The slogan on the hoarding caught your eye: “No paperwork, get loan in 7 days.” You quickly jotted down the phone number but wondered how an entity, other than a bank or a lending institution, can assist you in getting a loan.
Indeed, they are not loan providers, but are “loan arrangers”. These service providers help you secure a loan from the comfort of your home. From filling forms to submitting documents, every minute detail is taken care of by them. Here’s a look at the benefits of availing their services.
These entities are, in general, direct selling agents of one or more banks. And since they facilitate or arrange loans for you, they are also called loan arrangers. The entire loan process is undertaken by them. They also keep following up with the bank on the status of the loan as well. Also, if the bank requires additional documents, the loan arranger will collect it from you and submit it to the bank.
Also see | Service Details (PDF)
So in a way, they help you save time and ensure the process remains smooth for you.
“We basically work as an intermediary between a loan provider and a loan seeker. Our main functions include completing documentation, submitting documents to banks and ensuring that the process does not take much time. And we provide these services at the doorstep of customers,” says Surjit Singh Grover, head (e-commerce), Andromeda Marketing Pvt. Ltd, a Mumbai-based loan arranger. However, there are different types of loan arrangers in the market and you need to find one who will give you the best service.
Types of facilitators
Single tie-up: These loan arrangers have a tie-up with a single bank and can only help in securing a loan from that particular bank. These agents approach you with various offers when you visit a bank.
Multiple tie-ups: These companies have tie-ups with different banks and do not rely on just one bank. Hence, these companies provide more choices to the customers and help them in getting cheaper loans. Most of these companies operate online. Some of the companies who have tie-ups with multiple banks include Rupeetalk.com, BankBazaar.com, Destimoney Enterprise Pvt. Ltd, Andromeda, Raaj Khosla and Co.
How they operate
After being approached by a loan seeker, most companies send a representative who explains the process and collects documents.
However, some companies follow a slightly different approach. Explains Adhil Shetty, chief executive officer, BankBazaar.com, “Through our website, you may get an in-principle approval from a bank provided you fulfil the eligibility criteria. The in-principle approval is provided within 10 minutes of a customer providing his personal details. He may take a copy of the approval to the bank and take the process forward himself.”
In this case, the in-principle approval results in final approval unless the information provided by the customer is found to be wrong.
Besides easy processing and time saving, some loan arrangers may help you in reducing the overall cost. Most banks charge processing fee for all kinds of loans. This may be 2-3% depending on the bank. A loan facilitator deals on behalf of many customers and has higher negotiating power. At times, loan arrangers convince the bank to waive the processing fees partly or entirely which reduces your overall cost.
“Banks mostly have a very rigid structure regarding the interest they charge from the customers. But the processing fee part is negotiable and companies may help customers in getting a better deal on the same,” said Satkam Divya, business head, Rupeetalk.com.
Can the cost increase?
These facilitators are a link between customers and banks. Normally, if an intermediary is involved in any transaction, the costs are likely to go up. However, that is not the case. Firms generally do not charge from customers. Instead, they get their share from banks in the form of commission.
Loan arrangers cannot guarantee loan approval. The approval of a loan would depend upon whether you fulfil the criteria laid down by the bank or not. If you don’t meet the eligibility criteria, your application will be rejected even if you have availed the services of a loan arranger.
“We only care about the eligibility of the customer and nothing else,” says a New Delhi-based banker who did not want to be named.
The other drawback is that many loan facilitators only show interest in the process till the loan is sanctioned.
“Reputed companies remain available for customers throughout the course of the loan but it is also true that there are many who will not be interested once the first disbursal is made,” says Divya.
Also, the state-run banks do not operate on this model and hence they remain out of reach through this channel.
What you should do
It is not mandatory for customers to avail the services of these agents. It is best if you approach the bank directly. By doing so, you will be better informed about the loan conditions.
But if you don’t have time, there is no harm in availing the services of these intermediaries. Since they do not charge any fee, you have nothing to lose. However, customers should remain in contact with bank executives. “Customers should check with the bank and verify information about these arrangers. If the information provided by the company turns out to be incorrect, one should not deal with that facilitator,” says Surya Bhatia, certified financial planner and principal consultant, Asset Managers, a New Delhi-based financial planning firm.
Illustration by Shyamal Banerjee/Mint