Can Bank Delay Disbursement and Still Charge Interest?

[helloworld]

Looking for help and guidance:

My friend applied for a house extension loan, which got approved on April 3rd.

• The bank said only interest would be charged until the 2nd disbursement is done (Note: Even if the work is more than 80% completed, they disbursement twice at all times - branch people).
• The EMI would start from the 5th of the next month after 2nd disbursement.

So:

• If the 1st disbursement was taken on April 3rd, 27 days of interest would be charged for that amount.
• To save interest, the 1st disbursement was actually taken on April 24th for only 6 days of interest would apply for April.

Here's the issue:

• On April 24th, also applied for the 2nd disbursement.
• By that time, 80% of house work was already done.
• But the bank delayed the 2nd disbursement and only processed it on May 5th - 11 days later.

Because of this:

• Now we have to pay 31 days interest for the 1st disbursement (for May).
• And also 26 days of interest for the 2nd disbursement (from May 5th to May 31st).
• Even though we asked to start EMI earlier to reduce the principal, the bank refused.
• We escalated the issue, but each time it goes back to Level 1, who just says it was "approved on May 5th".

Questions:

1. Why did the bank delay the 2nd disbursement by 10 days? Was this a deliberate delay to earn more interest? Asking because if bank delayed lets say for another month then till that time have to pay interest for 1st disbursment only, right.
2. Why can’t we start EMI earlier, it was processed same like home loan yet in home loan we can start the EMI for the disbursed amount but not for extension?

Is there any way to raise a formal complaint against this or to find why they took 11 days to approve the 2nd disbursment?
(note: no visits happened for 2nd disbursment, asked multiple times about progress, they requested some site photos which shared)

@SJM / @RAMESH BABU N / @6ix9ine / Or anyone with experience on this?

Major issue: with charges + Interest + MOD fee .. Interest rate of 8.4% turns to be 11.5% (loan APR) which is almost same as personal loan.

 

[hender]

Looking for help and guidance:

My friend applied for a house extension loan, which got approved on April 3rd.

• The bank said only interest would be charged until the 2nd disbursement is done (Note: Even if the work is more than 80% completed, they disbursement twice at all times - branch people).
• The EMI would start from the 5th of the next month after 2nd disbursement.

So:

• If the 1st disbursement was taken on April 3rd, 27 days of interest would be charged for that amount.
• To save interest, the 1st disbursement was actually taken on April 24th for only 6 days of interest would apply for April.

Here's the issue:

• On April 24th, also applied for the 2nd disbursement.
• By that time, 80% of house work was already done.
• But the bank delayed the 2nd disbursement and only processed it on May 5th - 11 days later.

Because of this:

• Now we have to pay 31 days interest for the 1st disbursement (for May).
• And also 26 days of interest for the 2nd disbursement (from May 5th to May 31st).
• Even though we asked to start EMI earlier to reduce the principal, the bank refused.
• We escalated the issue, but each time it goes back to Level 1, who just says it was "approved on May 5th".

Questions:

1. Why did the bank delay the 2nd disbursement by 10 days? Was this a deliberate delay to earn more interest? Asking because if bank delayed lets say for another month then till that time have to pay interest for 1st disbursment only, right.
2. Why can’t we start EMI earlier, it was processed same like home loan yet in home loan we can start the EMI for the disbursed amount but not for extension?

Is there any way to raise a formal complaint against this or to find why they took 11 days to approve the 2nd disbursment?
(note: no visits happened for 2nd disbursment, asked multiple times about progress, they requested some site photos which shared)

@SJM / @RAMESH BABU N / @6ix9ine / Or anyone with experience on this?

Major issue: with charges + Interest + MOD fee .. Interest rate of 8.4% turns to be 11.5% (loan APR) which is almost same as personal loan.

Which bank ?

 

[helloworld]

Which bank ?

HD*C . .

 

[hender]

HD*C . .

For someone with H/L in BOB, got a Really Nice banker sitting in a different branch other than sanctioned office/Branch, she helped a lot in all statements/query, prepayment/loan closure and other related formalities.

As I can relate they currently have H/L with HDFC will check and confirm.

Disc: Not sure about Home Extension Loan or it can be of any help in the matter.

 

[SJM]

Looking for help and guidance:

My friend applied for a house extension loan, which got approved on April 3rd.

• The bank said only interest would be charged until the 2nd disbursement is done (Note: Even if the work is more than 80% completed, they disbursement twice at all times - branch people).
• The EMI would start from the 5th of the next month after 2nd disbursement.

So:

• If the 1st disbursement was taken on April 3rd, 27 days of interest would be charged for that amount.
• To save interest, the 1st disbursement was actually taken on April 24th for only 6 days of interest would apply for April.

Here's the issue:

• On April 24th, also applied for the 2nd disbursement.
• By that time, 80% of house work was already done.
• But the bank delayed the 2nd disbursement and only processed it on May 5th - 11 days later.

Because of this:

• Now we have to pay 31 days interest for the 1st disbursement (for May).
• And also 26 days of interest for the 2nd disbursement (from May 5th to May 31st).
• Even though we asked to start EMI earlier to reduce the principal, the bank refused.
• We escalated the issue, but each time it goes back to Level 1, who just says it was "approved on May 5th".

