Getting a loan in India is no more a tough mission even if you meet the eligibility criteria but the major concern that people have is to make up their mind whether to go for a Bank or a non-banking financial company (NBFC) for finance. There are many NBFCs like Bajaj Finserv Personal Loan and other that are coming up massively and offering Loans to borrowers.
Personal Loan products are offered by both, banks and NBFCs.
Banks and NBFCs: Key Differences
NBFCs are not allowed to accept deposits or issue drafts or cheques. Banks, alternatively, have the right to be a division of the payment and agreement system permitting account holders to send or receive cash. However, as per the consumer’s prudence and terms and conditions, both the banks and the NBFCs can provide loans to the consumers.
The Reason NBFCs are Much Better Than Banks
Banks have tough rules and require additional time to approve or sanction a loan. On the other hand, NBFCs ensure the processing is faster and the necessary finance amount is disbursed within a few days. Although the rate of interest is sometimes higher at NBFCs as compared to banks, borrowers still prefer to take loans from NBFC taking into consideration the ease of getting a loan and better customer support.
In order to summarise, the three main reasons why NBFCs are most popular over banks for finance are:
- Competitive Interest Rates:
The rate of interest is one of the major aspects of every kind of loan. NBFCs have started to focus on this area in the recent decades and have brought down the interest rates to compete with the banks.
- Quick Processing:
In banks, it’s important that the candidate must fulfill the specified eligibility criteria however; NBFCs are relaxed in this aspect. This makes approval of Personal Loans easier and faster at NBFCs. Usually, people apply for a loan when they are in urgent need of cash. By quick loan processing and competitive interest rates, NBFCs have taken this as an opportunity to fulfill that demand.
- Flexible Rules and Regulations:
The terms for lending at NBFCs are not as strict as banks. This helps borrowers to obtain loans without much difficulty. The applicants that are denied loans by the banks often find solace with NBFCs due to flexible rules and terms of lending.
- Loan Accessible by People with Poor Credit Score:
People with poor credit rating usually will not get loans from banks. If the credit score is low, the banks consider borrowers as high-risk individuals. Unless the credit score is over 700 or above, it is not easy to get a Personal Loan sanctioned from banks. Alternatively, finances are offered to people with low credit score by NBFCs but most of the time the rate of interest for such borrowers will be higher than the market rates.
Although NBFCs are useful for people who have a poor credit score and who are looking for flexible terms and better customer service, banks have their own set of advantages like attractive interest rates, high credibility and experience, and so on. If you are Looking for a Personal Loan, you must weigh the pros of cons of every loan provider available, and then only decide which lender is best to apply with. The best way to do this is to browse multiple Personal Loan offers of various banks on reputed online lending marketplaces, compare each product on the basis of interest rate, processing fee and other charges, and then apply for a loan that suits your need and pocket.