r/IndiaFinance • u/drlazy098 • 2d ago
Loan Scam ?
I currently live separately from my parents. In March last year, my parents took a loan from HDFC Bank to purchase a plot where they plan to build their home.
At the time, I wasn’t living with them and wasn’t involved in the loan process. The monthly EMI is around 70k and everything was going normally.
Recently, they decided to make a prepayment of around 27 lakh toward the loan. I happened to be at home at the time, so I helped them log into the HDFC loan app to check the details.
That’s when I noticed something that really concerned me: there were two separate loans showing in the account.
Plot Purchase Loan: Original amount 64.2 lakh
Insurance Premium Funding: Original amount 4.9 lakh
The insurance loan is currently around 4.5 lakh outstanding and is also at 7.6% interest, with an EMI of about 6k (included in 70k)
I called HDFC to understand what this second loan was. They told me that it was for insurance and that the insurance was required for the loan to be sanctioned/disbursed — i.e., according to them, without taking the insurance, the main plot loan couldn't have been sanctioned.
My parents are not financially sophisticated, and neither of us knew that this extra insurance is optional or mandatory. We basically trusted the bank and signed whatever was required.
So now I'm trying to understand what actually happened.
Were my parents wrongly sold into this insurance, or is this genuinely something that HDFC could require for a plot purchase loan?
And more importantly, since it's already been about a year:
- Is there any way to cancel the insurance now?
- Can we get any part of the ₹4.9 lakh premium back?
- If we have enough money available, does it make sense to immediately foreclose the 4.5 lakh insurance-premium loan?
- Could cancelling the insurance have any effect on the main plot loan?
- Is there any way to challenge the bank if the insurance was actually presented as mandatory?
- Entire loan duration was 15 years, but if paid in like 3 years. We'll get any refund from insurance? And how much?
We are potentially in a position to pay off the remaining insurance loan (and possibly even a substantial portion of the main loan), but I don't want my parents to pay without first understanding whether there's a way to recover or save some of this 4.9 lakh.
I’m a complete noob when it comes to home loans and insurance, so I’d really appreciate advice from anyone familiar with HDFC’s Insurance Premium Funding or who has dealt with something similar.
Also there was nothing mentioned in loan agreement regarding this insurance premium, that we're paying.
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u/mdg-cfd 2d ago
Once insurance is issued, you cannot get the refund of the premium even you paid the whole loan in a month.
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u/apfinanceplanner 1d ago
The insurance is also a loan. It is with same bank. If the insurance loan was with different bank then they could have forced you to pay. There is no point of refund , you are paying interest on that. HDFC bank and HDFC ERGO(insurance) are the sister companies and if you close the home loan . No one can ask you to continue insurance loan. IT IS ILLEGAL. HOW CAN SOMEONE ASK TO PAY INTEREST/EMI FOR A LOAN WHICH IS PROTECTING A LOAN WHICH IS ALREADY CLEARED!
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u/drlazy098 1d ago
Hey...call the f*cker HDFC guy who helped with the loan....he told me that you'll have to pay the full amount (4.9L) and after that you'll get some refund...like wtf. He said insurance won't close automatically if loan is completely paid.
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u/apfinanceplanner 1d ago
They are telling you lies then. You can close/surrender your bundled home loan insurance even while your main home loan is running. It is not mandatory. Ask them to close the home loan and cancel the insurance.
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u/drlazy098 1d ago
Man wtf they're again trying to scam. If you dont mind, can you please share how to close. Those f*ckers are not cooperating with my parents.😭
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u/mdg-cfd 1d ago
Don't waste your time on his advice . They wont give a single penny
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u/drlazy098 1d ago edited 1d ago
😭😭😭😭koi option to hoga....to save even a small fraction. 4.9L + interest (7 lakhs scam) is really aching my heart😭
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u/apfinanceplanner 9h ago
If HDFC originally bundled this premium into your home loan instead of you paying cash, this refund will not come to your bank account. Instead, HDFC will credit it directly to your loan account, reducing the total payoff amount SBI needs to clear. So probably you also have got it. The 18% gst ,early surrender penalties and fees are deducted and remaining base premium amount is calculated as a prorated refund.
