Teaser home loans

Q: I heard about Teaser home loans some but could not understand what is it. Please brief me

Navin Verma, Bangalore

26th October 2013

Home Loan in Bangalore

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interest rates

teaser home loans

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iMy question is that is the “teaser loan scheme” a marketing gimmick and are they beneficial to customers?

Armaan Saxena, Bangalore

26th October 2013

Comment

t is the “teaser loan scheme” a marketing gimmick and are they beneficial to customers? From a positive outlook, teaser loans help to make a good start for a long term loan commitment. This is due to the reason that getting a loan sanctioned at a particular discount for the first few years is definitely worth, especially in the era of rising interest rates. Hence, a property buyer should definitely opt for such schemes and go for it.

Yogendra, Bangalore

26th October 2013

When and Why they started the teaser home loan?

Navin Verma, Bangalore

26th October 2013

Comment

In the era of ‘increased interest rates’, borrowers are in a funk to avail a home loan, due to high monthly outflow that can take a toll on their savings. As an attempt to soothe the loan borrower’s sentiments and encourage them to avail loans, a number of banking institutions in India introduced the concept of “Teaser Loans” in early 2010.

Balaji, Bangalore

26th October 2013

Availing teaser loans, is considered as a risky move because of high default rates, and are generally proposed to low-income property buyers. However, when such borrowers attempt to refinance the loan before the rate climbs up, most of them do not come up to snuff for standard mortgages. As a result, borrowers bear the burden of increased monthly payments eventually.

Sukumar Gupta, Bangalore

26th October 2013

In the quest to bat eyes at the home loan seeking customers, a number of banks in the last few years have turn up with effective marketing strategies, teaser loans being one of the many. The concept of teaser loans clearly states that for the initial years, the loan will be on a fixed rate basis only to get converted to floating rate basis, eventually.

Yogendra, Bangalore

26th October 2013

Comment

But such a loan is generally not voted by the borrowers, since, servicing the loans becomes quite a difficult task when the normal rate becomes applicable. In a move to deal with this situation, RBI suggested the banks to set aside high capital of 2% provision from the earlier 0.40% on the teaser home loan schemes.

Sukumar Gupta, Bangalore

26th October 2013

According to RBI’s norms, all dual loans should be treated as teaser loans and provisions for such should be made by banks. Furthermore, RBI testifies the fact that such products are valid and are not banned, however, certain stringent rules are required to be adhered.

To straighten things up, RBI in 2010, asked the banks to make a “special provision” of 2% of the outstanding portfolio of such loans. In addition to it, since no banks were willing to accept the regulator directly, RBI asked the banks to pull out their teaser loan campaigns.

Seshagiri Mehra, Bangalore

26th October 2013