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Home Loan from Bank vs NBFC: Which is better?

By Tata Capital
14 December 2025
8 mins read
2121

Overview

When it comes to financing a dream home in India, potential homeowners often find themselves facing the critical decision of choosing between a bank home loan and a non-banking financial company (NBFC) home loan. Both banking institutions and NBFCs offer diverse home loan options, with each having its own set of advantages and disadvantages.

This article aims to provide an unbiased comparison between Home loan NBFC vs Bank loans, highlighting the various aspects that need to be considered before making a decision.

Significant differences between banks and NBFC home loan

Home loans from bank vs. NBFC differ in various aspects, such as interest rates, processing fees, eligibility criteria and the loan disbursal process. While banks often offer lower interest rates due to their access to low-cost funds, NBFCs can be more flexible in terms of NBFC home loan eligibility and documentation requirements. The processing time and customer service experience may also vary between the two.

Also, read – Bridge Loan in India

Advantages of Taking a Home Loan from a Bank

Lower Interest Rates: Banks usually offer lower interest rates on home loans than NBFCs, owing to their access to low-cost funds from the Reserve Bank of India (RBI) and deposits from customers. This can lead to significant savings on interest payments over the loan tenure.

Better Transparency: Banks are subject to stricter regulations and supervision by the RBI, resulting in better transparency in their operations and loan processes. This makes it easier for borrowers to understand the terms and conditions of their home loan and avoid any hidden charges.

Access to Additional Services: Banks typically provide a wide range of financial services, such as savings accounts, credit cards and investment options. Opting for a home loan from a bank can make it convenient for borrowers to access and manage these services under one roof.

One of the leading banks in India offers competitive interest rates for home loans. In addition to lower interest rates, bank customers also benefit from various concessionary rates for women borrowers and existing customers with a good repayment history. Furthermore, home loan borrowers have the convenience of accessing other financial services, such as savings accounts, credit cards, and investments, making their financial management much more streamlined.

Also, read – Home Loans for Under-construction Properties: Detailed Process

Disadvantages of Taking a Home Loan from a Bank

Stringent Eligibility Criteria: Banks generally have stricter eligibility criteria, including higher credit score requirements, which can make it difficult for some borrowers with a lower credit score to qualify for a home loan.

Rigid Documentation Requirements: Banks tend to be inflexible when it comes to documentation, requiring a long list of documents for loan approval, such as income tax returns, bank statements and property documents. This can be a hassle for borrowers who may not have all the necessary documents readily available.

Advantages of Taking a Home Loan from NBFC

Flexible Eligibility Criteria: NBFCs are known for their flexible eligibility criteria and are more willing to cater to borrowers with lower credit scores or unconventional income sources, making it relatively easier for many applicants to qualify for a home loan.

Faster Processing and Disbursal: NBFCs generally have quicker loan processing and disbursal times than banks, as they are not subject to the same level of regulatory oversight. This can be advantageous for borrowers who need funds urgently.

Customised Loan Products: NBFCs often offer specialised home loan products tailored to the specific needs of different customer segments, such as self-employed individuals, salaried professionals or non-resident Indians (NRIs).

Also, read – Top 10 home loan benefits you should know in India

Disadvantages of Taking a Home Loan from NBFC

Higher Interest Rates: NBFCs tend to charge higher interest rates on home loans than banks, as they source their funds from the market at higher costs. This can increase the overall cost of borrowing. However, the rate difference is not large compared to banks.

Limited Range of Services: Unlike banks, NBFCs may not offer a wide range of additional financial services, such as savings accounts or investment options, which could be a disadvantage for borrowers seeking a comprehensive financial solution.

Types of Home Loans Offered by Banks and NBFCs

As we discussed in the advantages of home loans by banks and NBFC section, both offer varied choices to fit your needs.

Here are the type of home loans or bank home loan options and NBFC home loan types:

Home Purchase Loan

This helps you buy ready or under-construction properties easily.

Home Construction Loan

This loan funds building your dream house on your land.

Home Renovation Loan

This loan helps finance renovations, repairs and home improvements.

Land Purchase Loan

This is useful to purchase a residential plot.

Balance Transfer Loan

With this loan you can shift your existing loans to a different lender for better rates.

NRI Home Loans

To support overseas Indians in property deals.

Also, read – Documents Required for Senior Citizens or Pensioners to Get Home Loan

NBFC Home Loan Interest Rates: Current Trends in India

Comparing NBFC home loan interest rates helps you choose wisely in today’s market.

Here are some latest NBFC loan rate trends:

NBFCs often offer competitive rates, slightly higher than banks but with flexible terms.
The NBFC current home loan rates start at 7.75% per year, depending on your credit profile and loan amount.
NBFCs focus on faster approvals despite slightly higher rates.
You can expect variable rates to follow market movements.
Keep an eye on special offers or NBFC home loan interest rate cuts targeting specific borrower segments from time to time.

