A home loan or housing loan is the amount borrowed by the individuals from financial institutions or banks to construct, buy or repair a residential property. There are several banks and NBFCs that offer lucrative deals on home loans. But most of us struggle while deciding between these two options. The question stands – Who offers the lowest home loan interest rates between banks and Non-Banking Financial Corporations (NBFCs)?
When picking between the two providers, it is important that you first clearly understand the differences between the two.
Differences between Banks and NBFCs
One of the major difference is that these two institutions are managed by separate government agencies. While the RBI keeps a check on the banks, the Companies Act regulates NBFCs. NBFCs are not allowed to accept deposits or issue drafts or cheques. Banks, on the other hand, have the right to be a part of the payment and settlement system allowing account holders to send or receive money. Both banks and NBFCs can offer loans to consumers as per their discretion and terms and conditions. No NBFCs offer overdraft facilities. As far as banks are concerned, only a handful few offer overdraft facilities.
What should you opt for?
While choosing between a bank and an NBFC, you should take into account the following key points:
1. Interest Rates: Compare interest rates before making the final choice. Choose the one offering the lowest interest rates with better offers and terms & conditions. However, that doesn’t mean that this should be the only factor to consider. Consider processing time, documents required, approval procedure, flexibility in foreclosure and prepayments, and even customer care services as well.
2. Credit Score Requirements: Both NBFCs and banks offer their best interest rates to customers with high credit scores. A credit score of 650 and above is considered suitable to obtain loans at better interest rates. However, customers with a lower score may find loans from NBFCs to be less stringent in terms of eligibility requirements.
3. Processing Applications: NBFCs may have a more relaxed approach to your loan eligibility. They understand that most loan needs are urgent and unpredictable, and by cutting down on the processing time, they attract a lot of people looking for a quick loan. Documents required for home loans are minimum when it comes to NBFCs. The procedure in the case of banks is more cumbersome.
Top banks offering home loans:
We have listed a few banks that are currently offering home loans at the lowest interest rates.
1. State Bank of India: