How to choose a Perfect Homeloan Lender

Planning to avail home loan? Then be cautious and go through this blog post as we help you know all about choosing a perfect home loan lender.  But, before offering tips about the same let us quickly know about the kinds of lender and how they are different from each other. So, scroll down the page and start reading:

Homeloan Lender

Img : vapulus

1. What are Housing Finance Companies?

They are introduced as individual entities under a license issued by the National Housing Board. These entities offer home loan under NHB’s predefined guidelines. In a definition, the Housing Finance Company is a kind of non-banking financial company that is formed to provide financial assistance to people for the construction, development or purchase of a residential unit, plot or a villa.

2. What are Banks?

The bank is a financial institution that works on the directives issued by RBI i.e. Reserve Bank of India. This institution deposits and carries out monetary transactions from and to the person’s account according to the credit limit of every individual. Also, the bank can perform lending actions directly and indirectly via capital markets. In fact, banks are regularized in most countries due to their financial stability.

3. Difference in Calculation of Interest Rate

Both banks and Housing finance companies follow different methods to calculate the interest rate. The banks are directed to follow the RBI [Reserve Bank of India] guidelines of the marginal cost of funds-based lending rate (MCLR) for all loans after April 2016.

Under the MCLR pattern, the interest rate will change at regular intervals although this change can be in a decreasing or an increasing manner depending upon the country’s economic situation.

On the other hand, the Housing Finance Companies lend loans on the basis of Prime Lending Rate i.e. PLR.

In short, banks cannot lend loan amount below the set MCLR but the HFC [Housing Finance Companies] can manage interest rate for consumers depending upon their credit score.

4. Benefits of Banks and Housing Finance Companies

The bank is a the best option to opt if you want to pay a minimum interest rate on home loan along with availing several banking services.

The Housing Finance Companies are best suitable in case of tainted credit score. This is also the best option if you need money on an urgent basis or in the minimum time possible.

5. Drawbacks of Banks and Housing Finance Companies

In a bank you need to wait for loan approval as the entire verification process takes a week’s time to complete. Also, the bank can reject the home loan application in case the applicant fails to produce one out of all required documents. This means a person has to have complete and up to date documents if he/she wish to avail loan from a bank.

The Housing Finance Companies can make you pay a high rate of interest in comparison to the banks.

6. Creteria to choose a perfect homeloan lender

The main feature of a strong and reliable lender is its financial strength. Also, check if the lender has maintained uniformity in the interest rate or changed it frequently. Another thing that is essential to check before opting for a home loan lender is how much time it will take to get the loan sanctioned.

Conclusion:

The Housing Finance Companies are currently facing issues due to the recent liquidity crisis and this has uprooted doubts in the mind of consumers. So, compare the interest rates and duration of loan approval before opting for a homeloan lender.