I am a first borrower who is planning to apply for a housing loan. How do banks and non-bank financial companies (NBFCs) assess in such cases creditworthiness? Do NBFCs offer benefits compared to traditional banks for first applicants? Which key factors should I keep in mind before I use a housing loan? “
-Name withheld upon request
With home loans that become cheaper and government subsidies such as Pmay (Pradhan Mantri Awas Yojana) in the game, this is a good time for borrowing for first home buyers. If you are new to credit, lenders assess your suitability based on factors such as age, educational background, current living conditions, stability of employment and overall assets. Your income bond ratio (a measure for how much of your income goes to debt repayments) should ideally be below 50-60%.
Self-employed persons are treated by most lenders on the same footing with loffe borrowers, although the documentation requirements may vary. In such cases, lenders can revise company details, return, bank statements and even informal accounts (Kacha accounts) to get an idea of your financial health.
Do you have to choose a bank or an NBFC?
Banks usually rely on credit scores, repayment history, task stability and your debt / income ratio to evaluate applications. NBFCs, on the other hand, often have more flexible eligible standards and can consider alternative methods to assess creditworthiness-worth they are a popular choice for first borrowers or people with a limited credit history.
They also tend to process applications faster (2-3 days versus 7-10 days for banks), require less paperwork and can approve borrowers with lower credit scores or surrogate income certificates.
What to keep in mind
Make sure that your documentation is in order – KYC documents, income departments, real estate papers and verification letters from employer, if applicable. Look beyond the interest when comparing loans.
Factor in processing costs (usually 0.5-1% of the loan amount), legal and technical evaluation costs, Most registration and insurance premiums. NBFCs sometimes abandon some of these costs during festive offers or for online applications.
It is a good idea to compare at least 3-4 offers for housing loans. Focus on the effective annual percentage (APR) instead of just the headline interest. Consider the loan of the loan, the flexibility of the reimbursement and advance payment options. Some NBFCs offer competitive rates and easier conditions for borrowers with strong general profiles – even without an extensive credit history.
Finally, use this first loan to build a solid credit record. Timely EMI payments In the next 12-18 months can go a long way to stimulate your credit score and unlock better financial options on the road.
D Arulmany is director and CEO at Veritas Finance Ltd.