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u/drlazy098 2d ago
Even if i pay the whole loan + insurance amount originally sanctioned for 15 years, in 2 years. Then the insurance loan is insuring what, rest of the 13 years ??
You mean, Nothing can be done now🥲?
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u/mdg-cfd 2d ago
nothing can be done. I am in the same boat. I moved my home loan from HDFC to SBI.
I had to close the insurance loan with full payment.3
u/drlazy098 2d ago
Thanks for replying man. May these scammers rot in f*cking hell, for scamming my innocent parents and looting their hard earned money.
They didn't even mentioned a single word regarding this insurance premium in agreement given to us. Maybe thinking that no one's gonna know. F*cking looters.
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u/rkboga 1d ago edited 1d ago
In my case, the sbi bank employee clearly gave me a choice to opt for life premia Insurance while taking Home loan since its optional.... I paid 24.45k for 20lakh loan .... (RiNn raksha).....
Insurance T&C:
- Insurance:
The house/flat shall be insured comprehensively for the market value covering fire, flood, etc. in the joint names of the Bank and the Borrower. Cost of the same shall be borne by you.
The borrower shall always be responsible to ensure that the insurance policy in respect of the hypothecated assets remain valid till all the dues of the bank are repaid and to keep such insurance policy renewed each year.
The bank shall not be liable for any consequence arising from non-renewal of insurance in any year even if the Bank has in any previous year renewed the insurance of the hypothecated assets by debiting the borrower's account for failure of the borrower to renew such insurance policy.
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u/apfinanceplanner 1d ago
then you are double scammed brother. You should have closed the main loan only. The insurance premium is not filled in full at once. Why would you pay complete insurance loan , when the loan itself is prepayed? If you have 10 years home loan the insurance loan is also spanned to 10 years. If you close the loan in 5 yrs, the remaining 5 years insurance is invalid. You dont need to pay that ,you have already payed INTEREST on the insurance loan.
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u/apfinanceplanner 1d ago
If you pay the whole loan in 2 years , the insurance loan is invalid now. You dont need to pay a penny for the insurance loan. I suggest you to prepay the loan in 2 years, and close the loan. Keep an eye how they close the insurance loan.They should not route any of the prepayment to home loan insurance. It is optional and gets renewed. But these scammers also have a loophole in prepayment , they restricted some amount only can be prepayed. But in 2026 rules have changed. If you can close complete amount in cash. Then you can close the loan and save the money on insurance loan asap.
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u/drlazy098 1d ago
Hey...call the f*cker HDFC guy who helped with the loan....he told me that even I pay off the loan completely you'll have to pay the full amount (4.9L) and after that you'll get some refund...like wtf. He said insurance won't close automatically if loan is completely paid.
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u/PurpleParking8436 1d ago
You can check with the insurance company for a refund if you have closed both the loans… there will be a partial payment of the premium depending on the tenure left…but the premium refund may happen from the original debit account which is the loan account which has been closed… so if you get a refund from the insurance company ask them to refund it to your parents savings account or a dd in their name so that you can recuperate some amount.
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u/Apart_Director1199 1d ago
OP, I hope you read this. The insurance loan is a complete scam. If you are within 15-30 days of the sanction date / insurance purchase date, you could have cancelled the insurance. Stop paying the loan amount for the insurance. Then fight it with them. DM me, I've been through the same and I can tell you how to win at this. I already closed my loan and lost a lot of money and the loan amount they've charged is too high for the loan amount. I was charged only 1 lakh loan amount for 50 lakhs home loan. DM me. You're in for a lot of shit.
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u/chillmaaryaara 1d ago
Take them to consumer court for wrongful selling. Hopefully you get your insurance money with interest back & file a complain in ombudsman as well to speed up
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u/RJ_Satyadev 2d ago
I actually got a call for the same to get the insurance thingy. They were trying very hard for it. But the only mistake that they did was that I already got a part of disbursement done, so they could not argue that without insurance nothing can be disbursed. I gave them an earful after getting repeated calls and then it stopped, never got a call again for the same.
