What You Need To Know When Considering an HDFC Personal Loan - MoneyTime

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The Housing Development Finance Corporation (HDFC Bank) is a financial services company based in Mumbai, India and offering a number of different financial products to its customers. 

The largest bank in India is called simply HDFC Bank and is known throughout the world. 

HDFC Background

HDFC was the first privately held bank in India, and since its 1994 founding, it has developed into India’s largest private-sector financial institution. There is an HDFC Group, with a variety of different financial and real property websites that offer a number of products, some of which are Home Loans and Refinancing. 

HDFC Personal Loan

HDFC Personal Loan

The organization offers its private banking customers personal loans for medium interest rates and relaxed requirements. There are some things that should be considered before jumping on an HDFC personal loan.

HDFC Basics

The bank is listed as a foreign entity on the New York Stock Exchange, which is somewhat of a confusing duality. HDFC is a bank with banking licenses to offer financial products to customers in the USA. Many foreign banks do this since the United States is a good country in which to conduct business. HDFC is somewhat different in the offering of personal loans based on their Indian criteria for approval. 

HDFC Personal Loan Approval

The personal loan at HDFC is offered with the need for minimal documentation to applicants that are already HDFC Bank customers. The process only takes a few seconds and is practically guaranteed to customers with good credit history and larger balances in their other financial accounts with HDFC. The customers who are pre-approved get their personal loans disbursed from 10 seconds to 4 hours after accepting the offer. The non-customer applicant takes a bit longer. 

HDFC Personal Loan Features

As of September 2019 update on HDFC financial statuses, the interest rate for an HDFC personal loan is 10.75% – 22.00%, with a processing fee of 2.50%. The usual terms for a loan between Rs. 50,000 to Rs. 40 Lakhs (4,000,000 rupees) are 1 to 5 years, the lowest EMI (Equated Monthly Installment) per lakh is Rs. 2187. How this equates into USD is presented below –

Loan Amounts from $709.12 – $56,730.00, at the latest market exchange rate.

Interest APR 10.75 – 22.00% with a 2.50% processing fee.

Repayment period 12 – 60 months

Minimum Monthly Payment is $31.02

Assessed Fees

A number of fees apply, especially prepayment penalties and late fees, which are assessed on the day after the due date, with a processing fee and interest fee above the regular interest rate and processing fee. Some caution is warranted. Overdue EMI interest is 2% + EMI / Principal. 

Prepayment and Pre-Closure

All personal loans have charges for prepayment or pre-closure, as well as early payments of the EMI. In almost all cases the EMI is due on the first of the month, no matter what date the loan was originated. If paid before the 1st, or after the 1st there is an interest charge added to the EMI.

Further Prepayment Limitations

In the case of prepayment or pre-closure, there is a schedule that is followed according to a block of months the loan falls into – the charges (penalties) are as follows

  • Salaried (e.g. the loan is based on the salary you make): No pre-payment is permitted until after 12 EMI’s are completed.
  • Part Payment is allowed up to 25% of the total outstanding balance for the year 
  • Two prepayments of 25% outstanding balance for the year can be made during the loan tenure. 
  • Note: there does not seem to be any provision for a private customer (salaried)  to prepay the entire balance of the loan early
https://www.hdfcbank.com/personal/products/loans/personal-loans/rates-fees

Borrower Requirements in the USA

The HDFC personal loan offered in the USA for non-customers who are not pre-approved usually needs a credit check, as well as the usual documentation for a personal loan from an established bank. HDFC bank requires a current pay-stub, proof of identity and proof of employment status (employers in India provide a letter that the employer gives to the bank to prove active employment over 3 months). 

World-Wide Reach

The average US borrower would not readily know about HDFC but out of the country it is widely known and regarded as reputable. The most important issue to remember is that an HDFC personal loan is carried by a bank that is only partially regulated by US banking laws. This is a public corporation in the United States but maintained as a privately held corporation in India. The private sector in India is much different from the private sector in America. 

What HDFC Offers for Banking

Compared to other banks and lending institutions in the United States HDFC is considered a traditional bank but has no branches in the United States. The bank offers wire-transfer services that carry no fee to send money to India, but there is a fee to take money out of India. The HDFC personal loan can be funded to an HDFC account that is accessed through NetBank, the HDFC portal for online banking. 

Online Banking

NetBank can accept payments, open accounts, apply for loans, and access other financial instruments within the HDFC family of companies. The access is through their main website and allows users to initiate transactions 24/7 all year long. The technology is not new, or cutting edge, but does allow for a wide variety of transactional and information-based features. 

Application Online

Applications for an HDFC personal loan can be made right online. The process does include an eligibility application for several different types of scenarios pertaining to the borrower’s financial status and background. 

