If you are going through a financial crisis, personal loans can help you come out of tough situations. Whenever in need of funds, traditional banks have always been the preferred choice for many individuals.
However, in today’s fast-paced financial market, NBFCs are emerging as the popular alternate option with faster loan approvals, quick disbursals, relaxed eligibility criteria and customized loan options.
While private and public sector banks follow strict criteria in offering personal loans, NBFCs offer more simplified, end-to-end digital process making them a preferred choice for individuals looking for quick funds at their disposal.
Know Why Choosing a Personal Loan from an NBFC is a Smart Move
Swift Loan Processing
Generally, NBFCs take less time in loan approval and disbursals, as compared to traditional banks, which might take from days to weeks. NBFCs require minimum paperwork with lesser formalities for loan processing. With its user-friendly digital platforms, NBFCs prioritize online application processes with quick disbursals. Unlike traditional banks requiring multiple bank visits, along with extensive paperwork and additional banking formalities.
Competitive Personal Loan Interest Rates
Traditional banks have to abide by the external benchmarks rates, as per the RBI’ guidelines and interest rate policies. However, NBFCs offer rates as per their internal benchmarking system, making them more flexible in offering rates depending upon your profile and requirements. At Paisabazaar, you can check and compare the personal loan interest rates offered by several NBFCs and choose the one that suits you best.
Flexible Credit Score Requirements
NBFCs are not stringent about your credit scores; as compared to banks who typically require a minimum credit score of 750 or above to approve your personal loan applications. Most of the NBFCs approve loan applications based on the applicant’s income level, job/business stability, and employer’s profile, nature of job and purpose of loan. Therefore, flexibility in their credit score check makes them more favourite than traditional banks.
Flexible Eligibility Criteria
The chances of loan approvals are comparatively higher, as compared to traditional banks because of NBFCs’ flexibility in their eligibility. Individuals who find it difficult to meet the strict eligibility criteria set by the lending banks can opt for the second prevalent alternative. The relaxed and flexible eligibility criteria of NBFCs makes them a popular lending choice for salaried and self-employed professionals and individuals who are New-to-Credit or with no to limited credit history.
Personalized Loan Products
NBFCs are specialised in offering customized loan products to its customers. Individuals with low credit scores are also able to get personal loans depending upon their income level, employment stability and employer’s profile. There are cases when you can avail loans of higher amounts or at lower interest rates based on your strong repayment capacity. NBFCs offer customized personal loans to individuals with high-income and working with a reputed company or organization.
Minimum Documentation
One of the most attractive reasons borrowers choose NBFCs over traditional banks is the minimal paperwork required for loan processing, in contrast to the lengthy documentation typically demanded by banks. Lesser paperwork makes the loan process much quicker and easier.
FAQs
Which is better, NBFC or bank?
The choice between NBFC and traditional bank depends on your urgency of funds, financial situation, credit profile and other preferences.
Does NBFC provide a personal loan?
Yes, NBFCs also provide personal loans to salaried and self-employed individuals, as nowadays they become an alternative to traditional banks, especially for applicants looking for quick loan disbursal, minimum documentation, flexible eligibility criteria and much more.
Why do individuals prefer NBFCs to banks for personal loans?
Individuals often prefer NBFCs to traditional banks for personal loans because of quick approvals and disbursals, flexible eligibility criteria, minimum documentation, customized loan products, competitive interest rates.
What documents do I need for my personal loan application with an NBFC?
If you are planning to apply for a personal loan from an NBFC, the documents required are usually lesser and simpler as compared to traditional banks. Typically, you’ll need your PAN card (mandatory), Identity proof (Aadhaar card, Voter ID, Driving License, or Passport), Address proof (like utility bills, Aadhaar card, Voter ID, or Passport), and Income proof (latest salary slips, bank statements, ITR, or Form 16)
How does the NBFC determine the maximum loan amount I can avail?
An NBFC determines the maximum loan amount that you can borrow based on your repayment capacity, credit profile, income level, employment stability, employer’s profile, etc.
What are the charges I should look out for on a personal loan?
Before applying for a personal loan, just not check the interest rates and look beyond it as well. Whether it is an NBFC or a bank, both apply several additional charges that can affect your total loan cost. The charges you should need to check include the processing fees, filings charges, prepayment and foreclosure charges, penal rates, loan cancellation charges, cheque bounce charges, late payment charges, etc.