NBFC Home Loans: The Smart Way to Finance Your Home

Looking to buy your dream home but not sure whether to choose a traditional bank or a Non-Banking Financial Company (NBFC) for your home loan needs? In this guide, we'll provide you with valuable insights into NBFC home loans in India. From interest rates to a list of top NBFCs, we've got you covered. Let's dive in!

List of NBFCs Providing Housing Loans in India

Non-Banking Financial Companies (NBFCs) home loans have become increasingly popular due to their competitive offerings and accessibility. Here's a list of NBFCs in India that provide housing loans:

1. HDFC (Housing Development Finance Corporation)

HDFC, with over 300 outlets across the country, is a pioneer in providing housing loans in India. Their extensive network, excellent customer service, and longstanding history in lending make them one of the top choices for housing loans.

2. Reliance Capital

Established in 1986, Reliance Capital is one of India's leading NBFCs for home loans. It boasts an extensive network and is known for offering competitive housing loan options.

3. Tata Capital

Tata Capital is a trusted name in the financial sector, offering a range of services, including home loans, with a focus on customer satisfaction and competitive offerings.

4. L&T Finance

L&T Finance is another major player in the market, serving over 10 lakh individuals with a wide range of financial services, including home loans.

5. Navi Loans

Navi, with its innovative approach to finance, provides accessible and customer-friendly housing loan solutions.

6. Mahindra and Mahindra Financial Services Limited (MMFSL)

MMFSL, with over 1,000 branches nationwide, offers various financial services. It also has a subsidiary, Mahindra Rural Housing Finance Limited, specializing in home loans.

7. Indiabulls Housing Finance Limited

Indiabulls Housing Finance is one of the major financial organizations in the country, offering mortgages at competitive rates and building a large customer base.

8. PNB Housing Finance Ltd

PNB Housing Finance Ltd is known for its diverse housing loan products and commitment to customer service, making it a go-to choice for many homebuyers.

9. Sundaram Home Finance Limited

Established in 1954, Sundaram Home Finance Limited provides various financial services, including housing loans, to over 1 lakh clients through its 550+ branches across India.

10. LIC Housing Finance Limited

LIC Housing Finance is known for its impeccable customer service and competitive housing loan products, making it a popular choice among home loan customers.

11. Muthoot Homefin

Muthoot Homefin is a reliable option for home loan customers, offering competitive pricing and transparent policies. It has a wide network across the country for customer accessibility.

Whether you prioritize competitive interest rates, expansive branch networks, or exceptional customer service, these NBFCs cater to a variety of preferences, ensuring that you can find the perfect housing with the NBFC home loan interest rate option that suits your needs.

NBFC Home Loans	Interest Rate	Maximum Loan Amount
HDFC	8.50% Onwards	Up to 75% on loans above Rs. 75 lakh
Reliance Capital	9.75% Onwards	Up to Rs. 5 Crores
Tata Capital	8.95% Onwards	Up to Rs. 5 Crores
L&T Finance	8.60% Onwards	Up to Rs. 7.5 Crores
Navi Loans	8.60% Onwards	Up to Rs. 5 Crores
Mahindra Finance	8.50% Onwards	Up to 75% on loans above Rs. 75 lakh
Indiabulls Housing Finance Limited	9.30% Onwards	Up to Rs. 5 Crores
PNB Housing Finance Ltd	8.60% Onwards	Up to 75% on loans above Rs. 75 lakh
Sundaram Home Finance Limited	6.90% Onwards	Up to 75% on loans above Rs. 75 lakh
LIC Housing Finance Limited	8.65% Onwards	Up to Rs. 15 Crores
Muthoot Homefin	10% Onwards	Up to 90% on loans under Rs. 30 lakhs Up to 80% on loans above Rs. 30 lakhs and under Rs. 50 lakhs

Advantages of Opting for an NBFC Home Loan

1. Expedited Processing

While traditional banks are often notorious for their lengthy loan processing times, NBFCs offer a distinct advantage in this regard. Non-Banking Financial Companies are known for their swifter processing of housing loans.

2. Minimal Documentation

Another compelling reason to consider some of the top NBFCs for home loans is the significantly reduced documentation requirements compared to banks. This streamlined process increases the likelihood of your loan application being approved.

