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![[Name your price!]](29lead.gif)
Nikita Agarwal
If you're looking for an ideal home loan, you could truly be in the driver's seat now. The Internet makes it possible for you to get the best deal, with different banks vying to get a piece of your business.
This is how it works: You decide the amount and the monthly installment you want to pay for a loan, and all you have to do is wait three days for the processing. At the end of that period, you get a tailor-made loan for your dream home.
Sounds too good to be true?
Apnaloan has tied up with auction site baazee.com to create a marketplace where banks will bid for your loan business. You decide the monthly EMI per lakh you are willing to pay. In doing so you may maximise tax reduction on interest payments. The loan companies will then bid for your loan, trying to offer you one that is closest to your requirements. Citibank, Standard Chartered and IDBI Bank are current participants.
The scheme launched in July 2002 in Mumbai, is called 'reverse auction', and aims to make the entire process of obtaining a loan, more transparent and competitive.
The process
All you have to do is log on to baazee.com and complete a form with how much EMI you're willing to pay per lakh. This form is sent to Apnaloan, which then collects proof of income documents and property papers from you. Apnaloan verifies the income and property documents of each customer who places an application online, acting as the entry-level filter. Customers with a good credit history can hold out for the best deal.
Valid papers are then submitted to the concerned banks depending on the amount of loan. At this point, the auction is declared open. The banks will then bid for the custom deal. Banks are able to view other bids, but not the names of competing banks. The customer can view both. This is how Apnaloan offers a 'name your price' auction for home loans. Within three days, your form will be processed and participating banks will bid for your custom. Relevant papers are given to the participating banks only after you accept a bid.
A win-win situation
"Reverse auctions are basically applicable where there is standardisation of the product. The bidders must have thorough product knowledge, and that's where Apnaloan steps in," informs Harsh Roongta, CEO, Apnaloan. He adds that the bank must make minor procedural changes and agree to not verify a customer's credit history, else the customer will receive verification calls from several different banks, which might prove tiresome.
"This concept is another way of sourcing quality loans as all the customers come through a reliable source, which is bazee.com," says Pawan Punjabi of IDBI Bank.
Banks can now be selective and service a customer whose profile they like, without having to announce a drop in interest rates. "It gives them the freedom to choose a customer and decide strategy. It is a win-win situation," explains Roongta.
Going by reports, the scheme is doing well. Apnaloan is currently disbursing loans worth Rs 2 crore per month from Mumbai alone, which is one-fifth of their business portfolio. "IDBI Bank is able to source Rs 50-80 lakh of business every month," claims Punjabi.
For the customer, it means cheap home loans at custom rates and affordable EMIs. According to Gautam Thakker, chief marketing officer, bazee.com, "It will empower the user to get the most attractive rate through competitive bidding."
When customer is the king
Arpita Seth who availed of reverse auctions for her 3-room flat in Mumbai is all praise. "You don't have to go from one bank to another asking for a loan; it saves time and paperwork and reduces the headache in finding the perfect loan."
Rajesh Kamat, a hotelier, searching for a home-loan agrees,"With property prices rising, it's good to have a service that makes loans easier to obtain and repay."
"Reverse auctions will make home loans so easy and popular that even young professionals will be able to buy their own apartments. Many of my colleagues have availed of the benefits and I might go in for it too," comments Nilima Chandorkar, a software professional.
The banks are wooing their clients with competitive interest rates. Says Punjabi: "We have offered interest rates as low as 9.65 per cent for a 20-year tenure, which is the lowest in the market."
So, is there a catch?
None according to Roongta who assures, "There is no 'fine print'. The only problem if at all, was that initially some banks wanted more documents after the bidding, but now that has all been ironed out. An issue arises only if the customer has not decided on the property he wants to purchase; that is the only case where a problem might arise."
Adds Punjabi: "In fact, the customer is certain to get a loan from any one financier."
With the pilot project soliciting such a positive response, the scheme will be extended to Delhi, Chennai and Bangalore. The next six months will see a planned rollout to other major metros.
The scheme may also be extended to car loans but not to educational loans as the market is not very competitive in that segment informs Roongta. According to Punjabi, home loans were a pilot project and in view of its success, reverse auctions will be introduced for other products as well.
"People are accustomed to looking for auctions on the site, so we decided to tie-up with them," explains Roongta of the decision to tie-up with bazee.com.
As for competition, Roongta is confident of handling any that comes by: "Competition will only help push the new concept and is always welcome. It will keep us on our toes."
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