HDFC charges Rs. 100 per transaction (online)

When I took my home loan in July 2008, HDFC was insisting that i sign up for ECS. Eventually i did, but only to cancel it at the end of the 1st month. 


The reasons i cancelled it:
1. They just had only 2 dates for ECS i.e. 10th and 25th of every month. I was asked to choose between these two. I had argued that i should have the right to decide the ECS date but they did not oblige. So i had cancelled it after one month. 
2. HDFC usually allows you to pay your EMI outstanding by the end of a month (say april 2011) upto the 5th of next month (i.e. 5th May 2011). So i thought why should i make the payment on 10th or 25th if i have the option to pay it by 5th of next month?
3. There was (there still is) an option to pay your EMI online. I thought it was the easiest option compared to PDCs or ECS. 


So i quickly switched to the online payment method and was quite confortable in it. 
I would usually pay my EMI anytime between 1st and 5th of the subsequent month and it went smoothly. 
But there was a glitch. Whenever i paid on either 4th or 5th, HDFC would send me a notice on 4th (which i would receive it by 8th or 9th) that my EMI was overdue and so and so interest was charged extra. 
Though (and obviously) these notices didn't have any impact on my account as i would have had already paid the EMI before 5th so the notices were not to be taken seriously. Still i contacted HDFC several times to stop the useless notices. Each time i protested, they suggested i use an alternative payment method like ECS, PDCs etc. They really pressed for ECS, but continued insisting the online payment method. 


Suddenly in October 2010, HDFC put a notice on their online portal that all online payment would incur a charge of Rs. 100 per transaction. It was really shocking. 
Payment of EMI using netbanking is just like an NEFT transaction and it should not involve any extra charges than what banks charge (Correct me if this is not the case). I have seen most of the banks charging a maximum of Rs. 5 (Rs. five) per NEFT transaction for a transaction below Rs. 1 Lakh. 


But this was HDFC's way of discouraging people from using online facilities. 
I contacted them and explained to them that they should not charge so much for just paying an EMI. Afterall it was not a credit card or a debit card. Rs. 100 is very high in any case for debiting the EMI amout from your bank. 


Their reply was more shocking. 

"Web payments are not used by customers to make monthly EMI payments and are used only selectively by those customers who are outside India.  This paymode is not offered in the offer letter. As mentioned in my earlier reply, you can submit post dated cheques."

I was literally spellbound after seeing this reply. I told them that the whole world was moving online, and you were being regressive by penalizing those customer who are trying to go online. 

As i didn't have any other option, i finally decided to continue the old way of paying by PDCs. 

But this time I gave PDCs dated 3rd of every [subsequent] month. 

Earlier, if i had made online payment on 3rd, HDFC would get it on 3rd or 4th. 

Now HDFC dutifully deposits the cheque on or after 3rd, (Usually 5th of every month), it then gets cleared by 6th or 7th. The cheque also exchanges many hands increasing the workload of HDFC's employees. 

Dear HDFC, please tell me, did you really benefit by discouraging the online payment?

Planning to change the name and url of this blog

I am planning to change the name and url of this blog, as i am willing to cover the home loan industry as whole and not just hdfc.
Suggestions welcome. 

End of teaser loan era

Finally SBI, under pressure from RBI, has ended the teaser loan campaign.
This is a big blow for existing customers (irrespective of the their lender) who are having loans very high high interest rates.

Teaser loans with lower interest rates for first 3 years were taking care of the switching cost (generally 2% of the outstanding principal) of the existing home loan. It has now gone. It is very easy to guess that private players might be behind the so called "pressure" from RBI.

It's funny that RBI is more concerned about teaser loans than the plight of such existing customers, and surprisingly, in the pretext of "concern" for existing customers. 

The myth of spread change "facility"

(Note: I'm really sorry that this post has not been phrased properly and readers many find the post unorganized and points scattered. )

HDFC boasts of providing you with the convenience of increasing your spread (thereby reducing your interest rate) by paying a so called "conversion fee"

Before going into the details, here are the facts about the "conversion fee"
1. HDFC doesn't give any acknowledgement of the fees paid (Though they pay service tax on the amount  you pay)
2. The conversion fee is NEVER reflected into your account statement
3. The conversion fee is not "seen" online. It won't reflect in any of the "transactions" like EMI, prepayment etc
4. The formula of the conversion fee changes all the times. Ask HDFC about how many times they have changed the formula.
5. The letter you get after spread conversion doesn't at all mention about the amount you paid as a fee. It doesn't even say anything like "subject to realization of cheque etc etc"

In short, HDFC makes sure that the conversion fee is never documented, atleast at the places where the customer can see it. They might record it internally, but for a customer it is completely hidden.