3. Flexibility

Banks tend to have stringent criteria for approving home loans, making it challenging for some applicants. In contrast, NBFCs offer a more flexible approach, facilitating a smoother home loan approval process.

4. Speedy Disbursement

The efficiency mentioned earlier also translates into faster disbursement of the loan. With NBFCs, you won't have to endure months of waiting to secure your home loan; the process is generally expedited.

5. Competitive Interest Rates

The intense competition within the home loan industry compels NBFCs to maintain competitive interest rates. This not only results in lower interest payments but also eases the burden on your loan's Equated Monthly Installments (EMIs). In many cases, NBFCs offer interest rates lower than those offered by banks.

6. Accessibility for Lower Credit Scores

Banks often require a pristine credit score for loan approval. In contrast, NBFCs are more open to extending loans to individuals with less-than-perfect credit scores. However, it's important to note that interest rates may be slightly higher for those with lower credit scores.

7. Fewer Regulatory Constraints

Unlike banks, NBFCs operate with fewer regulatory restrictions. This translates to a simplified approval process and greater accessibility for borrowers. However, it's important to understand that the loan amount disbursed by NBFCs may be lower due to the relatively relaxed regulations, as defaults tend to increase under these circumstances.

Banks VS NBFCs: What is the ideal preference for Home Loans?

The preference between Banks and Non-Banking Financial Companies (NBFCs) for obtaining a home loan is highly subjective and varies from person to person. It primarily depends on an individual's unique financial situation and requirements. Let's delve deeper into the major differences between these two institutions to shed light on their respective features:

Aspect	NBFCs	Banks
Services Offered	Primarily focus on various types of loans, including home loans.	Offer a wide range of banking services, including savings and current accounts, deposits, and loans.
Regulations	Regulated by the Companies Act.	Regulated by the Reserve Bank of India (RBI) under the Banking Act.
NEFT Prepayment	Typically accept only cheque payments for prepayment.	Offer NEFT prepayment options, widely available to all customers.
Interest Rate Calculation	Determine interest rates based on factors like property value, applicant's creditworthiness, and other variables.	Generally follows a fixed range of interest rates for all applicants, often tied to the base rate plus a margin.
Overdraft Facility	Usually do not offer overdraft facilities.	Some banks provide overdraft facilities, allowing customers to withdraw more money than they have in their accounts up to a certain limit.
Interest Rate	Interest rates can vary based on factors like the property's value and the applicant's financial profile.	Banks typically offer a fixed range of interest rates that apply to all applicants.
Loan Approval Process	Tend to have a comparatively stricter loan approval process, which may require more documentation and scrutiny.	Generally have a comparatively easier loan approval process with a standardized set of criteria.
Disbursement Time	Known for faster loan disbursement.	Loan disbursement from banks tends to be slower in comparison.

Ultimately, the choice between a bank and an NBFC for a home loan should be based on your specific financial needs and circumstances. If you require a speedy loan approval and disbursement process, an NBFC may be the better option. However, if you prefer a wider range of banking services and are comfortable with potentially more rigorous approval processes, a bank could be the right choice. 

Important Considerations Before Obtaining an NBFC Home Loan

Securing a home loan from a Non-Banking Financial Company (NBFC) can offer certain advantages, but it's crucial to weigh these benefits against potential drawbacks and make an informed decision. Here are some key factors to keep in mind before obtaining a home loan from an NBFC.

1. Interest Rate System

NBFCs typically use the prime lending rate system for home loans. However, most banks have transitioned to the Marginal Cost of Funds Lending Rate (MCLR) system, which often benefits customers by providing a more stable and uniform interest rate throughout the loan term. Prime lending rate systems may result in higher and fluctuating interest rates.

2. Benefit Pass-On Mandate

Banks are obligated to pass on the benefits of changes in the Reserve Bank of India's (RBI) policies to customers. In contrast, NBFCs have the flexibility to set their interest rates and are not mandated to adjust them in line with RBI changes. While this may offer the potential for lower interest rates, it also means that customers may not automatically receive the benefits of RBI rate cuts when borrowing from an NBFC.

