Personal Loans are excellent financing tools to fund any urgent or planned need, including a wedding, vacation, medical emergency, home repair, or higher education. Their popularity has increased exponentially over the last few years due to their easy availability and flexible repayment terms. However, when the time comes to apply for a Personal Loan, borrowers have two options: to borrow from a bank or an NBFC.
Here, we will discuss how an NBFC Personal Loan is different from a Bank Loan and which one is better to choose.
Understanding the Difference between a Bank and an NBFC
A bank is a financial institution that has to operate within the framework of the Reserve Bank of India (in India). An NBFC stands for Non-Banking Financial Company, which is not a bank but runs similar financial functions, such as providing credit and loan facilities, insurance, investments, etc.
Benefits of Taking a Personal Loan from an NBFC over Bank
NBFCs have grown exponentially in India’s lending market due to their customized offers, co-lending arrangements, growing reach, dynamic online presence, and robust risk assessment. Many reputed NBFCs provide ample loan amounts at competitive interest rates. One may avail several benefits by borrowing a Personal Loan from an NBFC rather than a bank:
Simpler Eligibility Conditions:
Most NBFCs do not have a long list of eligibility conditions that an individual must meet to borrow a personal loan from them. Any salaried employee or self-employed professional who fulfils the lender’s age, income, and credit score requirements can avail of a Personal Loan easily.
Low Credit Score Requirement:
A credit score is a significant number that every Personal Loan finance company considers before approving an unsecured Personal Loan. They check each applicant’s credit score to evaluate their credit history and determine their loan amount and interest rate accordingly.
That said, banks are stringent with their minimum credit score requirement. They don’t approve an individual’s application if their credit score is lower than their requirement, even by a few points. On the other hand, NBFCs have lenient minimum requirements as far as credit score is concerned. Although they may charge a higher interest rate for low-score individuals, they try to negotiate and work out a plan.
Online Application Process:
Applying for an NBFC Personal Loan is much easier and faster than a bank loan. Banks may call applicants to their offices several times before approving their loans. However, many Indian NBFCs now support a 100% digital loan procedure that a person may complete from their home. NBFCs are focused on keeping things easier for their customers, which is why they stay updated with the latest technologies to streamline the application process.
Banks take several days to scan loan applications, verify each detail manually, and approve loans. On the other hand, NBFCs use automated methods of scanning applications and confirming details, which happens almost immediately after submitting the online application form. Once the applicants enter their KYC details, the computerised system verifies them immediately and instantly confirms the loan approval.
Many individuals who want to borrow money restrain from doing so due to the fear of heavy paperwork. Banks ask for bunches of documents and photocopies to support loan applications.
On the contrary, many NBFCs support 100% paperless documentation for Personal Loans. They ask for minimal documents to verify an applicant’s identity, income, and residence. They do not require the applicants to visit their offices and submit the paperwork. Lenders supporting online loan procedures accept scanned copies of documents uploaded through their website. So, no paperwork is involved in an NBFC Personal Loan application.
Better Customer Service:
NBFCs are private companies that aim at making profits from their transactions. They compete with each other to attract and entice customers with their optimum customer care and service. They are known to offer satisfactory customer services to their borrowers in every respect.
NBFCs have several evident advantages for borrowers. With rapid improvement and increasing competition among them, Personal Loan borrowers can benefit significantly from selecting the best Personal Loan finance company according to their needs. All in all, NBFC is a good option if an individual wants funds quickly without any difficulty.
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