Considering A Loan Transfer From LICHFL?

Updated on December 28, 20186 mins read
home loan transfer LICHFL

Most people who take a home loan with LIC Housing Finance Limited do so because it has two big advantages – High Loan Coverage and Quick Loan Approval. This may not sound so impressive if you’ve never applied for a home loan, but speak to anyone who has, and you will understand exactly how tedious and time-consuming loan approvals are. The easy loan approval is why LICHFL is a strong name in housing finance. But of course, nothing in the world is free. LICHFL customers enjoy these benefits but they also have to face a lot of issues like:

1) High Interest Rate:

For new customers, LICHFL charges a reasonable 9.80% rate of interest on home loans. This rate remains constant for a certain period called fixed-rate period. The problem begins when the loan enters the floating-rate period. In the floating-rate period, the rate of interest changes according to the market conditions. LICHFL charges very high interest rates during this period which is a big problem if you have a long repayment tenure. Even a small rise in the interest rate has expensive consequences in the long term. For example, at the beginning of the floating-rate period if:

  • Outstanding loan amount- Rs. 50Lc, Tenure remaining- 20 years, Interest Rate- 9.50%
  • Then, Total Repayment Amount with interest: Rs. 93,98,021

Let’s say your interest rate is increased to 10.50%

  • Keeping tenure fixed, Total Repayment Amount with interest: Rs. 99,48,591

Therefore, with an interest rate increase of just 1%, you pay an extra interest amount of Rs. 5,50,570. That’s 11% of the outstanding amount! This interest rate jump can make life very difficult for the borrower because the EMI drastically increases. On average, LICHFL charges 11% interest rate but some unfortunate customers are also charged as high as 12.5%! If a customer is unprepared for this transition from fixed-rate to floating-rate, he might struggle to manage his other expenses like utilities bills and children’s fees as a large chunk of the salary goes into paying the EMI. In other cases, LICHFL doesn’t increase the EMI after increasing the interest rate; it increase the loan tenure. In this case, the customer doesn’t feel the pinch of the expenses as the EMI remains the same but he ends up paying a lot more money by the end of the tenure. Confused? Let me explain.

  • Say, Outstanding amount- Rs. 50Lc, Tenure remaining- 20 years, Interest Rate- 9.50%
  • Then, Total Repayment Amount with interest: Rs. 93,98,021

Let’s say your interest rate is increased to 10.50%

  • Keeping EMI constant, tenure is increased to 27 years
  • New Repayment Amount with Interest: Rs.1,49,18,299

You are paying an extra Rs.37,32,725! This is why it’s better to get your EMI increased instead of your tenure.

 

2) Poor Customer Service:

When I spoke to some of LICHFL’s customers about their experiences with the customer service, one person told me, “LICHFL employees are very quick and helpful when you apply for a home loan. After that, you are in God’s hands.” This sentiment is echoed by many LICHFL customers. Uncooperative employees, having to visit the regional office for the smallest of services, paying hidden charges and long delays for simple things are very common customer complaints. If you have a home loan with LICHFL, there’s a good chance you are fed up with these problems. If you are looking for relief, there are two options you can choose from: 1) Internal Transfer to a lower interest rate within LICHFL 2) Transfer your loan to another Loan Provider

 

Option 1: Internal Transfer to lower interest rate within LICHFL

Finance corporations are businesses. And like any business, they hate losing customers because it reduces their long-term profits. If a high Rate of Interest is why you want to transfer your loan, I would recommend that you have a chat with the Relationship Manager at your home branch. Tell them that you are unhappy with your current interest rate and are considering transferring to another home loan provider. If you have been regular with your payments, there’s a good chance that LICHFL will reduce your Rate of Interest for a processing fee of approximately Rs. 1,000.

Pros of an internal transfer:

Transferring your loan internally is quicker and easier than transferring your loan to another lender. Your EMI reduces and your costs go down immediately. The processing cost for an internal transfer is also lower than that of a loan transfer.

Cons of an internal transfer:

Since you are in the floating-rate period, it is quite likely that LICHFL will once again increase your rate and ask you to pay an additional Rs. 1,000 in processing fees to reduce it. An internal transfer does not solve the customer service problems or give you the most savings. LICHFL might transfer you to a better rate than your current one, but there’s always a chance that you can get an even lower rate by transferring to a different lender.

