Three years ago, a close friend applied for a personal loan. While we were chatting socially, he completed the application process. What amazed me was how quickly his loan was sanctioned and disbursed. It all happened, literally, in minutes. Granted, he had a long standing account with the bank and a strong credit rating, it was still instantaneous.
A month ago, the same friend applied for a home loan. From experience, I expected this to be a breeze. He had required down payment funds, necessary documents, more than the required income level and his needs were well below disbursement limits.
Imagine his surprise, when the process took days instead of minutes and was filled with multiple branch visits and multiple emails about documents. Now, I found that ironic because he could manage to get an unsecured loan in minutes, but it took him longer to convince the bankers that he qualified for a secured loan.
A loan where a bank can easily resell the property if the individual defaults tomorrow, a loan on which additional insurance is completed to secure it, in case the person dies due to an unfortunate event. However, this type of loan requires countless follow-ups and disbursement processes, compared to a personal loan where there is no collateral attached, no additional insurance, but which can be disbursed by a bank in a matter of minutes. minutes.
This incident got me thinking. What was the principle of this excessive delay for a loan backed by sufficient guarantees to guarantee it? With the advances in technology we seem to have made over the past couple of years, the process of documentation, site visits and disbursements should be fairly quick.
Part of the problem is in the process. The extensive documentation that is required, the physical assessment of the property, and the lengthy sanctioning and disbursement process, could all be overhauled. Each step of this process can take days or weeks, depending on the needs.
The recent Union budget proposed several measures that will be conducive to homeowners looking to buy their dream home in 2021. The sector is optimistic that retail sales will be encouraged and new projects could be launched in the affordable housing segment, in line with the government’s vision of “housing for all”.
At such a time, mortgage lenders need to be nimble to make the most of this opportunity and facilitate home lending, by developing their digital platforms to facilitate the borrowing process.
With considerable data already available with the Indian stack and in bank and credit bureau records, home lenders should focus on a process of assimilating the available data and matching it with the borrower’s financial records.
For documents that fall within the exclusive purview of the home loan, lenders may consider a specific quick toolkit of additional documents that can be digitally downloaded. Lenders can further leverage geolocation and video applications to verify the physical condition of the property. This could reduce costs and processing time.
India’s housing sector has not seen a downturn, despite the tough 18 months the economy has seen, this change could very well be the boost the mortgage books need. However, this would mean significant changes to traditional business models, but also extremely necessary in the long term.
The recent pandemic has paved the way for accelerated digitalization, and lenders investing in making the entire lending cycle transparent and fast have a lot to gain.
As a consumer, I would simply say that despite the high interest rates of personal loans, I prefer their speed of service. If home lenders chose to raise their interest rates slightly to make it faster and easier to process loans, from the comfort of my home or office, I certainly wouldn’t mind.
The extra cost may be worth it to be stress free and dispose of my funds faster and in turn own my dream home with a much better experience!
For a country aspiring to become a developed nation, I believe that a hassle-free instant loan for a home will do more basic social good for our citizens than easily disbursing a personal loan where there are high interest rates. , no proper end-use controls, and which has the potential to push our fellow citizens into the debt trap.
The opinions expressed above are those of the author.
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