Secured Loans – Boom Time for India’s Lenders
Lack of Public Transport Forces Vehicle Purchase
India is a vast country with a billion-plus population. Unfortunately, public transport has been a neglected sector for this developing country. People are forced to use transport that is either bad or in certain cases does not exist at all. Bad roads make life even more difficult for people looking to travel from one place to another. This is a fact about not just the villages, but also some of the major cities. With the easy availability of secured loans from banks and reduced interest rates, bachelors are looking to splurge on two wheelers in a big way.
Easy Loan Availability: A Boon to the People
Even though the recession has seen cuts in the job market, the situation is not completely grim in this country. Urban bachelors are still able to find jobs that pay well and leave them with disposable incomes in their accounts. Since travel time to commute to and from work is a major problem, these bachelors are looking to invest their money in vehicles that will give them the comfort of a hassle-free travel facility. Banks and institutions are more than willing to lend the money, as the loans are secured. With interest rates coming down in the month of October, a surge in sales was anticipated by manufacturers. Their anticipation was not unfounded. An increase in sales was seen in the month of October and continued into November as well.
No Issues with Credit Checks
India does not have a centralized system where credit scores of borrowers are monitored. As loans against vehicles are secured, banks are inclined to approve applications overnight. The only criteria that they seem to apply are an age limit of 24 on a person applying for the loan. Apart from the age factor, banks would also look for proof of employment and residence from the applicant. In the absence of proof of employment, a cosigner for the loan will also suffice. The applicant will have to make a down payment of 15 to 25 percent of the cost of the vehicle, apart from the costs of comprehensive insurance, vehicle tax, etc. The bank will also request direct debit facilities from the borrower’s accounts for repayment of the loan.
Vehicle to be Hypothecated With the Banks
The dealer selling the vehicle will have the name of the bank financing the deal on the original papers of the vehicle. This ensures that the Regional Transport Authority that completes the registration makes a note on the registration card that the vehicle is the primary property of the bank financing the deal until the loan is repaid in full.
Low Pre-Payment Charges
Borrowers of secured loans in India are spared from bearing high pre-payment charges. They are free to close the loan at any time that they find convenient. There are cases where borrowers have defaulted and paid additional charges. Banks find it easier to reach a negotiated settlement in such cases rather than apply a foreclosure on the vehicle. Current surveys certainly show that India’s banks are in for some good times in the days to come.