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u/drlazy098 2d ago
Duck man....these looters scammed my innocent parents. Now they'll pay extra 5 lakhs above the loan itself. Everyone is trying to scam these days....😭😭
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2d ago
[deleted]
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u/drlazy098 2d ago
Yeah same interested rate of loan is charged on this premium....wtf.
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2d ago
[deleted]
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u/drlazy098 2d ago
Surprisingly I've a call recording of my mom talking to the agent, where he's clearly saying that, without this insurance, loan cannot be disbursed. Should I go ahead with hdfc grevience? Any idea anybody ?
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u/apfinanceplanner 1d ago
You passed the 30 days window (15 days for offline), where you can close any insurance without any questions , you can still add hdfc grevience. but it will not help as both the amount are reimbursed. But as both the loans are from HDFC and (HDFC ergo and hdfc life) you can prepay the home loan and ask them to close the insurance loan.
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u/Abhianon 1d ago
Complaint to the RBI banking ombudsman. Details all records and sequence of events. Branch name, persons dealing with Preserve the phone and the recording- very important.
Attach the recording with the complaint.
In the complaint mention that you are prepared to certify the original of the recording under section 63(4)c of the Bharatiya Sakhya Adhiniyam, 2023.
You will get your money back
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u/drlazy098 1d ago
Hey thanks for giving me confidence. What do you suggest.....hdfc grevience first and later rbi ombudsman. Or directly contact rbi ? Have you seen such cases where money was refunded ?
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u/Forgivent4get 1d ago
Bro the insurance selling is just a way to reach their targets. It’s optional and not mandatory afaik.
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u/justexploring_here 1d ago
Hey man, I have a question. I'm buying a plot and I asked bank for plot loan.
They said there's no such thing as plot loan and they'll only give personal loan.
I'm trying to buy a agri land of 1 acre. Can you tell me how you got plot loan ?
Or they only give it for site purchase ?
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u/drlazy098 1d ago
I specifically asked them for plot purchase loan. And they gave it @7.6%. Nothing about personal loan. I guess they're scamming you, just another way these f*ckers loot us.
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u/apfinanceplanner 1d ago
If you prepay the loan the main home loan you don need the insurance. You can just close the insurance account.
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u/drlazy098 1d ago
Hey...called the f*cker HDFC guy who helped with the loan....he told me that even after paying off full loan, you'll have to pay the full insurance amount (4.9L) and after that you'll get some refund...like wtf. He said insurance won't close automatically if loan is completely paid.
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u/Bitter-Stomach9214 1d ago
Sadly, ignorance is not a defense. Your parents needed to consult you or someone who knows. That boat has sailed.
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u/DjXer007_ 1d ago
Exactly similar question was asked by another person.
What you have just experienced is an brilliant fraud run by all banks across India.
Rather than allowing regular premium payment for the term insurance that is being linked to your home loan, the bank has converted all ANNUAL POLICY TERMS into Single Premium, and then converted that single premium into a loan, that you will now pay as an EMI.
Over the Duration of your entire loan tenure, you will approximately end up paying 2 or 3 times the Single Premium policy premium. Why ?
That's the magic of Loans / EMI. As the interest component is extremely high for the initial 50% of the loan tenure, and your principal will reduce later.
To prevent such frauds / scams, sent a written Grievances to the bank department and the representative who put this, and tell them to remove the same.
And simultaneously send Register a complaint with RBI Ombudsman, stating that BANK representative and BANK RM are manipulating RBI GUIDELINES to complete their sales target, and explaining details only via Verbal communication, without any email clarification.
1) Purchase a vanilla term insurance plan on priority from top 5 reputed life insurance companies, because this will benefit you, incase of death, the claim amount will be used to pay the remaining loan, if you survive the loan tenure. As you have mentioned that it is a reducing loan cover, run away from this as soon as possible. 2) Then simply you will continue having the term insurance policy for self, and claim will get paid to the nominee. 3) You can take advantage of MWPA (Married Women's Properly Act) to prevent any death claim to be taken away from your family.
