PROJECT REPORT ON

Tanvi Mahendra Pawar

IN PARTIAL FULFILLMENT OF

THE DEGREE AWARDED AT

B.COM (ACCOUNTING AND FINANCE)

SEMESTER VI

SUBMITTED TO

UNIVERSITY OF MUMBAI

FOR ACADEMIC YEAR 2020– 2021

SUBMITTED BY

NAME : Tanvi Mahendra Pawar

ROLL NO :111

VIVA COLLEGE OF ARTS, COMMERCE AND SCIENCE

VIRAR (WEST)

401303
 DECLARATION

I Hereby Declare that the Project Titled “ A Comparative Study Of Home Loan
Of SBI BANK And ICICI BANK ” is an original work prepared by me and is
being submitted to University of Mumbai in partial fulfillment of “B. Com.
(ACCOUNTING AND FINANCE)” degree for the academic year 2020-2021. To
the best of my knowledge this report has not been submitted earlier to the University
of Mumbai or any other affiliated college for the fulfillment of “B.Com
(ACCOUNTING AND FINANCE)” degree.

Date: Place :

Name : Tanvi Mahendra Pawar Signature:

 ACKNOWLEDGEMENT

I Tanvi Mahendra Pawar the student of VIVA College pursuing my “B.COM

(ACCOUNTING AND FINANCE)”, would like to pay the credits, for all those who
helped in the making of this project. The first in accomplishment of this project is
our Principal Dr. A. P. Pandey, Vice-Principal Prof. Prajakta Paranjape, Course Co-
ordinator Dr. Audrin Colaco and Guide Dr./Prof. Rakhee Oza and teaching & non
teaching staff of VIVA college. I would also like to thank all my college friends
those who influenced my project in order to achieve the desired result correctly.
 INDEX

Chapter no. Topics Page no.

I Introduction
Chapter Contents

o Introduction of Loans
o Objective of Loans
o What is loan?
o Definition of loan
o Importance and features of loan
o History of home loan
o Types of home loan
o Advantage and disadvantage of loan
o Eligibility criteria for home loans
o Profile of Organization
II Review of Literature
Chapter Contents 30-32

o Literature Review
III Research Methodology
Chapter Contents 33-38

IV Data Analysis & Interpretation

Chapter Contents

o Survey[Questionaries’] 39-43

V Findings & Conclusion

Chapter Contents 44-45

o Finding & Recommendation

VI Limitation & Future Scope 46

VII Case Study 47

VIII BIBILOGRAPHY 48

IX Appendix 49-50
CHAPTER 1
INTRODUCTION

Home is where the heart is-owning a home is a lifelong dream for most of the people.
Home is more or less a lifetime investment and hence home loans are an integral
part of every person who dreams and wants to have a living space of his own.

Buying a home is a probably the biggest purchase most of us will ever make in our
lifetimes. Owning our own home is a watershed event in our life. You are the master
or mistress of your own space, your little corner in the universe. But the process of
finding your little nest is stressful one. A once in a lifetime investment needs a loan
and that is how a home loan comes into the scheme of things in your life.

Almost every citizen wishes to purchase their home in their name and in this day
and age land and property prices have increased significantly offering an attractive
investment of individuals in India. Almost all public and private sector banks are
offering home loans at attractive rate for purchasing their dream home. Home loan
usually cover a variety of types. All banks have come out with home loan product
studded with features and value additions that make the schemes not only attractive
but also serve as a sustainable source to the borrowers for owning their dream home.

State Bank of India (SBI) is a multinational financial services company

headquartered in Mumbai, and in one of the largest banks in the world. With
amazing home loan products and incredible, competitive rates of interest, SBI have
definitely one of the largest players in the home loan market. The bank has also
incorporated top of the line technology into its financial services making it a
customer friendly platform for customers to use.
ICICI bank is one of the most popular multinational banks in India. In terms of
assets, it is the third largest bank in the nation and is the fourth largest in terms of
market capitalisation. With an array of services to offer, ICICI is the go-to bank for
many individuals all over the country. One of its most prominent products is their
home loan product. Its wide range of home loan products clubbed with its
impeccable customer service, and its vast network of branches makes ICICI bank
one of the top banks in the country for home loans. With two heavyweights like
these to choose from, it can be a strenuous task. Below is a comparison table that
can help ease your decision-making process.

OBJECTIVES

• Ascertain the profile and characteristics of potential buyers.

• To find out the market position of loan.
• The study is done to understand the documents involve in the home loan scheme
and the repayment methodology adopted by various banks and the
HFC’s (Hosing Finance Corporation).
• To innovate home loan schemes and the risk capturing mechanism adopted by
the HFI’s and the future of the home loan segment has been undertaken as a part
of this study.
• To study scope of loans in future.
• Retail banking has been popular segment to enter into many banks.
• To know the preference of loan & advances of SBI over ICICI.
WHAT IS LOAN ?

A loan that a business owner gets from a bank. A loan is the act of giving money,
property or other material goods to another party in exchange for future repayment
of the principal amount along with interest or other finance charges. A loan may not
be for a specific, onetime amount or can be available as an open-ended line of credit
up to a specified limit or ceiling amount. Although many business owners who need
financing will automatically think to turn to a bank for that funding, traditionally,
paperwork and processing costs involved in making and servicing loans have made
the small loans most entrepreneurs seek too costly for big banks to administer. In
recent years, however, the relationship between banks and small businesses has been
improving as more and more banks realize the strength and importance of this
growing market. With corporations and real estate developers no longer spurring so
much of banks' business, lenders are looking to entrepreneurs to take up the slack.
Many major banks have added special services and programs for small businesses;
others are streamlining their loan paperwork and approval process to get loans to
entrepreneurs faster. On the plus side, banks are marketing to small businesses like
never before. On the downside, the "streamlining" process often means that, more
than ever, loan approval is based solely on numbers and scores on standardized
rating systems rather than on an entrepreneur's character or drive. You may be able
to boost your chances of getting a loan by finding a lender whose experience
matches your needs. Talk to friends, lawyers or accountants, and other entrepreneurs
in the same industry for leads on banks that have helped people in your business.
Put in the work to find the right lender, and you'll find it pays off.
 DEFINITION OF LOAN

Loan is “An arrangement in which a lender gives money or property to a borrower

and the borrower agrees to return the property or repay the money, usually along
with interest, at some future point(s) in time. Usually, there is a predetermined time
for repaying a loan, and generally the lender has to bear the risk that the borrower
may not repay a loan (though modern capital markets have developed many ways
of managing this risk).

TYPES OF LOANS

Loan refers to a sum of money borrowed at a particular interest rate. More

generally, it refers to anything given on condition of its return or repayment of its
equivalent. A loan may be acknowledged by a bond, a promissory note, or a mere
oral promise to repay. Banks grants 3 types of loans which are as Commercial loans
or Industrial loans, consumer loans and Mortgage loans

1) Commercial loans: commercial loans are mainly provided to the business and
industrial firms.

