Opting for the right kind of financing for one’s home is very important and thankfully there are a number of lenders in the industry today, enabling one to find the right home loan according to one’s budget.
Banks were more or less the traditional lenders even a decade back but now there are a number of NBFCs operating as well, like Bajaj Finserv and others. The question is, now that both the options are available, is it a better idea to opt for a bank or an NBFC?
One of the reasons why one can opt for an NBFC is that that the banks have usually very strict eligibility criteria and some fall short of meeting them. NBFCs are more lenient in this respect and so it is easier to get approved for them. It is also a fact that the NBFCs are continuing to perform better and there has been a 15% increase in customer satisfaction compared to banking customers.
Even RBI has agreed to it in their Financial Stability Report. NBFCs are fast becoming reliable financial intermediaries and are coming up with a lot of additional and alternate financing options, which are great for those who are looking for best home loans in India at attractive interest rates.
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Banks in India are incorporated by the Banking Companies Act whereas NBFCs are incorporated by the Companies Act of 1956. Although the services provided are more or less similar, NBFCs do not have the permission of the GOI to offer services like accepting demand deposits, issuing cheques, and the like and if your home buying involves any of these processes, then it is best to opt for a bank.
The other thing to notice is the home loan interest rate. For banks, it is most a combination of the base rate and the marginal rate while for NBFCs it is the RPLR – spread and that means that the NBFC interest rate will always be comparatively higher than the bank. There are certain housing loan EMI calculator in India which are easily available online on lender’s websites.
One should use an EMI Calculator to see how much one has to pay each month in comparison, with a bank and with an NBFC before zeroing in on the lender. However, other factors come here like the credit score and the income of the individual and it can be said that even with a slightly lower score or income, it is far more likely that you will get approved by an NBFC.
Hence, if you are in urgent need of financing for your home, but are unable to get it from your bank because of these issues, then at least you can get it from an NBFC even if you have to pay slightly higher rate of interest.
Hence, always try out a home loan eligibility calculator to ascertain whether you are eligible for the bank or an NBFC. Some of the perks of the latter are that, the processing time is quicker and the loan is disbursed in a matter of days, something that is very useful when you have to urgently book your dream home or risk losing it to another buyer.
There are less complications involved in terms of paperwork but as far as safety is concerned, banks are still the more secure option. This is not to say that NBFCs are not safe, but banks are better regulated and are subject to scrutiny which will make the process a lot more transparent.
So in case you have a poor credit rating or you want a loan with the least processing time, and you have some extra money to be able to afford the extra interest rate, then you might opt for an NBFC to finance your home without any trouble.