With the interest rate cycle reversing, a number of banks have increased base rates, making loans expensive for existing borrowers. Ideally, the advice which comes from a section experts is to switch the loan to another lender. But, if the property for which you’ve taken the loan is under construction, switching your loan to another lender could be an uphill task, notes a report in Business Standard today.
There are a number of reasons, for one banks do not approve all projects. They are selective and there are chances that the project in which you have bought the house may not have been approved by the new lender. In this case, you won’t be able to switch the loan.
The next is the schedule of construction by the builder. If for some reason the project is delayed, no new lender would be interested in taking up the paper. After all what’s the guarantee that the project won’t be delayed further or even get stuck completely?
Also if you have repaid only a minimum fixed amount during the construction of the loan, it might be looked down upon by the new lender, thinking you are a risky customer. On the other hand, if you’ve paid a substantial amount, especially the interest, the new bank may not be able to make money out of your loan account, and hence reject your switch proposition. It’s really a catch-22 situation.
And those who have been irregular in repaying the current lender need not even dream of switching the loan. No new lender would want a bad borrower. But, even this depends. Some banks don’t mind riskier customers, but they would have stricter terms and conditions for such borrowers.
Another reason why you might find it difficult to switch the loan is when you don’t have the necessary paper work from the builder. You can read the full Business Standard story here.