These have divided into:

 SHORT TERM LOANS: Short term loans are mainly given for a period
up to 1 year and usually granted to the business and industrial firms to
meet the working capital requirement. For e.g. Cash credit, bank
overdraft etc.(loans to finance the purchase of material or labor)
 LONG TERM LOANS: long terms loan are granted for a period above
5 years and are granted to meet capital expenditure. For e.g. Project
 Finance, Education loan etc.(Loans to purchase machinery and
equipment.). Most commercial bank offers a variable interest rate on
these loans, which means that the interest rate can change over the course
of loan. Sanction Of loan depends upon the credit and loan history of the
borrower, the borrower ability to make scheduled loan payment, the
amount of capital the borrower has invested in the business, the condition
of the economy and the value of the collateral the borrower pledges to
give the bank if the loan payments are no made.
2) Consumer loans: One of the important areas of bank financing in recent years
is towards purchase durables like TV sets, Washing machines etc. Banks also
provide liberal car finance. These days banks are competing with one another to
lend money for these purposes as default of payment is not high in these areas as
the borrowers are usually salaried person as default of payment is not high in
these areas as the borrowers are usually salaried person having regular income,
Further, banks interest rate is also higher.
For e.g. Housing loan, medical loan, car loan, Education loan.
There are two types of consumer loans
 Closed ended credit: Closed ended loan are for fixed period of time,
fixed amount of loan, but not for a fixed purpose. The items purchased
by the consumer serve as collateral for the loan.
 Open ended credit: Open ended loan are for variable amount of money
and it does not require the borrower to specify the purpose of the loan.
For e.g. Credit cards. Most open ended loans carry fixed interest rate and
its require no collateral for the loan.
3) Mortgage loans:

A mortgage loan or simply mortgage is a loan used either by purchasers of real

property to raise funds to buy real estate, or alternatively by existing property owners
to raise funds for any purpose while putting a lien on the property being mortgaged.
The loan is "secured" on the borrower's property through a process known
as mortgage origination. This means that a legal mechanism is put into place which
allows the lender to take possession and sell the secured property to pay off the loan
in the event the borrower defaults on the loan or otherwise fails to abide by its terms.
The word mortgage is derived from a Law French term used in Britain in the Middle
Ages meaning "death pledge" These are usually long term loans and the interest
rates charged can be either a variable or a fixed rate for the term of the loan which
often ranges from 15-30 years. These loan are used to purchase land or building such
as household and factories which serves as the collateral for the loan. There are many
types of mortgages used worldwide, but several factors broadly define the
characteristics of the mortgage. All of these may be subject to local regulation and
legal requirements.

 Interest: Interest may be fixed for the life of the loan or variable, and change at
certain pre-defined periods; the interest rate can also, of course, be higher or
lower.
 Term: Mortgage loans generally have a maximum term, that is, the number of
years after which an amortizing loan will be repaid. Some mortgage loans may
have no amortization, or require full repayment of any remaining balance at a
certain date, or even negative amortization.
 Payment amount and frequency: The amount paid per period and the frequency
of payments; in some cases, the amount paid per period may change or the
borrower may have the option to increase or decrease the amount paid.
 Prepayment: Some types of mortgages may limit or restrict prepayment of all or
a portion of the loan, or require payment of a penalty to the lender for
prepayment.
 . The most common way to repay a secured mortgage loan is to make regular
payments toward the principal and interest over a set term. This is commonly
referred to as (self) amortization in the U.S. and as a repayment mortgage in the
UK. A mortgage is a form of annuity and the calculation of the periodic
payments is based on the time value of money formulas
 THE IMPORTANCE OF LOAN

A question that then person who does not have a good amount of money at particular
time has no right to see dreams? Is he not authorized to fulfill his desire on time?
Should he stop dreaming? No, because there is solution for these queries. Loans are
available for these purposes only.

Loans are provided to people for such critical circumstances which may occur at
any time. In anyone’s life a situation may come when all of sudden you require cash.
A moment when you do not want to borrow cash from your relatives. There may
occur any kind of emergency when you need huge amount of money. There are
various types of loans like home loans, student loan etc. You can take any type of
loan you need. For each and every kind of need, loans are available. Home loans are
available for general home purposes like buying a luxurious car, going for a holiday
trip, educational purpose, home improvement etc.

Many of your desires can be fulfilled by this loan. Personal loans are available for
personal requirements like wedding ceremony, purchasing a home etc. Suggest on
that it is provided basically to students for higher education. Student who want to
study more but cannot afford can get apply for such loans and continue their studies.
To start a new business, you require a huge amount of money.

A person wish willing to setup a business may not have that much cash which can
meet out his requirements. For the business loans are available. You can get business
loans to start and well establish a new business loans to start and well establish a
new business in market. Whatever may be the kind of loan, all have fully fledged
facilities. All kind loans have their own importance. Above all, need of money
explains the importance of loans.

FEATURES OF HOME LOAN

Loan Amount: The loan amount is also determined by the repaying capacity and
credit profile.

Rate of Interest: Interest rate starts from 8.20% onwards and it can go up to
maximum of 11.35%.

Processing fee: Up to 1% of the loan amount or INR 1500 and for locations such
as Mumbai, Bangalore and Delhi will have to pay INR 2000

Tenure: The repayment period is up to 30 years

Easy Balance Transfer: With this facility, you can transfer your existing home loan
with other bank to ICICI Bank for a lower interest rate.

Prepayment: No charges are levied on partial prepayment or foreclosure of the

home loans and home improvement loans with floating rate of interest. For fixed
interest rate of home loans, customers will have to pay 2% of the outstanding
principal with applicable taxes.

Insurance Policy: An insurance cover to protect your family against repayment of

home loan in the event of unfortunate situations.
 HISTORY OF HOME LOAN

Home loans are usually the largest loans that consumers will ever make. Because of this, it is important to
know how home loans are started, the different types of home loans and similarities and differences
between them. In this way, consumers can make the best decision on which loan is the best decision on
which loan is the best for their purpose.

For many years, the only way in which to obtain money to purchase a home was to apply for a conventional
home loan. This type of loan was obtained through a bank, credit union or other private, non-government
affiliated financial institution. In 1938, the Federal National Mortgage Association, better known as
“Fannie Mae” was created and established as a Federal agency by then- President Franklin Roosevelt as
part of his new deal. It made it possible, even during a time when most people were out of work and had
little, if any, income to still be able to afford a home.

In 1970, the Federal Home Loan Mortgage Corporation known as “Freddie Mac”, was created to lessen
the “monopolization” of home lending that is was felt that Fannie Mae enjoyed. Both Fannie Mae and
Freddie Mac were at one time considered “government” auspices.
 TYPES OF HOME LOANS

Home loans are an attractive and popular means of buying a dream house for most people. In India, the
demand for home loans has increased manifold in the last decade. Every day numerous people apply for
home loans to own a perfect abode for themselves. The fact that home loans come with added advantages
(like tax benefits) is the icing on the cake.

Lenders provide home loans not only for buying houses but for a variety of related purposes. The home
loan market is brimming with diverse home loan products which cater to different needs of individual
customers.

The following are some popular types of home loans available in the Indian housing finance market:

 Land purchase loans

Land purchase loans are taken to buy a plot of land on which a borrower wishes to construct her/his house.
Most banks offer up to 85 per cent of the price of the land. These loans can be availed for residential as
well as for investment purposes. Almost all leading banks offer this loan like ICICI Bank (land loan), Axis
bank (loan for land purchase) etc.

