When Vijayananda Reddy realised he was paying 0.5% extra interest on his home loan a year after he availed it, he called his loan manager Harsha Raghavendra to see if there was something he could do about it. After all, a mere 0.5% interest rate could mean an extra of 30 EMIs.
Harsha told him how to smartly reduce his rate of interest, saving Vijayananda lakhs of rupees. This was the trigger for Vijayanandaâ€™s business idea of a company that helps people get a home loan, and in addition, manage it till the very end. No surprise then, he approached Harsha to cofound this company.
Having worked in three MNCs distributing home loans and a personal portfolio of around Rs 250 crore, Harsha knew exactly what problems people face not only while availing a loan, but also while paying it back.
After all, the home loan segment is a premium one with an average ticket size of Rs 23 lakh and a long payback tenure. Also, every month, an approximate of Rs 20,000 crore worth of home loans are disbursed across India.
And to address these problems, Vijayananda and Harsha founded Loanyantra, an online home loan management company, in July 2016 in Hyderabad.
Managing a home loan
Loanyantraâ€™s services start from the time you look for a home loan. There are 880 home loan products available in India, according to Harsha. So if you want to avail a home loan, all you have to do is register on Loanyantra with some basic details including how much your gross salary is.
Loanyantra then opens a bid in your name and shares your requirement with its partner banks. Within 24 hours, the banks revert with a reverse bid. Some may even say no. So within a day, you can see all the reverse bids from banks and pick the best one depending on which bank is giving you the lowest rate of interest, the highest amount and the lowest processing fee. Loanyantraâ€™s team also helps you out in deciding the same.
You can then decide on which lender youâ€™d like to go with. The banker calls you and takes it forward from there.
But it doesnâ€™t end here.
Loanyantra then begins monitoring your rate of interest. For this, the company has built a tool called the loan rate shield. It takes all the details of your loan and monitors your rate of interest and EMIs on a daily basis.
â€śFor example, say you avail a home loan at 9% rate of interest. If the interest goes up 0.5% in your case but the same bank is giving a lower rate to someone else and charging you higher, you will get an alert from us. You can then discuss this with your bank and negotiate to bring down the interest. You can even give us the task for a small fee. And if the bank does not agree, you can even transfer the loan to another bank through us. It is important to monitor your rate of interest while replaying the loan, even a slight change in the rate can significantly increase the number of EMIs you pay,â€ť says Harsha.
Even those having an existing home loan can register on the website and start monitoring their loans. The tool shows users any kind of fluctuation in the rate of interest, how much each bank is giving and a lot more.
Part payment alerts
Another service offered by Loanyantra is called part payment alerts. Once you avail a loan, Loanyantra asks the customer when he wants to close the loan. The average lifespan of a loan is 7-8 years. Say a customer wants to close the loan earlier, Loanyantra sends the customer part payment alerts â€“ in addition to the monthly EMIs â€“ which he has to pay towards his principal. This helps in closing the loan faster than the original time.
â€śIf you pay 15 EMIs instead of 12 in a year, a home loan that takes 20 years to close can be closed in just 11 years. By paying 33 EMIs extra, you will be reducing a total of 96 EMIs. This is the power of compound interest,â€ť Vijayananda says.
Loanyantra does not charge customers anything for the services it offers, be it availing a loan or monitoring it. It charges the bank a commission of 0.5-1% on the loan amount for every successful disbursement.
The company currently has 14 banks and is in the process of onboarding more.
Loanyantra was founded with an investment of Rs 15 lakh and then raised around $100,000. It is currently being incubated with T-Hub in Hyderabad. With around 20,000 registered users, Loanyantra has disbursed around 350 loans worth over Rs 120 crore across Hyderabad, Bangalore, Pune, Vishakhapatnam, and Vijayawada.
There are currently three to five players in the market offering loan services online. But according to Harsha, they handle every type of loan and have a much lower conversion rate.
â€śTheir support is only till disbursement. There is no management system. Only we have built such a tool. As of now 98% of the business is offline. And this is because there isnâ€™t much difference between an online and offline player â€“ both only help a customer till disbursement. But we introduced a whole management system online and people on board are seeing a lot of difference. We expect online penetration to grow and 15% of disbursement to happen online by the end of 2018,â€ť Harsha says.
Building more avenues of growth
The next step for Loanyantra is to introduce a B2B segment to its business. The company plans of tapping the builder market.
â€śThe builder market is untouched. There are a number of apartments and the builderâ€™s job is only to construct. They donâ€™t have a proper team to disburse home loans. We are partnering with them to offer special services to builders, so that they can help buyers avail home loans,â€ť Vijayananda says.
The service to builders will also be free of cost.
It has also launched an affordable housing scheme to tap the informal sector and has also partnered with some NBFCs for this. The idea is to be able to lend to even those who earn as less as five to ten thousand rupees a month.
It then plans on expanding into the personal loan segment. Geographical presence will also expand from just five cities to Ahmedabad, Kolkata, Chennai and Cochin. The idea is to add one city every two months.
In the long term, Loanyantra plans to white label banks. What this means is that the entire backend process will also be done by Loanyantra.
Currently, it only forwards leads to a bank. In the future, it plans to do the complete credit analysis, appraisal and disbursal. â€śThe banks will fund us and we will distribute to people based on their lending parameters. That is our future target,â€ť Vijayananda says.
This article has been produced with inputs from T-Hub as a part of a partner program.