Which is the Best Option for Taking Your Home Loan: HFC or Bank?

The impact of the Covid-19 on the Indian banking and finance sector has seen an unprecedented change to the extent that it has brought construction activities to a halt and significantly eroded the market of its potential buyer-base. Due to macroeconomic instability and the possibility of income deflation, many people are reconsidering their home-buying decisions. Yet there's no lack of lenders to those who have chosen to apply for a home loan.

If you have a good CIBIL score and a reasonable steady income stream, then you can get your loan from Shubham Housing Development & Finance Co. They offer you a home loan at the best possible terms. You will have to make your decision based on both your current partnership and the financial consequences of the loan.

But most of the time we have a million-dollar question; how do you make that choice?

Clearly, in both of these home finance types, there are some advantages and demerits. How to determine if a private bank, HFC, or NBFC can take a home loan? Here's a short guide on how to get your home loan selected.

Is the convenience and service quality of a high standard?

This is an intangible factor, but when you see it, you can still get good service. Home loans typically have an average lifetime of 15-25 years, so it's a very long-term relationship. Therefore the nature of the partnership matters a great deal. However, Shubham Housing Development Finance is going out of the way to give customers tools and solutions for digital empowerment.

It has been known to offer a better quality of service compared to banks. Also, the services provided by Shubham Housing Finance are more customized to the tastes and preferences of the customers.

Bank eligibility norms tend to be more strict.

You will see that normally banks take longer to accept loans than HFCs do. In addition to finding the lowest delivery rates, you also need to look for delivery speed.

Most HFCs are not insisting on a personal guarantee, but are Ok with property mortgage as security. In the case of banks, the transaction time is longer, and it often takes more time to disburse. You also have to make that a consideration, particularly if you want to close your property purchase quickly.

Emphasize the effective cost of the home loan

Of course, the first factor is the interest rate paid. However, you need to focus on cost-efficiency and not just the interest rate paid. Here you need to look not only at the cost of financing but also at the hidden costs such as pre-payment charges, transaction fees, etc.

Unlike banks, HFCs are not subjected to the same level of regulation and hence may not pass on rate cuts easily. Since their cost of funds is slightly higher than banks, this is because HFCs link their rates to a prime lending rate and not to an external benchmark as banks are required to do. Therefore the rates charged by NBFCs may be stiffer.

Thus, in case of a home loan, the most important decision isn't whether you take it from a bank or an NBFC. The decision is based on whether you can hold the home equity higher than your outstanding loan principal. That is when your home really brings value to you as an investment, apart from being an emotional anchor for your family.