 Home purchase loans

The home purchase loans are the most popular and the most commonly available home loan variants. These
loans can be used to finance the purchase of a new residential property or an old house from its previous
owners.

In this type of loan also, lenders usually finance up to 85 per cent of the market value of the house. These
loans are provided either on fixed interest rates or floating interest rates or as hybrid loans.
All banking institutions and housing finance companies provide this type of loan.

 Home construction loans

These loans can be availed by those individuals who want to construct a house according to their wishes
rather than purchasing an already constructed one. The loan application and approval process for home
construction loans are somewhat different from those of the commonly available housing loans.

The plot of land on which the borrower wishes to construct the house should have been bought within a
year for the cost of the land to be included as a component for calculating the total price of the house. If
the plot has been purchased more than a year ago, then the above clause is not applicable.

The borrower has to make a rough estimate of the cost that will be incurred for the construction of the
house and then apply for the loan with the same amount. The lender then takes over from there and analyses
the application to decide whether or not to sanction the loan.

The approval or disapproval of the same is intimated by the lender to the applicant. The loan amount may
be disbursed at one go or in several installments according to the progress in the construction of the house.
Banks like Canara Bank, UCO Bank, Bank of Baroda provide these loans.

 Home expansion/Extension loans

Home expansion or extension loans are useful in situations when people want to expand their existing
house. Expansion includes alteration in the current structure of the residence to add extra space such as
constructing a new room, a floor, a bigger bathroom or enclosing a balcony. Though many banks provide
loans for these purposes as part of home expansion loans, some banks lend for the same purposes as part
of their home improvement loans.

It depends on how a bank category its loans. Some popular banks which provide home expansion loans are
HDFC Bank (HDFC Home Extension Loan), Bank of Baroda etc.

 Home improvement loans

Home improvement loans are availed by individuals who already own a house but lack the funds to
renovate it. All kinds of renovations and repair works can be financed using this variant of home loans
such as internal and external painting, external repair works, electrical work, water-proofing and
construction of underground or overhead water tank etc.

ICICI Bank, Vijaya Bank and Union Bank of India are among those banks which provide specialized
home improvement loans.

 Home conversion loans

Those borrowers who have already purchased a house by taking a home loan but now want to buy and
move to another house opt for the home conversion loans. Through these loans, they can fund the purchase
of the new house by transferring the current loan to the new house. There is no need to repay the loan on
the previous home.

Though useful, this segment of home loans is accused of being quite expensive. This housing finance
scheme is provided by HDFC Bank among others.

 NRI home loans

NRI home loans is a specialized home loan variant which has been developed to assist non-residents in
acquiring housing finance to buy residential property in India. These loans are meant exclusively for the
non-resident Indians.

The formalities of availing this segment of home loans is similar to the regular home loans which are
offered to residents, only the paperwork is a bit elaborate. Almost all public and private sector banks
provide NRI home loans.

 Balance transfer loans

Balance transfer option can be availed when an individual wants to transfer his home loan from one bank
to another bank. This is usually done to repay the remaining amount of loan at lower interest rates or when
a customer is unhappy with the services provided by his existing lender and wants to switch to another
lender.
Banks such as Deutsche Bank, ICICI Bank, Kotak Mahindra Bank offer this facility among other lenders.

 Stamp duty loans

Stamp duty loans are provided to pay off the stamp duty charges on the purchase of a property. The amount
from this loan can be used solely for this purpose. This segment of home loans has yet not gained much
popularity.

 Bridged loans

Bridge loans are short term loans which are meant for people who already own a residential property but
are planning to buy a new house. It helps borrowers to fund the purchase of the new house until a buyer is
identified for the old house. It is extended for a period of less than two years and requires the mortgage of
the new house with the lender. Some banks offering this type of loan are Vijaya Bank, HDFC Bank etc.
 ADVANTAGES AND DISADVANTAGE OF HOME LOAN

 MAKES BUYING A HOME AFFORDABLE FOR ALL

The home loan makes it easier for an average middle-class salaried person to afford buying
a home of their own. The lenders in India sanction or reject the home loan application based
on the credit score of the applicant as well as their capability to repay the amount.
If you receive an income regularly and have the capacity to repay the EMIs (equated
monthly instalment), the lenders will quickly approve the application. Additionally, the
home loans have a long tenure, typically it ranges from 15-20 years, which means the EMI
is smaller and more affordable. So, by availing a loan, you can enjoy the happiness of being
a homeowner.

 A COST-EFFECTIVE WAY OF AVAILING CREDIT

One of the major home loan loans benefits is that it comes with a lower interest rate than
other forms of borrowing like a personal loan or a gold loan. This is because the lender
uses the property that you wish to purchase as a security against the amount you borrow.

Home loans interest rates are the lowest among other types of loans, although the interest
ranges from lender to lender, it usually hovers between 8% to 12%. Make sure that you
choose a lender that is offering the loan at the best interest rate; even a slight difference in
the interest rate could save you thousands of Rupees in the long run.

 CAPITAL GROWTH

Over the past decades, the cost of the real estate properties in India has been on the rise
consistently. Many experts suggest that the capital appreciation of the real estate properties
has been much higher than the interest you pay on the home loan.
For example, if you have availed a loan of Ten lakh rupees at the interest rate of 10 per
 cent and if the value of the property increases even by 20% by the end of the loan period,
then the capital appreciation will be higher than the interest you pay. The appreciation of
capital will help you take care of the expenses and yet gain profit on the sale of the property.

 COMPULSORY WAY OF SAVING

If you are wondering whether a home loan is good or bad, you must know that it has both
sides. It is just up to you how you deal with it. When you have cash in hand, it can be
challenging to resist the temptation of spending. If you are confident that you will have a
steady stream of income but are unable to save any money, then taking a home loan is the
best way to have saving. The money you pay towards the EMI, you can look at it as a
saving rather than an expenditure. This is because after you repay the loan completely, you
will become the owner of the house, which will have an increased value at the end of the
loan tenure.

 GUARANTEES SAFETY OF THE PROPERTY

Buying a home is once a lifetime expense, and you would surely want to ensure that the
property you invest in is free of any legal issues. This is where availing a home loan can
be a great boon. When you approach a lender for a housing loan, the lender will do a full
background check of the credibility of the builder as well as the property itself. They will
review the paper associated with the property and ensure that the building is legal and that
the builder has obtained all the clearance certificates from the local authorities.
Also, the lender will ensure that the property is not involved in any legal disputes. So, with
the lender taking care of the paperwork, you need not go through the tedious process
yourself, and if the lender approves the loan, you can be sure that the property you wish
you buy is safe.

 INCREASES THE LOAN ELIGIBILITY

When your home loan is in effect, and as you continue to repay the amount diligently or if
you have already repaid the loan in full, your CIBIL (Credit Information Bureau (India)
Limited) score will automatically increase, and the lenders will classify you as a safe and
 responsible borrower. This will help you improve your loan eligibility. You can use this to
advantage and avail loan at a more affordable interest rate.

