Loan From NBFCs: Things To Consider

Jun 11, 2011     Posted under: Home Loan

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NBFCs are gaining grounds very fast in the loan market. There are several areas where Banks are reluctant to offer a home loan, they consider the location and the chances for the development for that area along with other factors. Non Banking Financial Companies (NBFCs) solve this very problem but the interest rates for these used to so high in the range of 18%-20%, but off late interest rates for NBFCs have also lower down considerably and are in the range of loans provided by the banks -9.5% – 13.5%.

By lowering interest rates NBFCs are slowly positioning themselves as alternatives to traditional banks for obtaining loans. But there are several things to look if an individual is looking for a loan from NBFCs.

NBFCs might offer competitive rates on home loans but other charges are higher. The prepayment charges, default charges, check bounce charges etc. are higher compared to traditional banks. Their fee based income is also higher. Although there is an advantage of faster loan processing as NBFCs need less documentation, but one must ensure that all dealings with NBFC should be documented and duly signed by its officers. Since NBFCs do not have to follow many guidelines laid down by the RBI, the home loan borrower has to take extra steps to ensure everything is documented and there are surprises in the future.

TIP: Unless you are in a difficult situation, it is better to approach a bank for your home loan.

NitiN Kumar Jain

Nitin works in an IT MNC professionally but blogs and owns NKJ Live. He is also the co-owner of a professional start-up ARGHAM BYTES

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