In India, there are several options to borrow money to fulfill urgent needs or precious goals. Be it legally registered financial institutions or locally operating non-institutional lenders, options galore when you need money urgently.
However, the two most popular institutions offering loans against property in India are banks and NBFCs.
How Can You Use a Loan Against Property?
A loan against property is an easy to apply loan which banks and NBFCs approve to borrowers with ownership rights of residential or commercial properties. You may use the loan amount for anything you like, including wedding, traveling, house construction or purchase, business purposes, buying a motor vehicle, home renovation, etc. Being a secured loan, the loan against property eligibility criteria is fairly simple. Additionally, you can get an extended loan term of up to twenty (20) years for repayment.
But, while applying for a loan against property, borrowers often get confused between banks and NBFCs. Read on to find out the difference.
Loan Against Property – Bank or NBFC?
- Interest Rate
The first figure that all borrowers watch out for is the interest rate of a loan against property. But, if the interest rate is a key parameter, there is hardly anything to drive home, as both banks and NBFCs offer interest rates in the same range. NBFCs typically offer interest rates in the range of 9.50% and 10.65%. Banks, on the other hand, offer interest rates in the range of 8.80% and 12.40%.
Loan against property interest rates depends on a lot of factors, including credit score, monthly income after all deductions, disposable income, credit history, and property status. If your credit score is low, it is hard to secure a loan against property from a bank. NBFCs, however, may still approve your loan if your income level is sufficient to take care of the EMIs.
- Eligibility
Since banks are already reeling under monumental NPAs, they take the loan against property eligibility quite seriously. As a fact, you can seldom manage a loan from a bank if your credit score is less than 750. NBFCs, on the other hand, offer relaxed eligibility criteria. You can also apply for a loan against property when you have no credit profile. However, to increase your loan against property eligibility, you should prove that you earn a decent amount every month and do not have too many loans or credit card dues to repay.
- Application and Approval Process
The application and approval process are two such areas where the service quality of banks and NBFC vary greatly.
To avail a loan against property from a bank, you have to physically visit the branch, fill the application form, attach documents, and submit the application form. Banks usually take up to three weeks for approving the loan.
NBFCs, like PNB Housing, offers the facility of doorstep service delivery. You may conveniently visit the website of the lender, fill the application form online, upload scanned copies of original documents, and hit the submit button. Once the initial round of screening is done, the lender will send a loan officer to your registered address for physical verification of documents and the property. Once that is done, you can easily expect the funds in your account in no time.
Conclusion
Both banks and NBFCs offer attractive terms to loan against property borrowers. However, when it comes to service quality and value-added benefits, NBFCs clearly outshine other types of lenders.