 TAX BENEFITS

This is another significant benefit of availing a home loan. If you mortgaged property
against a loan, you could claim a tax deduction on the principal as well as the interest part
of the repayment. For the repayment of the principal component of the home loan, you can
claim a deduction under Section 80C. The maximum limit for deduction in this regard is
Rs.1.5lakhs.For the repayment of the interest component, you can claim a deduction under
Section 24B. The maximum deduction you can claim for the interest repayment is Rs. 2
lakhs. These deductions can be a massive amount in terms of calculating your overall
annual tax obligation. If you buy a house without a loan, you will miss out on these tax
benefit on home loan.

DISADVANTAGES OF HOME LOAN

 IT IS A BIG COMMITMENT

Once the lender approves your home loan application, you are making a huge commitment
for a long period. The typical duration of a home loan last between 10 to 30 years. This
means that you would have a debt for a significant amount of time in your life. Once the
loan is in effect, you would have to be prepared to control your expenses and focus on the
repayment.

 HOME LOAN MAY CARRY RISKS

The duration of the home loan typically spans over 10 to 30 years, which is quite a long
time. During this period, several unforeseen circumstances can occur. Some of these
instances can make it difficult for you to repay the loan.
 Events like divorce, sudden illness, loss of job, accident, can put in a tremendous financial
turmoil and affect your ability to cope with the burden of the loan, which in turn can result
in the loss of the property. In case, if you fail the repay the loan, the lender has the authority
to take over the property and sell it to gain back the money they lent you as a home loan.

 LOSS OF INVESTMENT OPPORTUNITY

This is one of the most overlooked disadvantages of home loan. When you apply for a loan,
irrespective of big or small the loan amount is or how long or short the duration is, as you
continue to repay the amount, you lose the opportunity to invest the same amount in an
investment tool that could yield you valuable returns. Imagine, instead of paying the EMIs,
if you could use the amount to invest in mutual funds or in a fixed deposit, you would get
valuable returns in the long run.

 LOSS OF TAX BENEFIT ON THE HRA COMPONENT

The employers pay housing Rent Allowance or HRA to the employees as part of their
salary. The HRA allows the employees to claim a tax deduction for the rent they pay for
the housing. To claim the HRA tax benefit, you must meet the following requirements:

o You must stay in a rented house in the city of employment and own a home in a
different city.
o Your house is under construction or is under re-development, and you have rented
a house until the construction work is completed.
  ELIGIBLITY CRITERIA FOR HOME LOANS

How much an applicant can borrow?

Home loans range from Rs. 1Lakh to Rs. 50lakhs. Your repayment period can vary from 1 year to 20 years
depending upon your capacity to repay.

Eligibility:

Age: - Minimum: you should be at least 21 years of age.

Maximum: at the time of loan maturity you should not exceed 65 years or your retirement age, whichever
is earlier.

Individuals:

You should have completed a minimum of 2 years of services (with a minimum of 1 year in the current
job)

Business persons/self-employed professionals:

You must have an established business or professional practice of not less than 3 years, with a positive net
worth and must have posted a net profit for the last 2 years.

NOTE: Minimum net take home salary of Rs.6000/-p.m. for salaried employees or annual income of not
less than Rs. 1.20lakh for businessman/self-employed professionals. (spouse/co-applicant’s income can be
included in the income computation.

1. Individuals who are salaried or self-employed, professionals, businessmen are eligible. Proprietary
concerns, HUF, partnership firms or limited companies are not eligible for this loan, where partners at their
individual capacity are free to avail this loan.
2. As a customer to enhance the loan eligibility, all HFIs lay down conditions to whom to be applicants, all
co-owners to the property should necessarily to be co-applicant. Income of the co-owners can be clubbed
together to get higher loan eligibility. Minors are not eligible to become co-owners, as also friend and
relative’s only blood relatives are eligible to take a property jointly.

Some of the acceptable relationships where loan clubbing is possible

Combination Income Clubling

Husband – Wife YES

Parent-Son YES(IF ONLY SON)

Parent-Daughter YES( IF ONLY CHILD)

Brother-Brother YES(If current staying together and intend

staying together in new property)

Brother-Sister NO

Sister-Sister NO

Parent-Minor Child NOT Eligible for Loan

3. The minimum age for the applicant and the co-applicant to become eligible for the commencement of
the loan is 23 years; no- applicant can be 18 years of age if their income is not clubbed to calculate the loan
eligibility.

4. The maximum age at the time of loan maturity for applicant or co applicant is 60 years or the retirement
age whichever is earlier.
 APPLICATION STAGE

This is the stage where the application from first reaches the concerned service
center/workstation. Here all the documents in the application are received by the
experienced staff present at the workstation. The banks employee who reviews the
file checks to see whether all documents are present and in their proper place. If the
documents are duly filled not fake, attested by authority and present in order. In case
any document is missing the applicant is contacted electronically or by mail or by
telephone and requested for the documents to be submitted. This exercise is called
FOLLOW UP. The credit appraisal of the loan application starts at this stage. The
workstation employees compute the gross salary, IIR, FOIR, loan eligibility ratio
etc. The credit worthiness of the applicant is calculated here.

 It is also at this stage that the QUICK DATA ENTRY of the loan application
is done to create a serial no, of the application. After that another page
appears and more data is entered. It is now that a special and unique LOAN
A/C NO. Is created under which all the loan processes will be carried out.
The system of electronically recording the data helps to create ready
reference, a proof helps in quick and easy processing of the data. It also
helps to very easily and quickly share the data with other employees of
bank.
 The next and important processing performed at the workstation is that of
filling up a document known as the INTERVIEW SHEET for processing
individual loans. It contains various simple entries like
1. Name of borrower
2. Name of co-borrower
3. Income details
4. Family background and permanent address etc.
5. Gross salary
6. Rental
7. Other incomes
8. Obligations
9. Remarks
 PROFILE OF THE ORGANIZATION

State bank of India, the country largest and oldest commercial bank with a
branch network of over 1100 branches and six associate banks located even in the
remotest parts of India. SBI offers a wide range of banking products and services to
corporate and retail customers. The bank descends from the Bank of Calcutta,
founded in 1806 via the Imperial Bank of India, making it the oldest commercial
bank in the Indian Subcontinent. The Bank of Madras merged into the other two
presidency banks in British India, the Bank of Calcutta and the Bank of Bombay, to
form the Imperial Bank of India, which in turn became the State Bank of India in
1955.[10] The Government of India took control of the Imperial Bank of India in
1955, with Reserve Bank of India (India's central bank) taking a 60% stake,
renaming it State Bank of India.

ICICI Bank, stands for Industrial Credit and Investment Corporation of India, is an
Indian multinational banking and financial services company headquartered in
Mumbai, Maharashtra, India, with its registered office in Vadodara. In 2014, it was
the second largest bank in India in terms of assets and third in term of market
capitalization. It offers a wide range of banking products and financial services for
corporate and retail customers through a variety of delivery channels and specialized
subsidiaries in the areas of investment banking, life, non-life insurance, venture
capital and asset management. The bank has a network of 4,850 branches and 14,404
ATMs in India, and has a presence in 19 countries including India.