 

Option 2: Transfer your loan to another Loan Provider

A loan transfer or balance transfer as the name suggests is the process of transferring your loan from your current provider to a new provider. Almost all lenders offer this service and if you are in the beginning stages of your floating-rate period, transferring a loan to the right lender can result in significant long-term savings for you. Once you have made up your mind about transferring to another home loan service, here’s how you go about it.

 

Details of transferring your loan from LICHFL:                            

  • Turnaround Time (Time from application to completion) : 60 days

This is the average time required from application to completion of the home loan transfer and may vary on a case to case basis. LICHFL can take up to 25 days to hand over your documents to the new lender. Only once the documents are released, will the target lender start the transfer process from their side.

  • The documents you need submit to LICHFL for the loan transfer are:
  1. Customer feedback form signed by you (This form may or may not be required depending on the LICHFL branch you visit)
  • The documents you need take from LICHFL to submit to the target lender for the loan transfer are:
  1. Foreclosure letter
  2. Complete loan account statement
  3. Original list of documents
  • Fees charged during the loan transfer process:
  1. Original List of Documents: Rs 573/-
  2. Loan account statement for 1 year: Free
  3. Complete loan account statement: Free

 

Conclusion

Whew! That was a lot of information. Now, we come to the main question – “Should you transfer your LICHFL home loan to another lender?”. Here’s my answer. If you are ok with going to the LICHFL office every time rates change, then it’s ok to get an internal transfer within LICHFL to a lower rate. But if you are willing to put in a little time and effort, then you transferring your loan is the best option for you. Even if you do an internal transfer, your rate probably might get increased by LICHFL at which point you’ll have to go and get the whole process done again. Anyway, compared to an internal transfer within LICHFL, transferring to a bank like SBI is a better option because they will give you a better offer than LICHFL’s best rate. The only suggestion I have at this point is: Do your research! Transferring your home loan takes time and money and you should be totally aware of all the nitty-gritties of the process. Weigh all the options available and then choose which lender you want to transfer to. And to help you with this part, there are various tools you can use like the SwitchMe savings calculator. You can also sign up for a free home loan evaluation and choose to get all the work done on your behalf. It really is that easy. Loan Transfer from LICHFL Our customer Mr. Manoj Kumar Juturu from Bangalore saved Rs. 12,64,038 by transferring loan from LIC to SBI. Here’s what he said, “Usually loan transfer agents take a lot money, but its not the case with SwitchMe. They have done loan transfer with very nominal fee and professional way.” Similarly, our customer Mr. Kapil Pandey from Pune saved  Rs. 15,83,983 by switching from LIC to Bank of Baroda. He shared “It was a great experience with SwitchMe. They help you to get your home Loan transferred at earliest. You don’t have to go to the banks. Switchme offers door step service from collecting your documents till your agreement is done to get Loan transferred.” And the list of our customers goes long. So the real question is, why should you stick to a bad loan when you can easily switch to a better future?  Signup for personalized advise, end-to-end switching service & online application tracking?

16 COMMENTS

Have a question? Post it here and we will get back to you within 1 working day.

  1. Vandita Toppo
    Nov 27 2017 at 9:04 pm
    Reply

    My husband has taken loan from LIC hfl…now he want to transfer his loan to SBI,but they are not giving. Foreclosure letter…. stating it will take time…and SBI has sanctioned and disburse by giving banker’s cheque now lichfl we’re not receiving that cheque….my husband is paying interest to LIC hfl and SBI too…

    • Suma Ganesh
      Suma Ganesh
      Nov 28 2017 at 9:54 am

      Hi Vandita,
      Thank you for writing in to us.
      It is unfortunate that you are stuck in this situation.
      Who has the SBI cheque at this time?

  2. Bhagabat Biswal
    Sep 15 2017 at 9:39 am
    Reply

    Dear madam ,I have a housing loan with LICHFL , I want to know about loan transfer policy of LICHFL. Some of question regarding this is as follows:

    1.How many month loan statement required ?
    2.Any transfer charges applicable or not ?
    3.How many times required for final transfer ?

