Non-Banking Financial Companies (NBFCs) are financial organisations that provide selected banking services, but are not banks as they do not have a banking licence. NBFCs aren’t allowed to accept deposits from the public which eliminates a lot of the banking regulations that traditional banks are required to follow. However, they can provide loans, underwriting services, credit facilities, etc. NBFCs also provide home loans that can be used to purchase, expand, or renovate a plot or house.
What institution is better to obtain a home loan is completely subjective. It varies from person to person. The financial situation of an individual determines where he/she needs to obtain a home loan from. For example, if the individual has an urgency in obtaining a housing loan, it is preferred that he/she approached a Non-Banking financial company for the same. The advantages mentioned earlier in the article shed light on the benefits of a NBFC. Mentioned below are the major difference between banks and NBFCs that shed lights on the features of both of these organisations.
|Services offered||Chiefly loans||All banking services|
|Regulations||Regulated by companies act||Regulated by RBI banking act|
|NEFT prepayment||Usually accepts only cheque payments||Available at most banks for all customers|
|Interest rate calculation||RPLR – Spread||Base rate + Margin|
|Overdraft facility||Not available||Available in some banks|
|Interest rate||Depends on the property, applicant, etc.||It is usually a fixed range of interest rate for all applicants|
|Loan approval process||Comparatively stricter||Comparatively easier|
Although obtaining a housing loan with a NBFC has its benefits, always do your research, evaluate you repayment capability, and understand the offer at hand before accepting the loan. It may be comparatively easier to attain a home loan from a NBFC, but can be a financial burden if the interest rates obstruct your repayment capacity.
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