 HOME LOAN PURPOSE

 Purchase construction of house flat

 Purchase of a plot of land for construction of house
 Extension /Repair/Renovation or alteration of an existing house/flat
 Takeover of an existing loan from other banks housing finance
companies.
 ELIGIBILTY

 Minimum age -18 years as on the date of sanction

 Maximum age-for a home loan borrower is fixed at 70 years i.e., the
age by which the loan should be fully repaid.
 There should be availability of sufficient, regular and continues source
of income for serving the loan repayment.

 DOCUMENTS

 Two photographs of each applicant.

 Proof of residence of each applicant.
 Copies of PAN Card for identify proof.
 Latest & original salary slip of employees/business proof for businessman
 Two years IT return form 16 for employees and three years IT return with
computation sheets for businessman/self-employed.
 Balance sheet for last three years for business man.
 Six months’ salary account statements for employees and saving account
statement for businessman/self-employed.
 Copy of agreement of sale.
 Copy of registry of house/plot/flat plus old registries.
 Copy of allotment letter/re-allotment letter of house/plot/flat.
 Latest plot /flat/house builder’s approval letter to be developing the project
and copy of license.
 Latest Non Encumbrance Certificate of plot/flat/house.
 Copy of approval Map/approval site plan of builder.
 Estimate copy of construction from government approved Architect for
construction/renovation cases.
 List of documents held with other bank from which housing loan is to be taken
over.

 SECURITY

 Equitable mortgage of the property

 Other tangible security of the adequate value like NSC’s, life insurance
policies etc., if the property cannot be mortgage.
 LOAN PROCEDURE FOLLOWED

The procedure involve in the disbursement of home loan by any bank entails the
followings steps

 Home loan application form is first submitted by the customer covering all
details.
 Checklist of requirements is requested for from the customers, and all
documents are required to be submitted (copies), they are then verified
whether the details are failed in correctly and whether all the documents are
submitted.
 Additional loans, if any are applicable. Many banks provide for the
supplementary loan as a part of their comprehensive home loan scheme.

SCRUTINY OF THE DOCUMENTS

The retail processing is a procedure, which involves careful scrutiny of accounts.

SBI bank uses a specialized system to go through the accounts, before dispersing
the loan to the customer. The basic groups set up in the process of loan applications
are:

RETAIL MANAGER ENTERER GROUP:

This group does the data entry. Upon completion of the data entry the group
forwards the same to the RM Verifier group to verify and resends it to the former in
case of tiny discrepancies for editing.
 The loan officer enterer group and the RM verifier group should ensure, confirm
and verify the following:

 The organization is in the appropriate list.

 The organization is not in the negative list
 The property location is not in the negative list.

Applicant Details:

 Name and the personal details

 Identify details address
 Employment details- salaried
 Financial details: Income asset ownership, existing bank account
details and credit card details.
 Employment details: business
Financial details: Existing bank accounts and credit card details.

EXISTING LOAN DETAILS

The name of the financial institution (in case of takeover) type of loan, purpose of
loan amount etc., as per the home loan application form.

 Loan request: Including the disbursement details.

 Acquisition request: Gee details, loan amount recommended, name of the
customer preferred branch.
 Reference details: Entry of all least one reference in mandatory.
 Property details: The RM enterer group and the RM verifier group shall affix
their initials on the home process note.
 HOME LOAN FACILITIES WITH VARIOUS ADD-ON BENEFITS

The banks have buckled for the completion of the home loan products by providing
various add-on benefits, which has also become a key factor in the competitive era
of home loans.

The banks have tied up with various property insurance companies in order to make
their home loan competitive. The ABN-AMRO bank which has entered the home
loan segment in October 2003 launched its product “All Smiles Home Loans” with
the lowest interest rate of 6 percent in the first year and 6.5 percent in the second
year has added a number of value added services like:

 SMS alert to help the customers keep track of their loan sanctions and
disbursement status.
 The bank also offers its smart Gold credit card to the borrowers and
concessional rates on personal loans and auto loans.

GIC housing finance limited has offered the consumer loans for the purchase of
home equipment at the same rates of interest at the home loans and lowers than the
other consumer loans.

The tenure of consumer loans is restricted to the tenure of 5 years.

Many banks have also done away with the guarantor for provision of the home loans
for amount less than Rs. 10 lakhs.
 THE FUTURES OF HOME LOAN

Homes loans are commodity that banks are dying to sell. After all, 30 years
of consumer indebtedness secured with a very tangible asset makes for a great profit,
when you consider the compounding of interest. Yet because of the subprime
mortgage crisis, home loan applications are no longer as easily and quickly approved
as lending institutions used to do.

As a matter of fact, those applying mortgage loans now must prove their
income and ability to repay the loan before they can even hope to get an interested
lender to take a closer look.

The interest rates on home loans have started coming down after the Reserve
Bank of India (RBI) decision to reduce the repo rate last month. The repo rate is the
short term lending rate on which the RBI extends short term loans to banks. The
repo rate is one of the major factors that decide a banks leading rate. The lowering
of the repo rate has reduced the cost of funds for banks and hence there was a drop
in loan interest rates.

The rates on new loan accounts have come down more than the interest rates
on existing loans. This is because new accounts are viewed as fresh sales. Hence,
banks float many promotional schemes and go aggressive on them. The rate cut
happens on existing loans only when banks get comfortable on their overall cost of
funds and are sure about maintaining their net interest margin.
 CHAPTER 2

Review of Literature

The Review Committee on NPE‟ 1986 recommended introduction of institutional

loans, while raising fees in higher education sector, as a strategy for releasing
pressure on the government kitty. Though it agreed that such an arrangement is the
need of the hour, yet it mentioned that educational loans do involve certain problems
in India. They were mentioned as- Psychologically, people are against loans. Credit
markets are not developed. Through the survey of literature, it is evident that
governments around the world used to bear a large part of expenditure on higher
education.
Actually, in almost all the countries, including India student loans used to be seen
as a measure to ensure the protection of weaker sections from the effects of high user
charges, in spite of the above mentioned problems. The budgetary strains brought
wide change in the financing patterns. Gradually, the debate shifted from „Should
there be increased reliance on private sector and other sources? ‟ To „What is the
reasonable balance between the state, student and private sector? ‟ consequently,
there arises need to lookout for mobilization of additional sources like philanthropy,
endowments, business contributions, taxing corporate sectors etc.
The increased cost recovery needs to be accompanied with student loans. The
government sponsored education loan schemes are no longer there. The interest
charged on education loans is equal to or higher than the market rate of interest.
More recently, this social consideration has got a backseat and the financial efficacy
has become the most important issue.
Tilak (1996) found many of the arguments made against student loans to be valid in
India; and therefore, he did not lend support in favor of student loans. Student loans,
without any carefully formulated policy, may affect the access and equity adversely.
Even American critics of student loans express their apprehensions in this regard
while saying that student loans may lead to inequality of access by restricting
participation of (ethnic) minorities in higher education. He visualized student loans
as a method of generating finances for higher education than a measure to improve
access & equity.

