When looking for a Personal Loan, an aspiring borrower may come across different lenders. Banks and NBFCs are the most popular lending institutions most people approach. However, the product is the same for both institutions; their plans vary. Banks are RBI regulated and have stringent protocols to follow, whereas NBFCs are more lenient and quickly responsive, which gives them a little edge over banks and other types of loan providers.
Correct information about the differences between several lenders can help you choose the best option. Here, we will conduct a point-by-point analysis of the available options and see how personal loans from NBFCs far outweigh the others.
Types of Personal Loan Lenders in India
1. Non-Banking Financial Companies
Non-Banking Financial Companies or NBFCs are not banks but run similar financial activities, like providing credit facilities, investing, and loans. Their facilities cover business loans, loans against properties, Home Loans, loans against securities, and vehicle loans.
The biggest slugfest while applying for a Personal Loan is the paperwork and long delays in credit. This is where NBFCs outstand other institutions with minimal documentation, a 100% digital procedure, quick approval, simple eligibility criteria, flexible repayment terms, and high-end customer service. In a nutshell, they provide you with a hassle-free and uncomplicated loan process. In addition, Personal Loans from NBFCs have no end-use restrictions, allowing borrowers to use the loan how they want, whether for a wedding, education, vacation, home renovation, or medical emergency.
Banks are formally organized financial institutes governed by the nation’s apex bank, i.e. the RBI (Reserve Bank of India). Owing to their regularised and highly coordinated functioning, they are trustworthy sources of Personal Loans when needed as they have physical existence and come under the government system. Nevertheless, people are often not comfortable handling their extensive paperwork, multiple branch visits, and strict eligibility conditions.
3. Peer-to-Peer Lending Platforms
P2P lending platforms are a form of online loans that fund loans from individual investors in place of lending institutions. While most offer pre-qualification options, one can check eligibility without affecting the credit score. Individuals with a low credit score find these lending platforms easily accessible, as most individual investors evaluate the applicant’s income and repayment capacity rather than their credit history. Consequently, the Personal Loan interest rates, origination fees, and processing charges are higher with P2P Personal Loans.
4. Credit Unions
Credit Unions are non-profit financial institutions with capped interest rates. However, a loan seeker must become a credit union member to take advantage of the loan offers. Although the Personal Loan interest rates are lower, loan amounts are smaller with limited services and more extended approval and disbursement times.
Determining Why NBFC is the Best Loan Option
After understanding the terms and conditions of various Personal Loan lenders in India, loan seekers prioritize NBFCs over other institutions for several reasons. Some of them are mentioned below:
Easy Eligibility: While every NBFC has varying eligibility criteria for Personal Loans, each of them appreciates a stable income and a decent credit score. A credit score above 750 ensures better Personal Loan interest rates with bigger loan amounts.
· Minimal Fees: fewer fees means minimal expense bearing while borrowing. Consequently, low application and processing charges attract borrowers to NBFCs.
· Fund Approval and Disbursal: Most of the time, loan seekers need funds immediately. Thanks to their 100% digital procedure, streamlined verification systems, and easy eligibility criteria, NBFCs can provide you with quick loan approvals and disbursement within hours.
· Flexible Loan Availability: NBFCs have a wide range of amount options. One can choose the loan amount depending on his requirement between the flexible minimum and maximum amount scale.
· Lower Interest Rates: The better the eligibility and credit score, the lower the Personal Loan interest rate. NBFCs reduce their interest rates due to massive competition, which gives borrowers the liberty to save extra money.
· Adjustable Repayment Terms: Most NBFCs have flexible repayment terms that one can choose according to their income and monthly repayment capacity.
· No Collateral Requirement: Personal Loans from NBFCs are 100% unsecured, meaning borrowers do not need to secure them with collateral, guarantor, or security.
While looking for a Personal Loan, having complete knowledge of various lending institutions and their regulations is crucial. You can analyze the pros and cons and choose the best one for you. NBFCs like are the best loan providers for various reasons mentioned above. Compare their terms and conditions and get one that best suits your requirement.