Why Choose NBFC for a Private Finance Loan?

If we look just a few decades back, we had limited options to seek funding in the form of a personal loan. Our options were limited to applying for a loan from a private or a public bank, and alternatively, we could reach out to an individual and borrow money from them. The former has always been a lengthy process, while the latter was unreliable.

Now in 2022, the finance sector has evolved significantly, and we have NBFCs. Many borrowers are still not familiar with the concept of NBFCs and how they work. Therefore, this article takes you through the overview and benefits of NBFCs.

What is a Bank?

Banks are the key players in the finance sector that accept deposits from the public and issue secured and unsecured loans to individuals. They have been a crucial factor in shaping the financial condition of a country or state. In India, the RBI or Reserve Bank of India regulates banks.

What is NBFC?

An NBFC, also known as a Non-Banking Financial Company, is not exactly a bank but is involved in monetary functions like regular banks. NBFCs provide private personal loans, investments, credit facilities, and other schemes. They also offer varied services to businesses, including the acquisition of shares, bonds, debentures, stocks, and securities issued by the government.

Difference Between NBFCs and Banks

• Although NBFCs are registered with the RBI, they are regulated by the Companies Act 1956. On the other hand, private and public banks are completely overseen by the Reserve Bank.

• Banks follow more stringent loan policies than NBFCs.

• Both the institutions follow distinct benchmarking systems for personal loan interest rates. Bank interest rates vary according to RBI policy and market forces, while NBFCs have complete control over interest rates because of internal benchmarking.

Benefits of NBFCs

Easy Eligibility Criteria

Unlike banks, NBFCs have simpler \eligibility criteria to approve loans. One of the primary considerations is your credit score, which should be as close to 750 as possible to seek an instant loan online with reasonable rates and terms. If your score is lower than this, you don’t need to worry – other criteria can help you, like, proof of regular income and your career portfolio. With NBFCs offering loans, it has made it easy for you to be eligible to apply for quick loans when you need them.

Minimal Paperwork

If you are an existing or pre-approved customer, then you don’t have to submit any documents to apply for a personal loan with NBFC. New applicants need to submit a few documents, but they are mostly limited to the latest salary slips, OVDs for KYC, and bank account statements.

Quick Approval

The best part of an NBFC loan is that pre-approved customers receive approval within a few minutes of applying for an instant loan. Moreover, for new customers or, in other cases, it takes around five to ten minutes (with a few exceptions and where certain conditions apply) to get unsecured loans approved from a reputed NBFC. Banks usually follow a complicated internal process before approving any loan application.

Fast Processing

NBFCs process loans faster than you can imagine, and the credit goes to their flexible norms and rules. If all the necessary requirements are fulfilled, online private loan applications can be processed within one working day, and borrowers can get money within 24 hours from a few selected NBFCs. So, if you need emergency funds, then non-banking financial companies can be your last resort.

Credit Score

Banks are quite strict when assessing a loan applicant’s creditworthiness, and a low score can jeopardise your chances of getting a personal loan. However, NBFCs don’t focus just on CIBIL score to evaluate your application but also use other factors. There are FinTech platforms that offer private personal loans to those who are new to credit as well. You might need to submit a few additional documents, go through certain scrutiny, and pay higher interest.

NBFC Personal Loan Eligibility

• The minimum age of the applicant should be 21 years at the time of applying for a loan, and the maximum age at the maturity of the loan should be below 60 years (it can vary from lender to lender).

• Self-employed applicants can apply for an NBFC loan provided that they meet the income criteria of the institution.

• Salaried employees working with private firms, government organisations, and multinational companies can also apply.

• Loan applicants must have a minimum of 1-year work experience.

• To avail of an NBFC loan, the applicant should be an Indian resident.

• Your monthly income should be at least ₹15,000 to be eligible for the loan.

Although these are basic criteria, rules may vary according to the lender.

In Conclusion

To sum up, we can certainly say that NBFCs are changing the finance market by offering competitive rates to borrowers. If you need quick and easy funds, then these lending institutions are the best solutions. However, make sure to check other aspects as well to assess the credibility of the lender.

Author bio

Shikha Ahuja is part of the content marketing team at KreditBee – India’s fastest personal loan platform where professionals can easily avail of personal loans in just a few minutes when in need of quick funds. Shikha writes to create awareness amongst her readers on topics related to loans, personal finance, and budgeting. Being a part of the FinTech industry keeps her on her toes, but she keeps herself grounded through yoga and meditation, and loves to host game nights during the weekends.