NBFC Impact on Vehicle and Housing Loan Sector – An Overview

In recent years, India’s Economy has faced numerous banking frauds done by huge organizations or associations, which creates a liquidity crisis in the financial sector. The Government of India has continued to constrict the present compliances to control such activities. But, those actions have delayed the ability of financial houses to avail easy loans to the credit searcher. In this blog, we will discuss how NBFC impact on vehicle and housing loan sector.

Impact of NBFC in Current Times

In the previous few years, Non-Banking Financial Companies (NBFCs) have contributed towards the financial sector, and they are still going forward by offering inexpensive and smooth financial support to the needy one. Non-Banking Financial Companies are quite extraordinary when it comes to executing reasonable and various financial services. Also, they have an extensive portfolio of financial services, including vehicle and housing loans accessible to the individual at a minimal rate of interest. In recent years, NBFC impact on vehicle and housing loan sector by providing loans at a reasonable interest rate easily for those who cannot avail loans from banks and private lenders.

At current, Non-Banking Financial Companies are supposed as the only alternative to a bank but before operating NBFC activities they need to obtain NBFC Registration Certificate from RBI under the Companies Act, 2013. Their choice of operation and nature of services are pretty similar to banks. These companies are not provided with the right to accept DD from the general public. With the growth of NBFCs in India, the financial services portfolio has been extended to a significant extent, which permits the unbanked sector of the society to avail of the loan. After knowing the impact of NBFCs in recent times, we can now discuss the NBFC impact on vehicle and housing loan sector. And compare NBFCs and banks for providing vehicle and housing loan in India.

Vehicle Loan Provided by Private Lenders and Banks – NBFC Impact on Vehicle and Housing Loan Sector

Buying a new car or bike is one of the most vital decisions for someone’s life. One of the main limitations in buying the vehicle is the shortage of financial resources. Most of the peoples fail to buy a car or bike owning to the non-fulfilment of financial demand that the banks are incapable of providing because of strict policies.

Following are some problems an individual faced while availing vehicle loan from a bank:

1. Stringent Norms: In comparison with the private lenders, the traditional banks’ norms are not favourable for an individual having a poor CIBIL score or low income.
2. Credit History: Before providing a loan, banks first considered or checked the CIBIL score as an essential factor for judging the creditworthiness of an individual, which sometimes becomes a restriction for the individual having a variable and low income.
3. Charges: Apart from strict norms and criteria, the banks, primarily the mainstream ones, enforced different types of processing charges before spending the real loan amount, which otherwise acts as a disturbance for most of the peoples.

NBFCs Funds for Vehicle Loan

Non-Banking Financial Companies (NBFCs) have developed as the protector for the unbanked sector of the nation. It permits financially weak peoples to provide cost-effective credit containing vehicle loans at a reasonable rate of interest. Previous success has permitted the Non-Banking Financial Companies to gain their loan range and increase the vehicle loan sector for an extensive reach.

Accessibility of different Non-Banking Financial Companies providing a wide range of credit scheme offers sufficient advantages to the designated owners of the vehicle. Some of the advantages are mentioned below:

• Non-Banking Financial Companies influence faceless verification by executing advanced technology identical to Fintech companies in India. This not only reduces the bother of manual processing but also reduce Turnaround Time (TAT^[1]) for the disbursement of the loan.
• Vehicle cost is the critical aspect for computing the interest rate that means the cost of the vehicle is directly proportional to the interest rate. The NBFCs provide affordable interest set for various criteria.
• Non-Banking Financial Companies solidifies flexible insurance options to fulfil the people’s requirement.
• The most significant benefit extracted by Non-Banking Financial Companies is that it provides auto loans with low EMI.

Housing Loan Offered by NBFCs – NBFC Impact on Vehicle and Housing Loan Sector

Buying a new house requires proper and effective financial planning or strategies. Normally, peoples are more tending to housing loan owing to easy repayment and disbursement options. Unlike conventional banks, where the expenditure of housing loan is imperilled to strict norms, Non-Banking Financial Companies is more productive in that concerns. Their primary focus is to put separately all the hindrances that are projecting with traditional lending. That generally exceeds paperless verification and smooth processing so that end-users find it suitable to provide pre-lending necessities.

Comparison between NBFCs and Banks Regarding Housing Loan

• Bank utilizes the aspect such as MCLR or Marginal Cost of Lending Rate as the origin of the house loan interest. In comparison, Non-Banking Financial Company calculates the interest rate by taking the PLR or Prime Lending Rate into account.
• Both Non-Banking Financial Company and banks leverage the CIBIL score of the designated borrower for defining the house loan interest rate. Whereas the NBFCs standards for a home loan are more favourable.
• Generally, banks disburse loans up to 80% of the property value, whereas Non-Banking Financial Company may offer house loans more than banks.

Advantages of getting Housing Loan from NBFCs

• NBFC offers credit services for all different types of home loans, which also contains Housing Extension Loan, Housing Construction Loan, etc.;
• Non-Banking Financial Companies simplify flexible terms and conditions for the individual who is looking for housing loans;
• Non-Banking Financial Companies being a private organization or entity work are committed to fulfilling their client’s demands related to housing loans;
• Because of the advanced technology used by NBFCs, they have shifted their working procedures on the online platform, and this permits NBFCs to reduce the cost and time-related duty of physical paperwork;
• While funding a house loan, Non-Banking Financial Companies set up different eligibility criteria related to location, repayment, property evaluation, etc.

Conclusion

From above, it is crystal clear that how NBFC impact on vehicle and housing loan sector. In India, NBFCs helps to grow the Indian Economy. These entities are taking every aspect to make financial services accessible to a wide range of clients. With the adaptation of new and advanced technologies, these companies are reducing the TAT (Turnaround Time) to a severe level. So, getting a housing loan or vehicle loan from the bank could be challenging for an individual, especially in the case of low credit score and low income. That’s why it is easy and affordable to avail loans from NBFCs.

Read our article:A Complete Guide on the Roles of Reserve Bank in Acquisition of Control in NBFC