HFC or Bank: Which lender should you opt for?

Planning to buy a house? Yes! Must be having a huge dilemma of whether to go for HFC or bank. There has been a debate going on between housing finance companies and banks for a very long time.

HFC or Bank For Home Loan

What is a housing finance company?

A housing finance company is under the National Housing Bank. It is to note that any kind of non-banking finance company can become a housing finance company. They must be fulfilling the requirement of the Companies Act.

Difference between HFC and Bank

The biggest difference between a bank and a housing finance company is on the basis of the interest-rate they operate on. The banks are always mandated by the reserve bank of India and we have to follow the rules, which are given out by them. The HFCs are related to the prime lending rate (PLR).

It is important to know that the banks can never operate at a rate lower than the RR, but on the same note and tangent, there is no such tag for the HFC rates. The HFC can set their own rates. This means that housing finance companies have an upper hand to choose their rates, increase, and decrease it according to their own state.

HFC or Bank: Which lender should you opt for?

Both options have their own pros and cons. If you want to go for a lower interest rate, you can go for a bank loan, as it tends to be a better option. However, this has a downside too. Your bank loan highly depends upon your credit score. If your credit score isn’t that good, you would have to go for any other kind of financing option. In rare circumstances, you can get a home loan from a bank even when you have a less credit score, it’ll just take a long time.

However, if you are in need of a quick loan, you must go for a HFC. Also, if you are getting a cheap rate of interest in a Housing Finance Company, go for it.

It is also said that more than 40% of the home loan market is under the HFCs because it is said that they are easy to get.

Point to be noted that when it comes to a bank, the change in interest rate is passed on to the customers as soon as possible.

There is an overdraft facility also available with the banks. Various banks give overdraft facilities in many ways. This means that if you are paying anything above your instalment amount per month, it will be used in the principal amount. This helps to reduce the obligation of the borrower in the long run.

Summing up

Now, we have covered the importance and the difference between both of the segments. However, you must know that buying a house and going for a home loan is a huge task. You need to do a lot of research. Carefully, go through various proposals that you get from both the sectors. Do a lot of research and you must make the right one decision after doing a lot of research. Talk to the people who have been in the same situation and have gone for both the cases. Only after this, make a decision and hope for the best.

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