Banks vs Housing Finance Companies: Key Differences

Banks vs Housing Finance Companies: Key Differences Every Home Loan Borrower Must Know

Comparing a bank and a housing finance company (HFC) on a financial marketplace can create a big difference for a home loan journey. You get to choose better interest rates, faster approval, and more flexibility. However, many people are still stuck believing the myths. Let us break them down and understand both to know which is the better option for a home loan.

How Are They Different

Here’s a quick look at how banks and HFCs (Housing Finance Companies) differ on key aspects:

Feature	Banks	Housing Finance Companies (HFCs)
Regulator	Reserve Bank of India (RBI)	National Housing Bank (NHB) and RBI
Rate Type	Linked to repo rate or MCLR	Linked to internal PLR (Prime Lending Rate)
Interest Rates	Usually lower for strong credit profiles	Depends on the credit score
Processing Time	Slower, with more documentation	Faster approvals, simpler process
Eligibility	Stricter, prefers salaried individuals	Friendly for self-employed or variable income earners
Customer Service	Standardised	More personalised
Loan Customisation	Limited	Highly tailored options available

Both have their strengths. While banks offer competitive rates and security, HFCs give convenience and flexibility.

Who Should Choose Banks

• Borrowers with a strong credit score.
• Those who want to combine multiple banking services.
• People who can wait longer for loan approval.
• Borrowers with a long and trusted relationship with the bank who want to leverage priority and services.

Who Should Choose Housing Finance Companies

• Self-employed or small business owners.
• Borrowers need faster loan processing.
• Applicants with lower or average credit scores.
• Those wanting more flexible loan options and easier documentation.

How a Financial Marketplace Makes It Easier

A financial marketplace connects borrowers to multiple lenders at once. Instead of visiting different banks and HFCs separately, borrowers can check everything in one place and compare their rates without any hassle. Here’s what it offers:

• Comparison of home loan interest rates and features
• Updated lender details and eligibility
• Tools like home loan EMI calculators can help estimate monthly EMIs
• Links to apply directly
• Expert guidance on improving eligibility

The Role of a Home Loan EMI Calculator

​​Before applying for a home loan, it’s essential to understand your repayment obligations. A Home Loan EMI Calculator helps you estimate the exact amount you’ll need to pay every month. Simply enter the loan amount, interest rate, and tenure — the calculator will instantly display your EMI, total interest, and overall repayment amount.

Using this tool, you can easily compare multiple loan offers and assess which option aligns best with your monthly budget. For instance, the PNB Home Loan EMI Calculator enables borrowers to make informed decisions by visualising their financial commitments in advance.

Top Banks and HFCs Offering Competitive Home Loan Interest Rates

Lender	Type	Starting Interest Rate (p.a.)	Max Tenure
Bajaj Housing Finance	HFC	7.45%	Up to 32 years
PNB Housing Finance	HFC	8.50%	Up to 30 years
South Indian Bank	Bank	8.50%	Up to 30 years
LIC Housing Finance	HFC	8.65%	Up to 30 years
ICICI Bank	Bank	9.00%	Up to 30 years

Disclaimer: Interest rates are subject to change based on lender policies and the borrower’s profile.

Borrowers can compare these lenders and more on Bajaj Markets, a financial marketplace.

Common Myths About Banks and HFCs

Myth 1: Banks offer more competitive interest rates on home loans.

The table above clearly shows that it is not true, and HFCs are offering competitive prices. While the rates may change, borrowers should know that banks do not always offer the lowest interest rates.

Myth 2: HFCs are not Trusted entities.

Most HFCs are regulated and follow strict RBI and NHB guidelines. They are safe, transparent, and professional.

Myth 3: Loan transfer is not possible between banks and HFCs.

Loan transfers depend on your loan terms and conditions, and not the type of lender.

Final Thoughts

For a borrower, what truly matters is better rates, terms, and security. It is important to make an informed decision, read the fine print, and select a trusted name. Since rates and eligibility vary by income type, credit score, and lender policy, it’s smart to compare all options before applying.

A financial marketplace like Bajaj Markets can make this process of finding the right home loan lender simple. It allows the buyer to compare multiple lenders in one place, check their credit score, calculate EMI, apply, and secure an ideal home loan.

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