When hard pressed for the receipt, what they give is a copy mentioning it as "conversion". You may draw your own inferences.

Now let's look at HDFC's claim that atleast they provide this facility, compared with other banks who do not do so.

From my experience, HDFC's PLR is like the horse that moves 4 steps forward, and 1 step backward. So when i took the loan in July 2008, it was 13.5, while now it's 15.5. Anyone can tell you that market conditions in July 2008, and April 2010 are relatively comparable. If you compare the interest rates that were being offered in 2008 then you'll find that they were slightly lower than that are being offered today.

But the similar thing doesn't apply to those who have taken loan from HDFC in july 2008.
Whoever took the loan from HDFC in July 2008 would have been offered the interest rate of 10.25 (give or take 0.5 depending on your credit worthyness), while the same would have been 12.25 by now.

Now new customers get it at 9.75 from HDFC. The old customers can also get down to 9.75 but then they must have either paid 0.5% (of the outstanding principal) 3 times to keep up with the new customers, or 1.5% in one shot.

This is what happens when you "avail" the facility of "spread change" provided by HDFC.
I would request you to write down the "lowest spread" you had on your account, then the readers can determine that the rate of interest you would have to pay had you not approached them for spread conversion.

From my experience, to keep one's interest rate down and comparable to the new customers, an average HDFC customer has to pay 0.5% (of the outstanding principal) every year. Calculate this for your tenure of the loan and you'll get to know why it's a myth and HDFC is not doing any favours to you.

Let me know your experiences and opinions on the same. 

HDFC clause 2.13 for spread change

Below is the clause mentioned in HDFC's home loan agreement that is paving the way for more and more fees as spread conversion charges. 

Clause 2.13: The spread applicable to the borrower for the purpose of computation of AIR is as indicated in the Schedule . In the event of HDFC offering revised spread in future, the borrower shall have the option to opt for the revised spread in respect of the loan, provided if such option is made available by HDFC, with prospective effect upon payment of such fee and execution of documents as HDFC may prescribe in that behalf. It shall be the borrower's responsibility to keep himself informed about the revision in spread from time to time. 

Now there are many inconsistencies in the above clause and its implementation by HDFC that we'll discuss one by one. 

1. It is the responsibility of the customer to know whether any new "scheme" is available to reduce their interest rates. 

Are the customers supposed to call them everyday to know the so called "scheme"? Why can't they put it on their website? The reason is obvious: Putting such schemes on website will show their true colors to their prospective customers and they will certainly think twice before taking a loan from them. 

2. The quantum of processing fees: The fees for spread change is absolutely arbitrary and one sided and it is decided on the whim of HDFC. 

It ranges from 0.5% to 1.5% of the outstanding principal. Note that 2% is the mark where customer might "leave" them altogether by shifting to another lender. 

3. The quantum of new spread: There is no fixed formula for the new spread you can avail of with respect to the new customer. In this case too the customers are at the mercy of HDFC. 

a) In April 2009, New customers were being offered a spread of 4.5, while old customers were being offered 4 (at the cost of 0.5% of the outstanding principal)

b) In January 2010, applicable spread for new customers was 5, while HDFC came with a new formula for old customers, with a new formula for fee. 

It was like below: 

Spread Conversion fee = (ER - NR)/2, with min limit of 0.5 and max limit 1.5

ER = existing interest rate

NR = new interest rate

c)In February 2011, they said that old customers can further pay 0.5% of the outstanding principal and reduce their interest rate to 9.25. When I went to enquire further, i got to know that there is further differentiation between customers who had their outstanding principal >20L and <20L. Note that in cases a) and b) there was no such differenciation.  

The readers must have observed that the customers are trapped with HDFC and to keep the interest rate comparable with that of the new customers, the existing customers MUST pay approx 0.5% of the home loan, which is a huge amount of you consider once every year. 

In my case, if had not at all paid any "extra" as a spread conversion fee, my interest would have been a whopping 12.25%, as against 10.25% at the time of the sanction of letter while taking the home loan in July 2008 (It's less than 3 years!!!)

You should really give some serious thoughts and then choose your lender wisely. 

Introduction to "Say No To HDFC"

This is not a hate blog.
This blog will contain pure facts and experiences from the people who have taken a loan from HDFC.
Most of the people I met regret about their decision.
Stay tuned for the "facts".