    • Suma Ganesh
      Suma Ganesh
      Nov 01 2017 at 9:57 am

      Hi Bhagabat,
      You will find the entire list of documents required above in our article.
      If you require assistance with switching your home loan, please go ahead and register on our website. One of our advisors will guide you through the process.

  3. Chhagan Lal Sharma
    Sep 14 2017 at 10:37 pm
    Reply

    Hi

    Can you tell me the time period of fixed rates in a home loan because I want to balance transfer my home loan. Section on 19 Oct 2015

    • Suma Ganesh
      Suma Ganesh
      Nov 01 2017 at 10:14 am

      Hi Chhagan,
      Thank you for writing in to us.
      It depends on when you took your loan. Please talk to someone from LICHFL to find out about your specific home loan account.
      We would be happy to help you with switching your loan

  4. Rohit Sharma
    Jun 27 2017 at 12:33 pm
    Reply

    Hi,

    I took a loan of 30 lacs for 24 years @9.5% floating from LIC HFL in Jul 2016.

    I am now trying to transfer my loan to SBI which is offering me an interest rate of 8.4%.

    LIC HFL is asking for Rs. 20,000 approx as foreclosure charges. Can you confirm if that’s legal ?

    Regards,
    Rohit Sharma

    • Sumita Nath
      Sumita Nath
      Jun 30 2017 at 2:13 pm

      Hi Rohit,

      Thank you for writing to us.

      There is no foreclosure charges on floating loan. Please ask LICHFL for the written document of same. Foreclosure charges are applicable only on fixed loan.

  5. Ajay Kumar
    Feb 09 2017 at 6:31 pm
    Reply

    Does Make system in L.i.c.h.f. at present.

    • Sumita Nath
      Sumita Nath
      Feb 13 2017 at 4:02 pm

      Hi Ajay,

      Sorry i didn’t understand your question. Could you please elaborate more on it so i can answer your concern.

  6. Goutam Das
    Dec 12 2016 at 12:44 pm
    Reply

    Hi,
    Can you please tell me, generally how much time LICHFL takes to transfer Loan internally ?

    • Sumita Nath
      Sumita Nath
      Dec 13 2016 at 5:19 pm

      Hi Goutam,

      LICHFL charges Rs.1145 for internal conversion.

  7. Akshay Deshmukh
    Sep 29 2016 at 4:15 pm
    Reply

    Hello Sir,

    Thanks for sharing such valuable information.

    I am looking to transfer my Home Loan to LIC HFL. I want to transfer my loan because I need a top up loan and my current lender(IDBI) is not offering me the same saying it is not meeting with criteria. My current interest rate is 9.6% and LIC HFL is offering me loan @ 9.5% (Home + Top Up).

    Please advice me on following :-
    1. Should I go for LIC HFL ? Will they increase Rate of Interest after 2 Years? I want to go for Floating option at the moment.
    2. If they increase Rate Of Interest significantly then Can I go for Transfer after 2 years? Will it be wise option? (My loan would be transferred twice one from IDBI to LIC HFL and second from LICHFL to some other lender)

    Please advice on above. Waiting for your reply.

    Thanks,
    Akshay

    • Sumita Nath
      Sumita Nath
      Sep 30 2016 at 3:10 pm

      Hi Akshay,

      1. I would advise you to check with other banks before going with LIC HFL because there could be a possibility of rate of interest getting higher after you switch. If you are going with LIC HFL opt for the Floating rate.
      2. If you are on the floating rate you can transfer at any point of time since there is no restriction on that.

  8. SBYadav
    Sep 20 2016 at 5:56 pm
    Reply

    sir , recently I tried to take home loan fram LICHFCL but due to lesser area of my plot (20sq mt) they denied it .My agent suggested me to take it from GRUH finance. I want only 5lakh .Sir please give me advice on it.

    • Sumita Nath
      Sumita Nath
      Sep 21 2016 at 12:43 pm

      Hi,

      Before going ahead with GRUH finance, you should try applying for a home loan at banks as you will get a benefit of less interest rates through most of these banks.