Questions:

1. Why did the bank delay the 2nd disbursement by 10 days? Was this a deliberate delay to earn more interest? Asking because if bank delayed lets say for another month then till that time have to pay interest for 1st disbursment only, right.
2. Why can’t we start EMI earlier, it was processed same like home loan yet in home loan we can start the EMI for the disbursed amount but not for extension?

Is there any way to raise a formal complaint against this or to find why they took 11 days to approve the 2nd disbursment?
(note: no visits happened for 2nd disbursment, asked multiple times about progress, they requested some site photos which shared)

@SJM / @RAMESH BABU N / @6ix9ine / Or anyone with experience on this?

Major issue: with charges + Interest + MOD fee .. Interest rate of 8.4% turns to be 11.5% (loan APR) which is almost same as personal loan.

Not sure what you are complaining about. If the disbursement is delayed you are paying less interest and not more. Interest is calculated on daily outstanding.

 

[helloworld]

Not sure what you are complaining about. If the disbursement is delayed you are paying less interest and not more. Interest is calculated on daily outstanding.

Ok.. Here's some example

Loan 7L..

1st disbursment -- 4L (they approved only that even though site is eligible for full because they have to disburse 2 times)

Approved on Apr 3rd, u can't pay EMI because 2nd disbursement not yet released until then you have to pay only Interest without any reduce in the principal amount (according to my understanding).

And that is daily basis based on the outstanding amount (currently its 4L).

So, availed the cash on Apr 24th where we paid 6 days of interest (until Apr 30th) = 553rs.

Applied for 2nd disbursement immediately because site is almost ready and aiming for EMI next month May 5th (as per HD*C only following month 5th will deduct the EMI after approving 2nd disbursement).

But due to some reason (whether its intentional or unintentional), they didn't approved till May 6th.

So, 2nd disbursement on May 6th for 3L -- we have to pay 25 days of interest = 1726.

Since no EMI this month, have to pay full 31 days interest for 1st disbursment 4L = 2853.

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In short, without reducing single rupee in Pricipal amount, one paid = 5132rs. extra because bank put weird conditions and pushed dates between approval.

this will be even more, if bank didn't approve 2nd disbursement in May but in Jun5th. Imagin till 2nd disbursment approved, one has to pay only interest for 1st disbursement without reducing principal amount.

then EMI starts from Jun 5th onwards for whole 7L loan with usual interest rate.

This 5132rs. is extra and considering this amount with Other charges like MOD, Proc. Fee, etc. loan APR comes to 11.5% (Overall amount we took / Overall amount we paid)..

pre-EMI interest is extra, on top of the total interest we’ll pay later in our full EMIs, let me know if I'm wrong here.

 

[helloworld]

It seems like its upto the bank to approve 2nd disbursement whenever they want, and until then one has to keep on paying Interest only. Atleast that is the only response I'm getting from HD*C support through mails. Will keep update, if they compensate extra interest for deliberate delay in their part.

 

[arun4455]

I still don't see any problem in the bank's working. The interest has to be paid on the number of days funds utilised. Since, you have not paid full EMI, so how the amount can not be adjusted in the principal.

 

[helloworld]

I still don't see any problem in the bank's working. The interest has to be paid on the number of days funds utilised. Since, you have not paid full EMI, so how the amount can not be adjusted in the principal.

Lets see.. if its approved before Jun 5th -- then EMI starts on Jun 5th which reduces principal (as part of that EMI)..

Since its approved after Jun 5th, have to pay only interest (for both 1st disbursment + 2nd disbursement) for entire Jun month without reducing single rupee in Principal amount. Means you're paying extra other than ur usual interest on your total principal amount which will start from Jul 5th onwards.

Hope this helps: https://www.technofino.in/community...-and-still-charge-interest.41835/post-1045529

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Issues:

1. Agreed for regular EMI start, but bank denied stating until 2nd disbursment approved -- one only has to pay interest (this is different than actual interest amount on loan amount) for bank benefit.

> your principal amount 7L.. and normal interest @8.5% (not yet started) + this additional interest

2. Still agreed for regular EMI to reduce the principal amount as soon as possible, but still bank denied it passed their monthly 5th date for 2nd disbursement approval (even applied before 10 days) -- this means one has to pay another month of interest on 1st disbursment, current month interest for 2nd disbursment.

> still your principal amount 7L.. and normal interest @8.5% (not yet started) + last month 1st disbursment interest + current month 1st disbursment interest + current month 2nd disbursemnt interest.

this is what you have to pay..

lets say if they didn't approve 2nd disbursment in Jun but in Aug.. then

> still your principal 7L with @8.5% (not yet started)

May: 1st disbursment interest
Jun: 1st disbursment interest
Jul: 1st disbursment interest
Aug: 1st disbursment interest + current month 2nd disbursment interst.

this entire thing wont' reduce ether principal or interest of your loan 7L with @8.5% interest.

AFAIK, this is problem in bank's working and way to loot money from customer without approving in time. (if they approve in time, customer start paying EMI which reduces their principal along with interest but if delayed they get additional interest).

 

[arun4455]

Think from different perspective. You are paying the interest for days the amount has been utilised by you. Yes, your regular EMI will start from the next month, so your loan will end after one extra month. But you are using that money for one extra month also.

You can prepay for any amount and reduce your tenure.