3. Overdraft Facility

Banks often provide an overdraft facility on home loans, allowing borrowers to access surplus amounts linked to their accounts. NBFCs, on the other hand, typically do not offer this option.

4. Documentation and Regulations

NBFCs are known for having a less stringent documentation and regulatory process compared to banks. While this can streamline the loan application process, it also means that NBFCs have more flexibility in setting interest rates, potentially resulting in higher rates. Additionally, NBFCs may be more willing to extend loans to individuals with lower credit scores, while banks tend to have stricter criteria.

5. Approval Rates

Due to their smaller customer base and more flexible lending policies, NBFCs may have higher approval rates for home loans. They are often eager to attract customers and expand their business. However, it's essential to evaluate your repayment capacity carefully before committing to a home loan, as taking on a loan you can't comfortably repay can lead to financial difficulties.

6. Research and Evaluation

Before accepting a home loan from an NBFC, conduct thorough research. Assess your ability to repay the loan, understand the terms and conditions, and carefully evaluate the interest rates offered to you. While obtaining a home loan from an NBFC may be more accessible, it's crucial to ensure that the interest rates align with your repayment capacity.

While NBFCs offer certain advantages such as faster approval and flexibility, it's essential to exercise due diligence and consider the potential drawbacks, particularly regarding interest rates and repayment capacity. A well-informed decision will help you secure a home loan that suits your financial needs and goals without becoming a financial burden.

How to Apply for an NBFC Home Loan: A Step-by-Step Guide

Securing a home loan through a Non-Banking Financial Company (NBFC) involves a structured application process. Here's a step-by-step guide on how to apply for an NBFC home loan:

Step 1: Application Form Submission

Begin by visiting the NBFC's official website or downloading their mobile app. Once there, locate the home loan application form.

Fill in all the required details accurately. You'll likely need to provide information such as your details, income, employment history, and loan requirements. Be sure to double-check the information for accuracy. Additionally, you'll need to upload the necessary documents, which typically include proof of identity, address, income, and property details.

Step 2: Processing Fee Payment

After submitting the application form and documents, you will be required to pay a processing fee. The processing fee is typically paid using your preferred payment method. This fee covers the cost of evaluating your loan application.

Step 3: Verification and Approval

Once your application is submitted and the processing fee is paid, the NBFC will initiate the verification and approval process. During this stage, they will review your application, documents, and eligibility criteria. The NBFC will assess your creditworthiness and your ability to repay the loan.

Step 4: Sanction Letter

If your application is approved, you will receive a sanction letter from the NBFC. This letter outlines the terms and conditions of the loan, including the approved loan amount, interest rate, tenure, and any other relevant terms. Review this letter carefully to ensure you are comfortable with the terms.

Step 5: Property Paper Verification

After receiving the sanction letter, the NBFC will typically conduct a thorough verification of the property documents. This is done to ensure that the property you intend to purchase meets the necessary legal requirements and is free from any encumbrances.

Step 6: Legal, Technical, and Site Investigation

Following the property paper verification, the NBFC may proceed with a legal check, technical evaluation, and site investigation. These steps are taken to assess the property's legal standing, construction quality, and overall suitability for financing.

Step 7: Loan Agreement and Disbursement

Once all verifications are completed, the NBFC will prepare the loan agreement. This agreement outlines the terms and conditions of the loan and serves as a legal contract between you and the NBFC. After signing the agreement, the loan amount will be disbursed as specified, typically directly to the seller or builder of the property.

It's important to note that the exact procedures and documentation requirements may vary from one NBFC to another. Therefore, it's advisable to carefully review the specific requirements and guidelines provided by the NBFC you choose to work with. Additionally, seeking guidance from the NBFC's customer service or loan officers can help you navigate the application process smoothly.

NBFC home loans offer speed and flexibility, but also risks of fluctuating rates. Potential concerns include interest rate uncertainties, complex paperwork, and credit score challenges. Here’s where NoBroker can help you. NoBroker's Home Loan Services can help you secure a hassle-free home loan. Empower your home-buying journey with NoBroker's expertise, saving time, effort, and money. 

Frequently Asked Questions