Do you long to buy your Dream Home? Most likely you would need a part to be financed as Home Loan By Bank OR Housing Finance Company. But when it comes to making a decision, you might not be aware of the difference between Home Loan by Bank or Housing Finance Company. Let’s see what you should do when you want to avail a home loan.

Inadequacy of funds is a major issue when you are buying a house. It is always better to accumulate first and then go for the final purchase. But sometimes, reasons like a good deal or family requirement pursued you to buy a home. You might not be ready, so the balance funds can be arranged by getting a loan from Home Loan By Bank OR Housing Finance Company.

A loan not only helps you in managing finances it also gives you a tax break. So a double benefit.

But when you want to avail a loan the 2 options you get are:

Scheduled Commercial Banks (eg SBI, Axis Bank, etc)

Or, Housing Finance Companies (eg HDFC Ltd, Tata Capital,Home Loan By Bank OR Housing Finance Company etc)

(HDFC Ltd is soon merging with HDFC Bank. So as of now, the 2 entities HDFC Bank & HDFC Ltd (an NBFC) are separate. But they are in process of merger and only one entity HDFC Bank will exist in the future)

Home Loan By Bank OR Housing Finance Company

Let us understand the Pros and Cons of Home Loan By Bank OR Housing Finance Company :-

Loan from Commercial Banks

Banks are all bodies identified or licensed by RBI, as Scheduled Commercial Banks.

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Corporate Banks are the most common solution when buying a house or renovating it. Banks grant loans up to 80% of the house’s value. The bank charges varied interest rates depending upon policies, cost of funds & the RBI’s Repo Rate.

Pros of Getting a Home Loan from a Bank

You will get the lowest interest rates compared to NBFCs.
Terms are flexible.
Generally, they work on their own (without middlemen), so you save the extra cost of transactions.
You may get the best offers based on gender, certain income groups, or the type of house you are buying.

Cons of Getting a Home Loan from a Bank

It is a very complex and time-consuming process while taking a loan from a bank.
The staff at branches is ill-trained so getting information and completing paperwork takes time & effort.
Loans are decided on various parameters like CIBIL Score, Income Documents & verifications. But this work (called Credit) is done at a central level (called CPC). So the files take more time to get clear.
It involves various legal formalities and a wide range of documents that should be approved otherwise they can affect the interest rate of our respective loans.
The loan is given to approve properties only. (Most banks do not finance over unapproved or newly converted properties.)
Post loan services like adjusting interest rates at the time of declining rates in the economy, and getting the annual certificate of the deduction are tedious due to low communication mediums.

Loan from Housing Finance Companies HDFCs or NBFCs

Housing Finance Companies (HFCs) are private house finance companies run by NBFCs and regulated by the Companies Act 2013. RBI has a separate body called NABARD, which regulates the housing finance companies in India.

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Pros of Getting a Home Loan from a Housing Finance Company HFC or NBFC :-

Their loan processing time is very fast and reliable.
Most processes like legal, and verification of property, are in-house & automatic. Hence take less time.
Generally, work with a network of branches or agents, so paperwork is divided & managed more efficiently.
Larges HFC & NBFC have good technological platforms & network branches to take care of post loan services.
Absence of a stringent process and one can get benefits if a few things are missing.

Cons of Loan from Housing Finance Companies HDFCs or NBFCs

They usually charge a higher rate of interest on loans as compared to Banks.
High cost as middlemen is involved.

Which option to choose?

Both Home Loan By Bank OR Housing Finance Company options have their own advantages and disadvantages. It is best if can get a loan from a bank. A low rate may a small fraction like 0.1% can save you a lot if you are running the loan for 20-30 years. But if you do not have time to chase the process, HFCs will suit you.

Similarly, in case you wish to repay a loan early by keeping a large EMI added with in-between principal repayment, it does not matter much. You should look for ease.

In case you already have banking relations, banks will help you lower the waiting time and documentation.