Three years ago a close friend of mine applied for a personal loan. While we were socially chatting, he completed the application process. What amazed me was the speed at which his loan was sanctioned and disbursed. It all happened, literally, in a matter of minutes. Yes, he had a long-standing account with the bank and a solid 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 snap. He had demanded down payment, the necessary documents, more than the required income level and his needs were well within disbursement limits.
Imagine his surprise, when the process took several days instead of minutes and was filled with multiple branch visits and several emails about documents. Now I found it ironic because he could successfully get an unsecured loan in a matter of minutes, but it took him longer to convince the bankers that he qualified for a secured loan.
A loan where a bank can easily sell the property if the individual defaults tomorrow, a loan on which additional insurance is completed to secure it, in the event that the person dies due to an unfortunate event. However, this type of loan requires countless follow-ups and disbursement processes, than a personal loan without collateral, without additional insurance, but which can be disbursed by a bank in a few minutes.
This incident made me think. What was the principle behind this excessive delay for a loan backed by sufficient guarantees to safeguard it? With the technological advancements we seem to have made over the past couple of years, the documentation process, site visits, and disbursements should be fairly quick.
Part of the problem lies in the process. The extensive documentation required, the physical valuation of the property, and the lengthy sanction and disbursement process may require an overhaul. Each step in this process can take up to several 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 industry is optimistic that retail sales will be encouraged and that new projects could be launched in the future. 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 make home lending easier, stepping up their digital platforms to ease the borrowing process.
With considerable data already available with the Indian stack and in bank and credit bureaus records, mortgage lenders should focus on a process of assimilating the available data and mapping it to the borrower’s financial records.
For documents that fall exclusively under mortgage lending, lenders may consider a specific quick toolkit of additional documents that can be downloaded digitally. Lenders can also take advantage of geolocation and video applications to verify the physical condition of the property. It could save cost and processing time.
India’s housing sector has not seen a slowdown, despite the tough 18 months the economy has seen, this change could very well be the boost mortgage portfolios need. However, this would mean significant changes from traditional business models, but also extremely necessary in the long run.
The recent pandemic has paved the way for accelerated digitization, and lenders who invest in making the entire loan cycle transparent and swift stand to gain.
As a consumer, I would just say that despite the high interest rates on personal loans, I prefer their speed of service. If mortgage lenders chose to raise their interest rates slightly to provide faster, easier loan processing 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 greater 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 checks at the end. use, and that has the potential to push our country people into a debt trap.
The opinions expressed above are those of the author.
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