Other Personal Products at HDFC

There are a variety of different types of personal products, offered by HDFC, and many of them offer the ability to access an HDFC personal loan. 

  • Cards
  • Accounts
  • Deposits
  • Loans
  • EasyEMI

How an HDFC Personal Loan Compares with Other Loans 

HDFC  

APR 10.75 – 20.99% (highest 30%) 2.5% Processing Fee – Calculated EMI (No surprises full Transparency) – Loan Amounts $700 – $56,000 – 12 months – 60 months – Easy Payment Options

HBSC 

APR 3.58% – 35.99% (highest 35.99%) $3,000 – $30,000 – 24 months – 60 months – Several different levels, such as Existing Customer, Premier Account, and New Account. Payments are easy and the EMI is fixed for the life of the loan. Fees apply, such as prepayment and pre-closure and late fees. Can make payments and apply for loans at branch locations. 

CitiBank 

APR 7.99% – 17.99% (minimum $10,000 loan) Loan Amounts $2,000 – $50,000, 12 months to 60 months – Can earn rewards for linked checking accounts enrolled in Citi ThankYou Rewards program. Fees – Overdue EMI additional Interest + EMI and Penalties – Prepayments offer no reductions – all outstanding interest and principal due at the time the prepayment is made. There are prepayment penalties and penal interest charged at prepayment. Part payments are accepted. 

Global Banking Comparison of an HDFC Personal Loan

There are a number of different international banks offering personal loans globally, and these can be found on the internet. On the upside: An HDFC personal loan is competitive, has an easy application process, relaxed requirements and offers for eligible bank customers in disbursement time and lower APR. 

On the downside: as with many loans today, HDFC loans are changing the way the process of repayment is being presented. Penalties for prepayment, pre-closure and early payment of EMI are not attractive to the average borrower. 

Overdue EMI

The Overdue EMI added interest charge and processing fee is not altogether aligned with the way the USA is trying to get away from those types of fees. Added interest is reminiscent of loans where the APR grows to 350% if there is a missed payment, from generated fees based on the outstanding principal. 

Reasonable Fees

The need for a fixed late fee or prepayment fee is essential to a reasonable loan repayment plan. No one is perfect — sometimes people have more money then they need and sometimes less. The fact that other large international banks are also charging added interest to an overdue EMI is troubling. It speaks to how banks consider what makes them profit and what doesn’t. 

International Monitoring

The international banking industry is very large but has very little regulation. The Federal Reserve of the United States, through monetary controls and policies for its currency, can monitor the international monetary systems at work but has no standing on banks such as HDFC Bank, or its parent HDFC Group. Banks that fall into this range can include Bank of England, HBSC, and others. 

How the Global Banking Market Offers Loans

The global banking industry, as moved and influenced by US banking regulations and restrictions, can often follow a broad outline on banking and financial product sales that mirrors a reasonable and reputable system. Many countries offer their customers legitimate terms and conditions, on financial products. Unfortunately, there are times that the industry fails to adequately protect borrowers and consumers who need loans and financial products to live relatively normal lives. 

The Great Recession

This was played out in the USA in 2008-2009 fiscal year, during a severe recession which saw the foreclosure of billions of dollars in mortgages. The losses were felt all over the world, in markets that were all considered legitimately operated and above reproach. That marker in history needs to be remembered. 

Commonsense Banking Practices

Offering loans of up to $50,000.00 to people who have $75,000.00 in a checking account is somewhat backward. While lenders can’t survive financially if their loans aren’t paid, offering a higher interest rate to people with a reduced ability to pay, doesn’t seem to make a lot of sense. Just like offering someone with $75,000 in savings a loan for $50,000. The same holds true of offering a 0% APR on a car loan to only people who have enough money to pay for the car outright. 

The Sources 

As many cited news agencies are now reporting, EMI is a way to generate much higher interest and processing fees for themselves, while further burdening the consumer. The EMI is a calculated payment that is determined by the loan parameters (loan amount, repayment period, interest) and then an installment interest rate and processing fee. 

No More Grace Period or Limited Fees

The installment interest and processing fee come each month and can double the initial payment. Many of the major banking institutions and lenders are using EMI to pay back personal loans, with prepayment penalties and overdue EMI penalties that are added interest and processing fees. On top of that, the penalties are being added to EMI within one day, instead of a customary waiting period. 

The Never-Ending Loan

This type of increased payment creation must be carefully researched for every loan offer a borrower might inquire about. It might be an industry-standard practice, but it is just more of the same type of ever-increasing, never-ending loan payments for people who don’t have perfect credit or have an urgent need. There needs to be a little more commonsense transparency and rejection of these types of terms on a more regular basis.

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