Home loans are a secure financial tool that allows a person to build a home, and the cost of it gets covered by the borrower in terms of loan repayment options they are getting from the bank.
A bank is an institution that provides home loans to customers at a fixed interest rate and is beneficial for those who don’t need a lot of customizable options in their home loan. However, with the housing finance companies in the markets, they are making the loans available to the broader section of the society as they have the experience and expertise in that domain.
The housing finance companies are the ones that provide borrowers with more customizable terms, such as gaps in the loan repayment option where a person might choose to skip a month for EMIs and will not be charged extra by the company.
The DSAs are also better equipped with the terms that the housing companies provide to the customers. DSA’s full form is Direct Selling Agents, and they are the ones who connect the borrowers with the right lenders.
Here are some of the advantages of choosing housing finance companies over banks when it comes to getting a home loan.
Providing a Tailored Solution to the Borrowers
When banks provide the housing finance solution, they are more stringent in the application process, which eliminates the lower-middle class and the marginalized section of society from getting home loans.
People with no credit history miss the chance of getting a home loan at a favorable interest rate from the banks. Here come the housing finance companies who are equipped with a large database of borrowers and have the technology to manage the loans better.
They understand the financial position of the borrower and provide them with the perfect solution that is good for the financial health of the borrower and also ensures the borrower can fulfill the dream of getting a new home.
The options of low-income housing loans and the step-up loan options are all essential elements to secure the financial prospects of the borrower and ensure that they can pay the EMIs without defaulting on their terms.
Helps in Faster Processing and Approvals
The next advantage of a housing finance company is that they are proficient in the faster approval process and is also a trusted partner in approving the home loan by checking multiple criteria of the borrower.
Generally, bank home loans take longer to process, which makes borrowers wait. The HFCs provide faster approval and communicate the details of the loan amount and the conditions attached to it with much clarity. Customers can stay responsive to the HFCs and get closer to their dream homes faster.
Provides Flexible Credit Policies
Banks have a stricter credit policy, requiring a credit score of more than 750 points. Now, a marginalized section of society can get home loans without any worries about low credit points, as the credibility of the borrower is judged based on other factors that might allow them to get a home loan from the housing finance companies.
Along with the credit options, it also judges the financial prospects of the clients. It provides them a better restricting option, which makes the repayment terms quite easy for the borrower allowing them to have the advantage of home financing.
Higher Loan Disbursal Rate in Affordable Housing
In the affordable housing segment, the loan amounts are quite low, and for the banks it’s not profitable for them to get those customers who are in the segment of affordable housing. Here, the HFCs create a plan and system through which they can manage the customers in the affordable housing segment and provide them with the required funds for building or buying a new home.
The DSA partner apps are the ones where affordable housing borrowers can get the loan rates for their amount and then can connect with the right lenders that can provide the required loan amount to the customers along with the right repayment plans.
A housing finance company can do all of this work as it builds expertise in one particular domain, and the data for them is more nuanced and can leveraged while processing future loans.
Therefore the requirement of housing finance companies, along with banks, are required in the industry as there is a market for both these institutions to cater to.
