing.
Basavaraj Tonagatti
Pradeep-I dont have second thought about scrutiny. But there are few officials who run behind target and can do anything for that sake. Otherwise NPA is not so high.
Sreekanth
No.1 useless article! What is relation between lending and financial planning? What “loyalty” points exist? Which lender is caring about so called loyalty and want to hand-hold a customer? What reputation of the lender is the author talking about? This article does throw light on nothing in reality. There is no sincere efforts put in to write this! I doubt if it is really written by the said author.
Basavaraj Tonagatti
Sreekanth-For your information, lenders nowadays are turning into financial planners and also the financial product sellers (Recent RBI caution about seperation of this, just a reminder to you). Reputation of lender depends also. For example a difference between a reputed bank to NBFC. Which one you chose?
Also, thanks for your views calling “USELESS ARTICLE” 🙂
Sreekanth
Banks may be doing 100 things, but how is lending related to financial planning, to consider financial planning as a criteria? This is first time I ever heard or read someone saying that I should be concerned about financial planning while I’m intending to take a loan! The author may be intending to focus on insurance often bundled with home/personal loans. Google for any bank or NBFC reviews, there will be both +ve and -ve views. Let’s look in reality – HDFC, ICICI, Kotak,Yes, CITI, SBI, Canara, Bajaj Finance, PNBHFL, LICHFL, Tata Housing,HDFC etc all are well reputed. What additional reputation a customer can check for these institutes?! These reputation checks are useless for these institutes where majority loans are being served. But I’m almost sure that any reader who reads an article like this already knows that he should stick to established players! Most loans are taken from banks or big NBFC players like Bajaj, HDFC. Most home loans are taken from public or private banks. There is nothing new indeed in this article that is not known to anyone who has basic knowledge. Your comparison of Bank vs NBFC is plain wrong. Bajaj Finance allows online part/pre payment for loans without any time limits. CITI bank has 6 months waiting time for pre-closure and 12 month waiting time for part payments and that too only one part payment with a multiple of EMI is allowed. Same is case with most other banks including HDFC bank. What reputation of CITI or HDFC bank compared to Bajaj Finance helped here for the benefit of customers? Axis bank allows friendly part payments compared to even bigger players like HDFC, ICICI, PNB, SBI etc. HDFC, ICICI, SBI are even more reputed than AXIS. Almost none of the big banks like HDFC, ICICI allow online payment of part payments even when part payment is allowed with too many conditions. So, what reputation are we even talking about? This is exactly why I said that this article throws zero light practically.
The only interesting thing in the article is that, it as usual followed the trend of providing ‘tips’ in even figure only like most articles published on media – 5 tips, 10 tips, 15 tips etc!!
Basavaraj Tonagatti
Sreekanth-“Let’s look in reality – HDFC, ICICI, Kotak,Yes, CITI, SBI, Canara, Bajaj Finance, PNBHFL, LICHFL, Tata Housing,HDFC etc all are well reputed”-Well reputed? Check their NPAs and their financial health. Part payment not allowed? For example in Corp Bank, you can take home loan today and can close it next day. Interest will be for a day. Rest is left with you to DECIDE 🙂