A common problem facing potential borrowers is where to buy a loan. Should they go to a bank, or talk to a non-bank finance company? Both of these financial institutions offer lucrative deals to customers for all types of borrowing needs. There are many differences between the loans offered by banks and NBFCs. Understanding these will make the purchase decision easier for consumers.
Banks and NBFCs: Key Differences
NBFCs are not allowed to accept deposits or draft withdrawals or checks. On the other hand, banks have the right to be part of a payment and payment system that allows account holders to send or receive money. Both the bank and the NBFCs provide loans to their customers on their terms and conditions.
Who can apply for a loan?
When choosing between banking and NBFC, you should consider the type of loan you want. Many NBFCs, for example, offer a wide range of long-term consumer loans that allow for faster processing and easier payment structure. Banks, on the other hand, can have a wide variety of loan products. The following points can be major decisive points.
Interest Rates: Bank loans with floating rates linked to MCLR, linked to macroeconomic factors such as RBI-approved lending rates. NBFCs and housing finance organizations (HFCs) borrow according to the Prime Lending Rate (PLR), which is not controlled by the RBI. This allows NBFCs and HFCs greater freedom to increase or decrease these levels as they see fit. The borrowers can calculate their installments on the HDFC Car Loan EMI calculator.
Credit Point Requirements: Both NBFCs and banks will offer their best interest rates to customers with high credit ratings. For example, the leading bank recently offered its best interest rate of 8.35% on home loans to customers with a CIBIL note of more than 750. However, customers with low scores (grades 550-700) may find that loans from NBFCs are less robust depending on car loan eligibility requirements.
Loan Eligibility: NBFCs may be more freely available on your loan eligibility - the amount you may be allowed in terms of your repayment amount, credit score, etc. For example, banks will usually pay up to 80% of your household value and at no cost in respect of stamp duty and registration. NBFCs can devise ways to help customers incur these additional costs on loans.
Strong Papers: NBFCs have an amazing market share for commercial loans. They have been able to achieve this with free paperwork and processing requirements. Banks, on the other hand, work entirely on paper. We are in the age of high NPAs and banks are responsible for lending very carefully.
When you buy a car loan with a view to tunnel options or bank NBFCs it is best to avoid it. Both banks and NBFCs have their advantages and a final decision must be made to keep in mind the type of loan, interest rates, costs, credit points, and the repayment period.
Benefits of Car Loan:
Future savings
Many people think that when the will purchase a new car, they will be free from paying the repair charges. This is true, as we all know that new cars are very fuel-efficient which will incur fewer expenses on gas. Similar is the case with other expenditures too.
No collateral required
No collateral is required for a car loan. The reason behind this is that the car itself will be the mortgage to your loan amount.
Ideal for credit history
Even if you have bad debt, you can still get a car loan. The positive factor about car payments is that they complement your credit history, as long as you stay over the last payment days.
Increased value
Lenders of a car loan also offer additional benefits like free fuel, free service, etc. These bonuses are not a good reason to take a loan, but they certainly do not hurt!
Creating an improved budget
A car loan comes with an agreement on how much to pay per month.
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