Where should I go for my home loan balance transfer, Banks or NBFC? It is one of the questions which makes every borrower in the situation of doubt and throw him into an enigma. When this situation arrives in the home loan balance transfer the borrower should be patient about it and not deal with it like he has to catch his last train which is departing from the station i.e. running. The approach in these matters of home loan is to first break words with your current bank regarding your proposal of lower interest rates and if they disagree then only move to the second option.
Well, the interest rate is not the primary thing in the home loan balance transfer it should be understood by the borrowers. They have to dig in deep to find the real picture of what they are actually getting out of the deal on making the transfer i.e. either it’s a win-win or making a fool of yourself. Well, ultimately it’s the choice of the borrower to make. But, here is a list of benefits offered by Banks and NBFC’s in the context of home loan balance transfer.
- MCLR AND PLR
All new loans are linked with MCLR (Marginally Cost of Lending Rate) which acts as a benchmark for the banks on the floating interest rate by RBI. Upon this rate, the banks charge interest rate spread. A loan linked with such interest rates will be notified in the changing interest rates by the bank quickly and transparently as compared to the base rate. The PLR (Prime Lending Rate) which is followed by the NBFC’s doesn’t have the above limits of interest rate and can change the rates as per the selling requirements.
- LOAN TO VALUE RATIO
The banks and the NBFC’s offer 80% of the amount of the home loan borrowed by the borrower and the last mile costs have to be incurred by him which changes the value of the home from 100 to 105-100%. While to meet these needs such as registration fees and stamp duties and other costs no bank funds the money. However, NBFC’s can make an exception by including these costs which permit the borrower to borrow a large amount. This gives NBFC an edge over the bank.
- LOAN ELIGIBILITY
The banks and the NBFC’s both have a particular standard for allowance of home loans for the candidates. Both, of them, demand particular proof of the borrower to invest the money. The banks and the NBFC’s evaluate a candidate on various aspects such as the credit history, the CIBIL score, the amount, the risk, the debt-income ratio and other things considered by the bank. While in this manner, banks have strict eligibility criteria for the approval of the home for the balance transfer where the standard is typically up to 80% for a borrower to qualify. On the other hand, in the terms of NBFC, the criterion for the home loan balance transfer of a borrower is comparatively higher as on the other few aspects they are a bit relaxed. So, the loan must be borrowed accordingly.
- PAPERWORK AND PROCESSING
The paperwork and processing one of the other matters that should be taken into account while transferring your home loan. The banks have a strict paperwork process when it comes to the home loan transfer. They scrutinise your each and every document against the attractive interest rate they offer. Whereas, NBFC’s, on the other hand, are not offering so attractive interest rates on the transfer as compared to the banks. But, they are relaxed in the matter of documentation when it comes to it. But, they shouldn’t be mistaken for that as the standard set by them for the approval of the loan is higher than the banks. So, it can be a bit hard to qualify for the same.
- ADDITIONAL PRODUCTS
Both, banks and the NBFC’s have the tendency to sell additional products to the prospect borrowers along with the loan. These products usually involve the additional insurance with the loan. The insurance plans help to retain the amount of the home loan if the borrower dies within the particular period. So, both of them have cross sell targets where the banks having huge customer base. So, they don’t push on the additional products. But, the NBFC’s have a less customer base. So, they look at the profitability per customer.
Also, it should be taken care of that, overall the Banks/NBFC’s home loan history should be evaluated before making the home loan balance transfer to avoid issues in future.