With more NBFCs (Non-Banking Financial Companies) launching loan apps, it has become easier for potential homebuyers to apply for loans. Still, there are apprehensions among people, especially when it comes to choosing between a traditional bank and an NBFC. Questions like whether NBFCs are safe are pretty common.
So, should you go for a home loan from an NBFC?
Competitive interest rates:
To compete with the low-interest rates offered by traditional banks, NBFCs have also started offering loans at low rates. Today, you can get home loans at interest rates as low as 6.40% p.a. with an NBFC.
Can be obtained with a low credit score:
NBFCs usually don’t follow a stringent loan application and approval process like traditional banks. As a borrower, it’s easier to get a loan with a relatively lower credit score from an NBFC than from banks. However, this may vary from financing company to company and may also affect the interest rate on the loan.
Ensures quick procedure:
NBFCs are more tech-focused. With the introduction of consumer-friendly apps, taking a home loan has never been this easier. You can experience a hassle-free application process, minimal documentation, and quick loan disbursal with NBFCs.
Easy approval of a home loan
NBFCs are more flexible when it comes to approving a home loan. One of the many goals of NBFCs is to offer a customer-friendly, hassle-free loan application process. They are pretty flexible in terms of eligibility and documentation.
Minimal documentation required
The documentation procedure could be relatively hassle-free in the case of NBFCs. Most NBFCs have resorted to online documentation (for application) and KYC post-pandemic. This also decreases the disbursal time for loans.
Increased Loan-to-Value ratio
Every borrower has to pay stamp duty and registration costs for the property for which they are getting a loan. States set their own stamp duty, and usually, borrowers have to cover this cost themselves. While banks fund none of these costs, some NBFCs include some of these additional costs in their loan schemes. This eventually contributes to higher LTVs.
The eligibility criteria set by NBFCs differ, but generally, these prerequisites are easy to meet.
Indian citizen. Some NBFCs may give loans to non-resident Indians as well.
23 to 65. The age range differs for salaried and self-employed citizens.
Only earning citizens can apply for a home loan. Unemployed citizens can apply as co-applicants.
A salaried employee needs to have a work experience of 3 years. A self-employed individual needs to be in the current business for 5 years.
NBFCs usually look for a credit score above 750. Those with lesser credit scores can still apply, but the interest rates will be higher for them.
NBFCs ask for minimal documents to make the application process hassle-free. You will be required to present the following general documents:
NBFC home loans are designed to fulfil every borrower’s dream to buy a house. Even though NBFCs have a smaller customer base, they are constantly striving to make personal finance more accessible to customers.
NBFCs can be a better alternative to banks in case you are looking for a hassle-free loan application process. However, make sure to consider the interest rates, your repayment capacity, and other fees and charges, before applying.
Ans: No, they are not the same thing. Housing finance companies (HFCs) are NBFCs that provide financial aid to people only for housing-related purposes.
Ans: In 2020, RBI allowed NBFCs to co-lend with banks. This co-lending arrangement is made to improve underserved sectors of Indian society. This allows registered NBFCs to borrow from RBI, but only with banks.
Ans: A borrower should analyse many factors before obtaining a home loan like interest rates, eligibility criteria, processing time etc. However, the option about which scheme is better is subjective and varies according to the financial capabilities of individuals.
Ans: Generally, home loans are given to individuals above the age of 23. But few NBFCs make special provisions for 18-year-olds to get these loans.
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