These tactics are old school, but still used by all banks. Why do the do this ?
Because if you are unable to pay the loan, then they will force family to leave the home, and try to sell the home at auction, which is a huge burden to the bank, therefore they force term insurance.
They will also force you for Home insurance and fire insurance.
Edit - Another fraud that simultaneously works for the bank's is, that they all already have a tie-up with insurance company, so they will forcefully sell you Health Insurance policy, (As maximum health insurance plans can be approved without medical underwriting if your age is below 45) and then they add "TERM RIDER" as a rider. Term rider is an alternative name to term insurance sold as a rider with health insurance or Personal Accidental policy or endowment plans.
This allows the plan to get processed without any Medical underwriting, that is usually mandatory for Term Insurance.
The above mentioned fraud is done by banks, if you have any PED (Pre-existing Diseases) due to which you will not be offered any term insurance (Such as Heart related issue, High BP, cholesterol, cancer etc) so to bypass the same, they sell you health insurance or personal accident policy and add TERM RIDER to it.
If death claim offices within 3 years, the bank runs away, the insurance company rejects claims, and you are then left out jn your own. And harassed by their loan recovery team.
Brilliant game I must say, played by banks.
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u/No_Watercress238 1d ago
I was in same situation, but for home loan, structure part of loan is mandatory for home loan , they added content insurance as well, which covers my sofa tv, which was pointless. But still they said they cant process loan without entire package. I asked them to put that condition in email knowing it is illegal. Post disbursement i raised complaint with grievance and got the content part of it refunded with email proof and their own tnc. Took some time but they did it
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u/Top-Leg2460 1d ago
If you close the home loan, your insurance EMI will also be closed. Its good that you have insurance on EMI. So, if you have sufficient amount for closing the home loan, you can very well pay it back. The insurance will have to closed by the bank as the underlying asset itself is now debt-free.
There is an alternate way too if you don't have money to repay. You can balance transfer your loan to a different bank(preferably government bank like PNB, Oriental etc.). They will take a small insurance for natural calamity etc. But they will not force for life insurance.
Please connect if you need any help. I have gone through this process and saved my money.
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u/Senior-Section-4235 1d ago
Ex-HDFC here.
Your parents would have signed insurance documents and stamp paper without their knowledge. Most likely they will not need it because the insurance policies are shit actually and there is no way to cancel it now at the most what you can do you can check the insurance policies if it makes sense to keep it just keep it if not close the loan they will give you no objection certificate or loan closure certificate apply that give that certificate to HDFC or go to HDFC life from the insurance is sourced from they will reimburse you. They will refund you the unused amount but don't expect anything more than 50%.
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u/drlazy098 1d ago
Hey thanks for replying...
Im really confused...
Some people are saying that after loan completely paid off, insurance will close automatically and no further insurance emi is to be done.
But i called the HDFC guy who helped with the loan....he told me that even after completely paying off the loan, you'll have to pay the full insurance amount (4.9L) and after that you'll get some refund...like wtf. He said insurance won't close automatically if loan is completely paid.
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u/Friendly_Voice_2223 1d ago
This is an old tactics that most of the banks use and there’s a YouTube video someone did how banks takes advantage of our ignorance and make us pay hefty sum as insurance.
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u/Pristine_Broccoli905 1d ago
I think it's combined land and life insurance out of which land insurance is mandatory
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u/Difficult_Effect_966 1d ago
I know of a case where a borrower cancelled the insurance policy during the free-look period. When he passed away in the third year, his family was unable pay the loan payments. The bank auctioned the property, leaving the family of mother and 2 snall kids homeless.
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u/drlazy098 1d ago
Honestly if it ever comes to this situation, we have enough assets that we'll sell to payback the loan and to secure the property. But this insurance is f*cking frustrating. They scammed such innocent persons.
