Almost all NBFCs (Non Banking Financial Companies) insist on insurance cover on the property mortgaged for a home loan, to deal with unforeseen calamities (fire, earthquake, floods, etc.). In fact, borrowers who avail a home loan against property mortgaged to the NBFC should also go in for life insurance (loan-secured policy) on the borrower/co-borrowers, the assured amount of which will be the outstanding in the loan account from time to time. This way, the huge loan burden will be met by the prematurity of the policy and the spouse/legal heir will be spared the loan burden in case of the unfortunate death of the borrower. The premium on this policy can be met directly by the borrower or the borrower can request the NBFC to permit debiting of this premium amount to his/her loan account, if the NBFC so agrees.
Disadvantages of home loan from NBFC
There are some disadvantages that one must take note of while applying for a home loan to an NBFC.
(a) NBFCs are secretive about their internal loan process.
(b) They sometimes force the borrower to buy other financial products.
(c) The process fees at some NBFCs are at higher levels.
(d) The charge on a default is usually much higher than that of a traditional bank.
(e) Some NBFCs insist on stiff conditions (such as providing collaterals) in their loan sanction.
(f) Some NBFCs insist on higher margins (thereby increasing borrower’s stake).
(g) NBFCs do not normally disclose the reason for loan rejection (some of the reasons are too flimsy and not based on facts).
You can contact Grievance and Redressal of NBFCs Home Loans in case of Home Loan Complaints.
Consumer VOICE did home loan comparison of 7 NBFCs on basis of loan amounts, processing charges, rate of interest, eligibility age, repayment periods ad other parameters to recommend the Best Buy, Good Buy and Fair Buy for a home loan from NBFC.