If you are planning to buy a house by taking a home loan, there are two options you can choose from. You can either take a loan from a bank or a Non-Banking Financial Company (NBFC).
The popularity of NBFCs has increased in the last few years, and customers are now more aware of the two options they have. However, choosing between a bank and NBFC can be a tricky task.
Most people usually rely on banks over NBFCs when taking a substantial loan for their house. But it would help to be aware of how the two institutions provide finance and the different criteria they follow.
The difference in interest rates
Banks are directly linked to the RBI and offer home loan interest rates based on the Marginal Cost of Lending Rate (MCLR). The MCLR-linked interest rate implies that whenever the MCLR changes, the interest rate will also change. It can either increase or decrease. However, banks follow complete transparency in this procedure and clearly mention the time intervals at which the interest rate can change.
On the other hand, NBFCs do not come under the purview of the RBI and offer their interest rates at the Prime Lending Rate (PLR). Thus, if you have a good credit score, you can negotiate with the lender to sanction the loan at a nominal interest rate.
Additional Read: Factors that Impact Home Loan Interest Rates
Eligibility criteria: banks vs NBFCs
Your age, monthly income, credit score, desired property cost, and other things determine e apply.
Processing time and disbursal
Banks and NBFC typically perform verifications and background checks to ensure the applicant will not default on the EMI payments. Applicants are often required to submit documents like income proof, bank statements, identity proof, etc. However, most NBFCs offer a fully digital application process, making it more convenient for borrowers to apply for a loan.
You can scan and upload all the documents from your home. This brings down the processing time, and the loans are disbursed quickly.
Additional Read: 8 Points to in Mind before Taking a Home Loan
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