Banks vs HFCs: Difference

Banks are not only the place from where one can avail home loans. One can also get a home loan with attractive interest rates from Housing Finance Companies (HFCs). An HFC is a kind of an NBFC (Non-Banking Finance Company) that solely works into the financing of purchase or construction of homes.

Banks are regulated by the Reserve Bank of India, however, the HFCs are regulated by the National Housing Bank which is a subsidiary of RBI. Banks use the money deposited by the customers in their savings and current accounts. The rates of the HFCs are much higher when compared to the banks because they raise funds from public or borrow from other banks.

The advantage here is that bank can provide loans with lower interest rates but are strict with the legal terms when comes to the eligibility of the borrower. The credit score plays a very important role when applying for a loan from a bank. On the other side, the HFCs may consider any shortcomings in documentation and might be soft on the credit score side but will be charging higher interest rates.

In either case, the buyer has to make a down payment before applying for a home loan. Down payment is a minimum 10% of the property price which has to be paid by the borrower. Still, many people miss out on buying their dream home due to not enough funds for the down payment. HomeCapital is a new fintech company that helps you get ahead in life by providing 50% down payment as an interest-free credit through their partnered financial institutions.