How Can NBFCs Be Better Than Banks for Availing Home Loans
Since housing loan is a long-term financial commitment, it is essential to compare the options provided by the various lenders carefully. Read this post to find out how borrowing from NBFCs can be a better option than taking a loan from banks.
There are numerous lenders offering housing loans to customers seeking financial assistance for the purchase of houses and plots. It is essential to study the loans offered by the different lenders because the loan features given by NBFCs can vary from those provided by banks.
Here are five reasons you should choose NBFC for taking a housing loan
1. Interest Rate: The primary difference between Banks and NBFCs is that they have different guidelines governing their lending rates. The lending benchmark for banks is the Marginal Cost of Lending Rate (MCLR), which determines their housing loan interest rates. The Reserve Bank of India (RBI) also governs the lending rate of the banks, and therefore, they cannot be below the MCLR rates.NBFCs are regulated by the National Housing Bank (NHB), and their lending rates are dependent on the Prime Lending Rate (PLR). Unlike banks that have restrictions on offering interest rates below MCLR, the NBFCs have no such limitations and hence can provide PLR linked housing loans with competitive interest rates.
2. Eligibility Criteria: Banks can be stringent about the eligibility criteria, and this can leave a huge number of borrowers dejected. Buyers disappointed in not meeting the eligibility criteria of the banks can try applying for housing loans from NBFCs which have relatively lenient norms.All lending institutions require a decent credit score because it reflects the sound financial health of the borrower. Lenders generally prefer a credit score of 750 and above. If your credit score is lower due to delayed credit card payments or other factors, NBFCs may still offer you a housing loan at a high interest rate.
3. Higher Loan Amount: The maximum amount you are eligible to borrow depends on the market value of the property. Both banks and NBFCs arrive at a value after assessing several factors like the location and age of the property. The actual cost of buying a house in Zoom Property can go beyond the market value determined by the lending institutions. Registrations costs and stamp duty charges can add to the overall cost of the house. However, banks do not fund these extra charges. Most banks disburse a loan amount of up to 80% of the property’s market value. Since this amount might not be enough to cover brokerage charges and furnishing costs, you might have to arrange money from other sources. NBFCs can include additional charges associated with home purchase while determining the property’s market value. These charges can range from 3 to 11% of the market value and can amount to a few lakhs depending on the cost of the house. Therefore, availing housing loans from NBFCs can spare you the trouble of looking for other sources to fund additional charges.
4. Relaxed Documentation Process: The documentation process in banks can be complex, and the rigidity in requirements of income proof and other documents like their Digital Signature can be a hassle. NBFCs, on the other hand, are more flexible with transparent processes and minimum documentation requirements. Since time can be a major factor while buying a house, the ease in availing a loan from NBFCs is a great advantage.
5. Flexibility: NBFCs can offer several variants of home loans tailored according to the individual needs of the borrowers. There also can be different options for loan tenures and EMIs for customers with varied financial backgrounds. NBFCs can also offer doorstep service and customer support facilities such as offering legal advice and technical counselling, which can be beneficial for customers.
The influx of NBFCs has given hope to several borrowers who were unable to avail loans from banks. NBFCs offering attractive rates have widened the range of options available for borrowers who can choose the loan that is best suited for their requirements and budget constraints.