Also, read – How You Can Repay Your Home Loan Quicker

NBFC Home Loan Eligibility Criteria

Following are the criteria for housing loan eligibility NBFC:

The age specifications defined by the lenders.
A proof of stable income criteria NBFC loan with salary slips, ITR, or employment profiles.
A good CIBIL score above 750 for better chances of approval.
Valid ID proofs like Aadhaar and PAN cards.
Your bank statements, to show sufficient repayment capacity via debt-to-income ratio.

Salaried or self-employed both qualify for a NBFC home loan under the NBFC home loan eligibility criteria with proper financial proofs.

Also, read – Consequences Of Missing Home Loan EMIs

Role of NBFCs in India’s Financial Inclusion & Home Loan Sector

In growing India’s economy, there’s a big role of NBFCs. They serve people that banks often ignore, like self-employed or rural borrowers. NBFC financial inclusion works through quick approval of home loans with flexible rules in the NBFC home loan sector.

NFBCs also make use of digital platforms and mobile banking facilities. This offers faster loan disbursements for different customer segments. This inclusive approach of NBFCs supports economic development and provides faster approvals compared to banks.

Also, read – Tax Exemptions on Taking a Home Construction Loan

Which is the Best NBFC for home loans in India?

While various top NBFCs offer flexible home loans to borrowers, Tata Capital is a leading NBFC for home loans in India. With Tata Capital, borrowers can apply for a customised home loan online and enjoy a quick approval and disbursal process.

Here are the features of Tata Capital home loans-

1. Multipurpose loan

Tata Capital home loans are multipurpose. You can use the funds for various purposes such as house construction, extension, purchase of under-construction property, home renovation, etc.

2. Easy eligibility criteria

Many NBFCs, such as Tata Capital, have simple eligibility criteria to cater to a wide range of borrowers. The standard eligibility factors include age specifications, credit history, employment profiles, and stable income requirements.

3. Quick online application process

You can quickly apply for a home loan online. All you need to do is access the home loan application form from the website, fill in your information, and upload the necessary documents. The experts will verify your documents and inspect the property. Once verified, your loan will be approved and disbursed within a few days.

Conclusion

In conclusion, the decision between taking a home loan NBFC vs bank loan ultimately depends on the specific needs and circumstances of the borrower.

To make the best choice, borrowers should compare the interest rates, processing fees, loan features and customer service quality of different banks and NBFCs before deciding on a home loan provider. They should also evaluate their financial situation, credit score and long-term financial goals to determine which institution will best meet their needs. By carefully considering all of these factors, borrowers can make a well-informed decision that will help them secure their dream home and achieve their financial objectives.

Tata Capital provides customised home loan products catering to specific borrower segments. Tata Capital has a reputation for faster processing and disbursal times compared to banks, which can be particularly advantageous for borrowers with urgent financial needs. In addition, Tata Capital offers attractive features, such as flexible repayment options and minimal documentation.

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FAQs

What Does an NBFC stand for?

NBFC stands for Non-Banking Financial Company. These financial institutions provide banking services like loans and credit facilities and are registered under the Companies Act 2013.

Is NBFC good for home loans?

NBFCs can be a good option for home loans due to flexibility in eligibility criteria and faster processing times compared to banks. However, home loans from NBFCs can carry high interest rates, and the terms may vary, so comparing offerings before applying for a loan is important.

Is it safe to take a loan from NBFC?

Taking a loan from an NBFC is safe. These lending institutions follow strict security regulations to ensure that you can have a safe and smooth loan process. Moreover, it's essential to check the NBFC's credentials, interest rates, fees, and customer reviews before committing.

Who is eligible for a loan from NBFC?

Eligibility for a loan from an NBFC varies based on factors like income, credit score, age, and employment status. Further, NBFCs may have specific eligibility criteria for salaried employees and self-employed professionals. As a result, you must check specific requirements with your preferred lender before applying.

Are NBFCs better than banks?

NBFCs and banks each have their advantages when it comes to applying for a loan. NBFCs may offer quicker loan processing and more flexible eligibility criteria, while banks typically provide better transparency in processes, lower interest rates, and access to additional services such as savings accounts or investment options. The choice ultimately depends on the individual preferences and financial needs of the borrowers.

How does Tata Capital simplify NBFC home loan processing?

Tata Capital offers a quick approval and disbursal process. Our digital verification and minimal documentation requirements make NFBC home loan processing simple.

Can NRIs apply for NBFC home loans?

Yes, NRIs can apply for NBFC home loans. They just need to meet the eligibility criteria, such as a valid passport, age, and income proof.

What are the repayment options available for NBFC home loans?

NBFC home loans usually offer repayment options primarily as EMIs with flexible plans like step-up or step-down EMIs, and part-payments. Contact your lender to learn about the repayment options they provide.

How to calculate EMIs for NBFC home loans?

You can use Tata Capital’s online EMI calculator for calculating EMIs for NBFC home loans. EMIs for this loan are calculated in the same way as that of a bank home loan.

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