Loan takeover: a relief for homeowners

Affordable interest rate and the simplified terms and conditions set by banks have been encouraging clients to transfer their loans from one bank to another.

The loan transferring system, or widely known as loan takeover between two banks, usually offers a lower interest rate than the actual one on the back of lowering of the rate in the market.

Most of the banks are now offering zero percent processing fee for clients while taking over the loans.

If required, the new lender allows the clients to enjoy an additional amount of credit on top of the amount disbursed to them when they transfer the loans.

This means, clients are not locked down to the bank for the duration of the loan even if the interest rate is unfavourable to them.

The loan takeover system protects clients' interest as it always opens a window for them to choose a new bank, said Md Arup Haider, head of retail banking at City Bank.

“Clients can swiftly shift banks when lenders make an attempt to hike the rate on home loans,” he said.

“Unexpected interest rate increase can be avoided using the process.”

Yousuf Harun Nuri, a banker by profession, said he had taken a home loan of Tk 80 lakh from a second generation bank four years ago at 13 percent interest to purchase a flat.

The loan has recently been transferred to another bank as it offered Nuri 11 percent interest. Moreover, the lender extended an additional credit support of Tk 10 lakh to renovate the flat, he said.

“This was a great relief to me,” he added.

A fair competition is now prevailing in the banking sector because of an easy process to take over home loans, said ASM Muahidur Rahman, head of retail customer relationship management at Bank Asia.

Lenders continue to show an eager interest in taking over the loans as there is no flaw in the mortgaged documents of the clients in most of the cases.

“The banks that disbursed the loans initially verify the documents submitted by the aspirants for the loans,” said Rahman. 

The interest rate being offered for transferring home loans to Bank Asia ranges from 10 percent to 13 percent, according to Rahman.

As of September, Bank Asia's total outstanding retail loans stood at Tk 1,062 crore, 79.37 percent of which was disbursed to those who built homes or purchased flats.

The bank's outstanding amount of takeover loans stood at Tk 80 crore as of September.

Clients are now enjoying a rate benefit while transferring their home loans from one bank to another, said ANM Mahfuz, head of consumer banking of Prime Bank.

The financial institution offers interest rate of 10.50 percent to 13.50 percent for taking over home loans from other banks, Mahfuz said.

Between the months of January and September, the lender took over home loans amounting to Tk 22.40 crore.