About two years ago, I was in a fix. I needed an urgent home loan to establish my SOHO (Small office Home office) for shipping custom made watches for my website. Although my idea had received quite a few pats, I knew profitability would only come with time. The risks and rewards were in order but I had little security to offer. I did have some savings and an old farm house that was left to me by my father.
However, no bank was interested in giving me a home loan based on this property, which was in a remote rural location. Obviously, the estimated land value in an underdeveloped area failed to meet their expectations.
I could have sold the property to the village head, but my dad’s deadpan look, staring down through the aging photo frame, made me shrink away from the idea. More so, my sentiments came in the way of encashing the childhood memory-filled farmhouse. I knew NBFCs (Non-Banking Financial Companies) were an option but I had no inkling if they would offer low enough rates to make my borrowing viable. A home loan ad campaign by a noted NBFC came to my rescue and I decided to apply immediately. Within a month, I managed to secure my first big order, right from the comforts of my SOHO. Ever since, I always suggest and opt for NBFCs for home loans.
There is little difference in securing home finance from a bank or an NBFC in terms of interest, repayment periods, percentage of the value of property taken into consideration, and usual documentation. So, how does one make the decision?
- While buying your dream home, opt for multiple repayment options that fall in line with your financial situation. For instance, the Flexi EMI Home Loan from Tata Capital offers the scope to repay your debt in your way
- NBFCs offer competitive interest rates with lowest possible EMIs and high home loan eligibility to match all current and future needs – Tata Capital’s ‘Bullet Repayment’ and ‘Step Up’ modules are classic examples of the same
- Leading NBFCs offer in-principle online approval on the basis of minimum documentation and pre-defined conditions for your home loan. With faster processing of documents and the cheapest deals to their credit, they can be tough competition to banks and other HFCs
- The most important factor to consider for availing home loans is its interest burden. Tata Capital’s attractive floating interest rates (which start at 9.80% for Rural Housing Finance for a loan amount up to INR 15 lakhs), and loan tenures ranging from 12 months to 360 months make it a viable option for many
- Do you happen to be a woman applicant? Certain NBFCs have preferential interest rates for you
- The processing fee, which is generally up to 1 per cent of the total loan amount, is another key variable. It differs from one NBFC to another
- Another count where NBFCs gain a clear advantage over other home loan providers and banks is that while calculating the loan amount, they value a property inclusive of its statutory charges, such as registration and stamp duty. This entitles you to a higher home financing amount. Banks value a property exclusive of such charges
- The overall loan processing time taken by NBFCs stands at an average of 7 days while most banks take more than 15 days.
Whether I intend to use my home loans for buying a plot of land or a new flat, for improving my home or purchasing resale property, I always knock on the doors of NBFCs. Once there I structure the loan after taking into account all repayments, payments and my income streams. Very soon, I find myself smiling all the way back home with the knowledge that the amount needed will reach my pocket without much ado or fuss.