Ram (1996) observed that the Students Loan Programmed was quite successful in
Singapore. He noticed in this regard that full employment, continuous demand for
skills, labor shortages and higher economic returns to educational investment all
tantamount to a degree of economic development in case of Singapore, where the
concept of loans for education becomes acceptable with little persuasion and public
debate. Actually, Ram agrees with the school of thought (few researchers) which
opines that a country could afford to introduce student loans only at a given level of
development.

Hillman (2003) rightly comments that the alternative to free/subsidized access to

publicly financed education is private payment. Student may, however, lack the
means to pay for their education and may wish to borrow to finance their education
costs. The private lenders may be unwilling to lend for studies. The impediment to
lending, according to him, is asymmetric information that results in moral hazard.
The asymmetric information, that results in moral hazard. The asymmetric
information is that students know their own effort input and motivation, but lenders
can observe neither effort input into studying nor the motivation to study.
Repayment of loans based on the expectation of the future earnings, and the risk of
default facing the lender depends on the observed effort of the student in studying
and preparing for exams A moral hazard problem arises because, according to him,
it is the no observable behavior of the student that determines whether education will
provide an income or not which, in turn, will anticipate the repayment of loan He
opines that this moral hazard introduces government involvement into student loans.
Government can provide loans directly through a government agency or security to
the private lender by guaranteeing repayment of loans. Accordingly, he advocates
government supported student loans on the following grounds: resource potential
equity in sharing the costs of higher education; and efficiency by making students
more serious with respect to their education and careers. (Assistant Professor in
Economics)

The Reserve Bank of India (RBI) advised urban co-operative banks (UCB) against
giving big ticket loans to public sector companies on grounds that it is not in line
with 'the co-operative principles and dilutes the cooperative character of UCBs.'
In a notification the RBI said that UCBs should focus on providing small value loans
to middles and lower income groups Farmers and small businessmen.
"UCBs are advised as a matter of principle. Generally not to grant large value loans
to public sector or government undertakings.” RBI said in a letter to CEOs of UCB.
The RBI has not defined large value loans.
"The move wills results into more availability of lendable resources for the low and
middle income group but it will hamper growth for those banks that are following
sound policy”. These banks found an avenue to deploy resources with PSU on short
term basis for improve their earnings and support their balance size. “Said DR
Shirodkar. CEO of New India Co-operative Bank.
The letter says RBI said has been observed that a few UCB have been sanctioning
high value loans to PSUs by admitting them as nominal members or otherwise.
Sources said that such instances were found in some Gujarat based cooperative
banks. "These banks did not want to dilute that ownership by giving loans to
individuals. So they began giving short term loans to PSU by making them nominal
members. “Said a senior banker who did not want to be named. To avail loans from
a co-operative bank a borrower has to purchase shares of that co-operative bank so
that he has a stake in the well-being of the bank.

RBI said that UCBs are meant 'primarily to meet the credit needs of the society by
providing loans and advances to low/middle income groups (small borrowers).
Agriculture and Small businesses for furthering the cause of cooperation. Grant of
high value loans to PSUs is not consistent with the co-operative principles and
dilutes the cooperative character of UCBs.'
 CHAPTER 3

Research Methodology

3.1 STATEMENT OF PROBLEM

Housing loan is one of the emerging portfolio of both Private and Public sector
banks. The national housing policy of the Government of India emphasize that the
incentive to be given to customers buying residential properties. Accordingly, in
income tax there has been concessions / tax sops for the individual buyer for home
use. 60-65% Tax sops given by the government for housing loans have been
instrumental in driving growth in this sector. The government allows tax benefits to
both the home loan consumer and the lender.

A home loan consumer is allowed tax deductions on the following:

 Interest paid on home loan: As per Sec 24 (b) of the Income Tax Act, 1961,

annual interest payments up to Rs 1,50,000 on housing loans can be claimed as

deduction from taxable income.

 Principal repayment of home loan: Sections 80 C read with section 80

CCE of the Income Tax Act, 1961 says from gross total income, an Rs.1,00,000
of principal repayment on home loan is allowed as a

deduction.

Under Section 36 (1) (viii) of the Indian Income Tax Act 1961, with respect
to any special reserve created and maintained by a financial corporation engaged in
providing long-term finance for construction or purchase of houses in India for
residential purposes, a maximum amount of 20 per cent of the profits (earlier it was
40 per cent) obtained from such business (figured in the head ‘Profits and Gains of
Business or Profession’) and carried to such special reserve is tax deductible. This
deduction is available only up to double the total amount of the company’s paid-up
share capital and its general reserves. Since the loan is given by banks by mortgaging
the property, hence there is significant security to banker for disbursing the loan.
However, the customers have different opinions about the housing loan scheme.

The present investigator noticed from the review of the literature that there are
very few studies to examine financial performance of the banks in housing loan
sector.

“Due to availability of affordable houses on the periphery of metros and in Tier-II

and Tier-III cities, demand for housing finance has been good,”

Mr. R.V. Verma, Chairman and Managing Director, National Housing

Bank, November, 2011

So far in the financial year 2011, the repo rate of Central Bank of India has raised
from 6.75 per cent to 8.50 per cent. Banks countered this situation by re-aligning
their Base Rate upwards from the 8.25 - 9.50 per cent band as on April 1, 2011, to
10-10.75 percent.

Banks determine their actual lending rates on loans and advances with
reference to the Base Rate and by including such other customer-specific charges as
considered appropriate.
 The present study was undertaken with the intent to investigate after
examining the literature reviewed and noticed that their exit gap in terms of
customer satisfaction towards the home loan disbursed by schedule banks.
Accordingly, the problem of the study focus on customer satisfaction towards the
housing loan schemes of the bank .An after has also be made for comparative study
of private and public sectors banks delivery and disbursement of loan leading to
customer satisfaction. Investigator also attempted to explore reason for shifting of
home loan availed from one bank to another bank.

 Key problems of the study are:

1. To study difference between public sector and private sector bank on customer

satisfaction.

2. To study differences on socio-economic categories of customer on customer

satisfaction of public and private sector banks on house loan

3. To study relationship amongst customer satisfaction towards the bankers and

availing of the loan

4. To examine factors affecting public and private sector banks on the customer

satisfaction for the home loan disbursed to their customers.

3.2 OBJECTIVES OF THE STUDY

The objectives of the study are:

1. evaluating and comparing the Home Loan portfolios of Public and Private

sector banks;

2. evaluating and comparing the Home Loan disbursement of public and Private

sector banks;

3. knowing customer’s attitude or response on the home loans schemes;

4. knowing customers’ satisfaction level while dealing with the Bank;

5. suggesting strategies to increase customer satisfaction, understand the reasons

for default.

The section of methodology consists of a short depiction of sample of the

study and demographic composition, the population of the study, the instruments
utilized to collect data, the study design, the procedures used for data collection, and
the details of the methods and techniques used for analyzing the data.

3.3 RESEARCH DESIGN

Methodology is a body of knowledge by that researchers enable to explain

what they did and how they analyze. All these methods indicate their limitations and
resources help to identify their assumptions relating to their potentialities to research
advances (Miller, 1983). According to him a research design is an under-pin which
help to the types of questions that can be addressed and the nature and give of the
evidence to others so they can come to know that how it is generated (Clark et al.
1984). In other hand lots people, they have issue of research methodology as
according to them it is a important to any study or research. By this we can give
appropriation between data, research paradigm and collection methods etc. all the
aspects that help to research findings. According to Churchill (1979) research design
give a guide line to researcher for the collection and analysis. We can say that
research design plays an important role but with a significant link between the theory
and argument, which come by empirical data collected by researcher for study
(Nachmias and Nachmias 2008). An option of research design always helps to come
in a decision with given or fixed range of dimensions of the research process
(Bryman and Bell 207, p.40), but it also come with influences methodological
procedures which can be data collection, data sampling and statistical packages.

This research design is exploratory and comparative to determine the customer

satisfaction towards house loan scheme offered by public sector and private banks.
3.4 SOURCES OF DATA

A- Primary Source: - Approaching the home loan customers of public sector banks
and private sector banks and obtaining relevant details by questionnaires, personally.

 Interviews (Tool: Questionnaire): An interview is a technique of data collection

that involves respondents’ oral questioning and survey. Interviews can be

conducted with varying degree of flexibility.

 Structured Interview:

Structures Interviews are conducted with a fixed list of questions in a standard

sequence that have mainly fixed or precategorized answers. So as to make the
questions always answered in the same circumstances, a structured interview
was standardizing with regard to questions for respondents’ survey. This
significantly minimized the impact of context, where the answers to a survey
question can depend on the type of foregoing questions. Although effects of
context cannot be averted, it is often desirable that all respondents are held
across constantly. This technique to gather information is very limited. To
follow the structured method, mostly the surveys are carried out either
telephonically or even the person is leaned.

B- Secondary Source: - Data has been collected from statistical bulletin published
by varies organizations journals, periodicals, newspapers, annual reports of the
respective nationalized banks, annual report of Reserve Bank of India (RBI), RBI
Bulletin, trend and progress of banking (annual publication of RBI), SBI, ICICI,
HDFC, PNB etc. (bulletin, annual report) and all publications and reports published
by respective nationalized banks annually. Personally approaching the SBI & ICICI
banks and obtaining relevant details.
  Plan of Analysis: -

For producing data clearly we have used pie-charts as statistical tools. For
representing data neatly and efficiently, percentages and averages have also been
used.

 Development of Data Collection Instrument: -

Survey Method is the mode for collecting data. The questionnaire has been prepared
by the Researcher according to the requirement of the collected data.
 CHAPTER 4

Data Analysis & Interpretation

 CHAPTER 5

Findings & Conclusion

FINDING:

 State Bank of India is popular bank as compared to ICICI bank.

 State Bank of India and ICICI bank both provides very good services to its
customers.
 Customer satisfaction level of SBI bank is very high compared to ICICI bank.
 In the user ratio of home loan 80% of customers are using SBI product and 20%
are in favour of ICICI bank..
 Public prefer to take home loan from SBI bank than ICICI bank.

RECOMMENDATION:

 During this survey, it was found that sometimes customer had to wait for home
loan scheme processing done by the staff of SBI bank. Efforts should be made
to reduce it.
 It was found out that in SBI there is lot of formalities in the home loan scheme
processing, too much documentation is done.
 SBI bank should open more branches in different cities.

 ICICI bank should organize the program in the society, so that people will be
aware about the company and different product of the bank.
 ICICI bank should make people understand about various benefits of its product
 CHAPTER 6

Limitations & Future Scope

 Limitations:
o It is a long-term debt. This means that you have to deal with it for a specified period, which
means that you have to commit yourself to making monthly payments specified in your
agreement for the period indicated to repay the loans.
o If you miss payments, you will face serious consequences. You can face foreclosure or
repossession of the property. In addition, you could also face penalties and legal issues. It
will also reflect in your credit rating, which can lead to a low credit scores.
o You may not be able to make early loan repayment. Few lenders give option for early
repayment. Although there are some who will allow you to do this, they will charge you
with early repayment fees.
o Loans are very helpful. However, you have to manage them well because you can get into
a lot of trouble if you fail to make the expected payments.

 Future Scope:
o The housing finance is likely to remain a low risk low margin business that records
fast growth in the foreseeable future.
o Further research work may cover the other credit managers assisting the branch
managers, wherever applicable in respect of their psychological factors.
o Due to these pandemic bank will come up with new facilities.
o Overall survey define that the customers will prefer SBI bank for taking home
loans.
o So SBI should come up with some new facilities and also rate of interest.
o While taking home loans interest rate is the only thing which attracts the most for
customers
 Case study
Case study 1:

First Home Buyers - Mr and Mrs Smith are looking to buy a family home

Mr and Mrs Smith have been happily renting an inner-city two bedroom unit for the
last four years. All along, they’ve also been well disciplined in saving for a deposit
for their own home.

With children on the horizon they know they’ll need to move out of the unit in the
foreseeable future and into a family home. So the Smiths have decided they’re now
in the best financial situation to ditch the rental market and take the plunge into the
world of mortgages!

Unsure of how much they can borrow, uncertain of where to look for the best loan
deal and with advice coming from all directions, the Smiths are a little overwhelmed!
So they agree to visit one reliable and expert source – a mortgage broker. Also
known as a home loan negotiator, a mortgage broker is the middleman between the
borrower and the lender. They’ll aim to find you the best home loan deal for your
situation and will be there every step of the way from applying for the home loan to
settlement of the property.

Working out their borrowing power

The Smiths are elated, they have saved $100,000 for the deposit of their first home.
The higher the deposit the less the Smiths will pay in interest over the life of the
loan. Before heading off to see the mortgage broker, the Smiths would like to get a
realistic idea of their borrowing capacity. Based on the deposit amount and their
combined incomes Mr Smith plugs some figures into ahome loan borrowing
calculator. It reveals, they can borrow $400,000 which gives them a total amount of
$500,000 for the purchase of a home.

The Smiths visit the broker to move forward with the loan process and disclose their
finances and deposit amount. They’re immediately informed of good news, they
won’t be hit with lenders mortgage insurance (LMI)! This insures the bank against
you not being able to make your mortgage repayments and can cost tens of thousands
of dollars depending on how much deposit you have. If you have a deposit of 20%
or more you will avoid LMI, which is the case for the Smiths, if they’re to purchase
a $500,000 home with a $100,000 deposit.

Deciding on the type of home loan to go for

The mortgage broker then goes through the different home loan and interest types
the Smiths can choose from. Keeping in mind, there is no right or wrong, it comes
down to the choice of the borrower. A variable rate home loan means the interest
rate will change according to the market, so you could be subject to a rate rise. The
other option is taking out a fixed rate home loan where the interest rate is locked in
for the introductory period (1-5 years) of the loan. At the end of the period it reverts
to a variable rate. If the Smiths would like a mix of both rate options they do have
the option of a split rate loan, which as the name suggests splits one portion as fixed
and the other as variable.

