PROJECT REPORT ON

SUNAINA MADHU PARHYARD

IN PARTIAL FULFILLMENT OF

THE DEGREE AWARDED AT

B.COM (ACCOUNTING AND FINANCE)

SEMESTER VI

SUBMITTED TO

UNIVERSITY OF MUMBAI

FOR ACADEMIC YEAR 2022– 2023

SUBMITTED BY

NAME : SUNAINA MADHU

PARHYARD

ROLL NO :275

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 : Sunaina madhu parhyard Signature:

 ACKNOWLEDGEMENT

I Sunaina Madhu Parhyard 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 Coordinator 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 Objectives 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 Advantages and
disadvantages of
loan
o Eligibility criteria
for home loan
o Profile of
organization

II Review of Literature
Chapter Contents o 30-32
Literature Review

III Research Methodology

Chapter Contents 33-38

IV Data Analysis & Interpretation

Chapter Contents o
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)

YES(If current staying together and intend
Brother-Brother
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
D R 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-
anddisadvantages-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