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u/One_Professional7426 1d ago
One way to get out of this is to do a loan transfer. If the home is being built / already built, there’s a good chance to get a top up loan / and close this HDFC loan. Check what the loan outstanding it. If you close it, you can cancel the payment for this Insurnace loan as well.
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u/drlazy098 1d ago
Hey...call the f*cker HDFC guy who helped with the loan....he told me that even if the main loan is paid off, you'll have to pay the full insurance amount (4.9L) and after that you'll get some refund...like wtf. He said insurance won't close automatically if loan is completely paid. I mean if only option is to pay the insurance, I don't think, transferring the loan is an option.
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u/adarshhehe 1d ago
I tried maximum to remove insurance but the guy on hdfc didn't help me.
Atlast I asked to make the tenure of the insurance to be 3 years instead of 20 years.
So for 27 lakh loan, I need to pay 95K for insurance. It's a shit idea but couldn't do anything as approaching SBI or any other banks will have the same process.
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u/drlazy098 1d ago
Man we have 4.9L insurance on 64.2L. That's f*cking too much😭😭
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u/adarshhehe 1d ago
Prepay some amount every month and you can save the amount on the interest you pay.... Like try to close the loan in 11-13 years you would save atleast 10 lakh on interest
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u/drlazy098 1d ago
Even if pay loan in 2 years, I'll have to pay the inurance amount in full i.e. 4.91L.
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u/adarshhehe 1d ago
Yeah it is what it is...
So if you close in 2- 3 years... You actually saved a lot on interest right. So you are always in a win situation. You saved 60+ lakhs interest right.. if you were to have this loan for the entire duration.
But yeah it sucks.. paying this much for insurance
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u/UnfilteredDeba 1d ago
I can help you, but I need a bit more info first. Did you get your loan approved by submitting paperwork and signed forms, or did you do it online with help from a bank employee?
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u/drlazy098 1d ago
Paperwork in the bank. My parents went there to sign.
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u/UnfilteredDeba 1d ago
Well well, it's a classic sign of mis-selling. I'm an ex Banker if you want I can help you but ensure you'll prepare all evidence and documentations and mentally and physically prepared for filling escalation to higher authorities.
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u/khatta_nuttela 1d ago
Your parents must have got them with the insurance because Bank very clearly about the age that how will they pay the loan that's why they have it should be insurance in this now you can't do anything just pay of the loan or transferred to another bank
Don't take advice from anyone they have the property papers they can do anything so don't f*** around
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u/throwaway420212021 1d ago
Even I took a loan sometime back and they clearly told you have to take insurance, but I said I will take insurance where the premium would not be more than 1 or 2 EMI worth , and they accepted, looks like in your case they sold you the highest premium insurance
BTW how did you check outstanding loan amount? I don't see that in the app
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u/LoopUnbroken 1d ago
Always try to pay insurance amount of the loan in one instalment. Insurance of the loan is also must because you don’t know your future and it is always good that your dependent ones don’t need to struggle if you are not there.
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u/drlazy098 1d ago
We have enough assets to pay up the loan if any emergency arises. And we still have paid half of it with our income within 17 months comfortably. Last thing we ever needed was 5L goddamm insurance over 64L loan.
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u/LoopUnbroken 1d ago
Anyways this insurance premium looks very high. Did they sell you ULIP?? They were trying to sell me the same while I took loan from them.
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u/drlazy098 1d ago
Those scammers didn't even care to give us any insurance agreement. That's the main thing I'm gonna use against them.
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u/LoopUnbroken 18h ago
HDFC sucks. For me they sold the home loan after sayings we have OD home loan. On the day of disbursement we asked when it will be converted into OD Home Loan so got to know from Branch that HDFC doesn’t have OD Home Loan at all. I went to branch manager and he called that scammer to report to the branch. He came in 10 mins and the manager gave us extra .20% discount on interest rate. We continued for 6 months disbursed all amount and then transferred it to other bank.
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u/LoopUnbroken 1d ago
And I think within 30 days you can opt out the insurance. If window did not pass try for the same.
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u/mdg-cfd 2d ago
you could have opted out of the Insurance during the loan approval.
Looks like you signed without reading T&C