The Smiths think long and hard, as choosing the interest type is one of the biggest
decisions they’ll make in getting a home loan. After looking at the pros and cons of
each, they decide that a fixed rate home loan suits their situation at this point in time.
On a strict budget, the Smiths want to know exactly how much they will be making
in repayments each month for the next three years. They can’t afford to suddenly be
paying more one month if interest rates rise. They have also chosen a short 3 year
fixed term as the longer the fixed rate term the higher the interest rate. At the end of
the 3 years the Smiths believe they will be more comfortable switching to a variable
home loan which will have a lower interest rate.

Considering the first home loan features

While the Smiths have chosen to go with a fixed rate home loan, it does have its
disadvantages. There are less flexible features with this type of loan compared to a
variable rate home loan. The broker explains to the Smiths that they won’t have a
loan which has a mortgage offset feature. An offset account is linked to your home
loan and the amount that is in this account is offset against the balance owing on
your home loan. The more money in your offset, the larger amount in interest you
save. The Smiths aren’t too concerned at this stage about not having this feature as
they don’t have any additional savings, it’s all been going towards the deposit!

Hard at work finding the most suitable home loan for the Smiths, the broker has
found a great deal which offers free extra repayments. The Smiths are very happy to
have this feature as every Christmas Mrs Smith gets a substantial bonus from her
employer. Putting the bonus towards the loan will save the Smiths money in the long
run and it will help reduce the time it takes to pay off the loan. Once the Smiths make
an extra repayment with the home loan deal they are considering, they are entitled
to a repayment holiday. This feature may come in handy when Mrs Smith goes on
maternity leave, as it means they can have a ‘break’ from making repayments on the
loan but only for a short time of up to six months.
 Choosing the home loan term

Decisions, decisions, decisions! The Smiths need to select a loan term of 25 or 30

years in which they will repay the loan off in full. The longer the loan term, the more
it will cost them in interest. The shorter the loan term, the more the monthly
repayments will be. For example it looks like the mortgage broker has found a hot
deal for the Smiths with a 5% fixed interest rate on a $400,000 home loan. With a
loan term of 30 years, monthly repayments would be $2,147 and interest paid over
the period would be $373,023. But after doing the maths with aloan repayments
calculator the Smiths realise they can save $71,515 in interest if they take out a loan
for 25 years. Monthly payments will be $2,338 ($191 more) but in the long run the
Smiths are all about paying off the loan quickly and paying less in interest.

Organising the home loan pre approval

With all the big decisions made, from loan type, features and loan term, the mortgage
broker is ready to get the Smith’s paperwork sorted for a loan pre-approval. They
pile together, pay slips, notice of assessments, a full copy of their last two tax returns
and account statements of their savings and credit card accounts. A home loan pre
approval means the Smiths can make a “conditional” offer on a property, which is
subject to finance. They’re well on their way to purchasing their first home!

Case study 2
How we saved $7,000 on home loan repayments each year

Paying off your home loan will probably be the biggest financial expense you’ll ever
take on. So if you’re signed up to a mortgage with a less than competitive rate you
could be paying far more than you ought to.

To show you how much you could save by making the home loan switch, we hand
the podium over to Brisbanite, Jessica Steele who saved a whopping $7,000 a
year by refinancing. Here’s her story:

Before Jessica and her husband Brett refinanced, they were with a big bank
and being charged 5.05%, which they were unhappy with. Jessica explains, “We
went to the bank and asked for a better deal but the best they could offer us was
4.48%. We felt like, once the bank had our business they didn't care.”

The couple decided it was time to look around to see what else was out there and
started their search by conducting an online comparison of home loans. Jessica and
Brett came across Heritage Bank and liked what the bank had to offer.

“We found Heritage could offer us a much lower rate of 4.14%, which meant we
would save around $7,000 in home loan repayments each year.”

Jessica describes Heritage Bank staff as really helpful, making the switching process
easy. “Their communication was great and they really made us feel welcome.
Everyone at Heritage was much more friendly.”

“We’ve saved heaps by shopping around and will put the money towards our
upcoming renovation later in the year,” adds Jessica.
For others out there thinking about refinancing, Jessica advises, “Go for it. It doesn’t
cost you anything to shop around and ask questions. Don’t settle for what you’ve
got because there’s always a better deal out there.”

Are you thinking about refinancing? Compare today's lowest refinance rates now or
read on for Mozo’s 4 top refinancing tips:

1. Budget for any switching costs

Refinancing is a great way of slashing your monthly repayments, but there are a few
costs you’ll need to keep in mind, including discharge and exit fees (if you’re signed
up with a fixed rate loan) and upfront fees charged by the new lender.

2. Look for flexibility

In addition to a great rate, two popular home loan features your might want to
consider are an offset account, which you can use as a place to park your cash and
reduce the amount of interest you pay, and an extra repayments facility which allows
you to pay off your loan faster.

3. Compare deals online

Rather than spending hours visiting each lender’s website, use a reputable home loan
comparison website like Mozo.com.au to compare home loans side by side and find
out which lenders are offering the best home loan rates.

4. Haggle
When you’ve picked a home loan you like, the potential savings don’t stop there.
You could slash your rate even further by negotiating with the lender before you
sign on the dotted line.

Fore more handy switching tips read our tell all Refinancing Guide.
 CONCLUSION

Since both the banks are competing equally with each other. SBI bank is little bit
below the line in young customer handling compared to ICICI bank. The study show
the SBI Home Loan has product portfolio for satisfying different consumer needs in
lucratic manner. SBI bank is more reliable compare to ICICI bank. Both the bank
already has good number of employees. Both bank provides the benefits like SMS
alert and other features so as to make the home loans are more attractive. The home
loan segment can be extended to the NRI segment.
Maximum customers are satisfied with today’s banking scenario. Maximum
customers like the most in banking services i.e. less paper work whereas they also
like the EMI base loan scheme. The ICICI bank is little bit below the line in
concentrating on Loan & advances products & services then to SBI bank. But SBI
should be considering more reliable because of public sector bank & because of its
various schemes.
 BIBLIOGRAPHY

website
 www.investword.com
 www.steetdirectory.com
 www.enterprenuer.com/encyclopedia/bankloan
 www.rediff.com
 www.ehow.com
 https://mozo.com.au/home-loans/resources/case-studies
 https://www.adityabirlacapital.com/abc-of-money/advantages-and-
disadvantages-home-loan
 ANNEXURE

1) Your age?
- 21-23years
- 24-29 years
- 30-35 years
- 35 years & above

2) Education qualification?
- Under graduate
- Graduate
- Post graduate

3) Your occupation?
- Business
- Profession
- Service

4) Your annual household income?

- Less than 2lakh
- Between 2 to 5lakh
- Between 5 to8lakh
- More than 8lakh
5) How do you come to know about home loan?
- Advertisement
- Peer group
- Banks
- Financial advisers
-
6) Do you have all the documents which are required to home loan procedure?
- Yes
- No

7) Based on your experience would you select this bank of any services or
product in future?
- Definitely would
- Probably not
- Probably would
- Definitely not

8) Which Bank you prefer for taking home loans?

- SBI
- ICICI
- Others

9) Satisfaction level
- Yes
- Quite Satisfy
 - No

10) While taking home loans which things attract you most?
- Interest Rate
- Service provider
- Payback Period
- Schemes
- Others