When looking to avail of a personal loan, you have two main types of lenders to choose from, NBFCs and banks. While the financial instrument is essentially the same, there is more than just a tiny difference between NBFC and bank offerings. Firstly, and most importantly, the RBI regulates banks and follows stringent protocols. This gives NBFCs a slight edge when comparing NBFCs vs banks as NBFCs come under the purview of the Companies Act of 1956 and have more freedom. Knowing the difference between NBFC and a bank can help you choose the right lender for yourself while taking a personal loan. Taking a personal loan from an NBFC may be the better option in certain scenarios. Here is a 3-point analysis on NBFC vs bank on personal loans to give you more insight on this.
Personal loans from Non-Banking Financial Companies offer quicker approval
As NBFCs are under the purview of the Companies Act of 1956, their approval protocols are not as strict as those of banks. NBFCs have relaxed criteria and various loan processing protocols that are designed to offer expedited service to borrowers. An excellent example of this is the Bajaj Finance Personal Loan. As a new customer, you can get approval within 5 minutes if you apply online and have a solid financial background. Similarly, if you are an existing customer, you can avail of a pre-approved offer in just a few clicks and have the entire sanction disbursed to you within hours.
However, with banks, loan processing can take 1 to 2 weeks, which delays approval and disbursal. This is one reason why an NBFC personal loan is better, as its loan processing is much quicker and better suited for time-sensitive situations.
Additional Read: Apply for a Bajaj Finance Personal Loan in minutes
An NBFC loan can be more cost-effective
NBFCs enjoy more freedom than banks concerning the setting of personal loan interest rates. This is a key difference between NBFC and bank workings. For instance, banks must link floating rate loans to benchmarks tied to RBI-mandated lending rates. However, NBFCs set their rates based on internal benchmarking, giving them greater control of the rates they can offer. This means you have a high chance of negotiating more favourable personal loan terms when visiting an NBFC. You can also reap interest rate benefits more efficiently with an NBFC.
Further, when comparing NBFC vs bank personal loan offers, you will note that, from interest rates to processing and part-prepayment charges, the offerings are comparable, with certain bank loans outdoing NBFC counterparts and vice versa.
Banks have strict loan eligibility terms
In terms of approval, the NBFC and bank differences are best noticed when comparing loan eligibility terms. As the RBI regulates banks, they must follow strict protocols before granting permission. This means ensuring that applicants meet the criteria completely without lacking in any way. As a result, approval chances are lower, making a bank loan not as accessible as an NBFC loan.
An excellent example of this is the minimum credit score requirement needed to get a loan. Most lenders, banks, and NBFCs require you to have a score of at least 685 to qualify for funding comfortably. However, in most cases, banks may not entertain applicants with a score of less than 750. This is not the case with NBFCs as lenders are not strict, and applicants with low credit scores also have a chance at getting approval, albeit on less favourable terms.
Additional Read: What are the Personal Loan terms and conditions?
With a more detailed understanding of the difference between a bank and an NBFC personal loan, you can now choose the right option for you. Typically, when pitting NBFC vs banks for a personal loan, it is essential to consider your financial profile. With a weak profile, your chances of approval for a personal bank loan are slim. So, to give yourself the best chance at securing the funding you need via a personal loan, Non-Banking Financial Company offerings are well worth checking out.
Among the best NBFC offerings in the market is the Bajaj Finance Personal Loan. It offers you a suite of features, including:
- Collateral-free funding of up to Rs. 40 lakh
- Competitive personal loan interest rates
- Flexible tenure ranging up to 96 months
- Simple and easy-to-meet eligibility criteria
- A minimal requirement for documentation
- Online application with instant approval within 5 minutes
- Speedy disbursal of the full sanction in under 24 hours of approval
In summary, to borrow wisely, keep the difference between NBFC and bank personal loans in mind and weigh the pros and cons well. To get a feature-rich personal loan from NBFC Bajaj Finance, apply online today.
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