In today's fast-moving world, financial requirements can arise anytime, and personal loans can help fulfil many such needs quickly. Traditional banks have been the primary source for individual borrowers until now. However, personal loans from Non-banking Financial Companies (NBFCs) are slowly becoming popular. Let's find out why an NBFC personal loan could be more suitable than one borrowed from a traditional bank.
1. Smooth Processing
One of the primary features of NBFCs is that they typically offer fast loan approval and disbursal processes. Traditional banks mostly spend much more time on verification and also give applicants a lot of paperwork. In contrast, NBFCs simplify the loan application process, which often reduces delays in processing and approval.
2. Flexible Eligibility Criteria
Traditional banks typically have strict eligibility requirements, particularly regarding credit scores and employment status. On the other hand, NBFCs do cater to a large population. They are likely to provide personal loans to individuals whose income is not stable or whose credit score is not perfect. This openness explains why instant personal loans from NBFCs have become highly attractive to candidates who are refused by some of the big traditional banks.
3. Greater Loan Approval Rates
The loan approval rates of the NBFCs are relatively higher than those of traditional banks because of the flexible terms of the former. Applicants with moderate credit scores or inconsistent incomes can also qualify for a personal loan from NBFCs.
Traditional banks typically avoid taking too much risk when lending to someone with a poor credit history or credit track record, while most NBFCs consider the same application. This wider scope of approvals makes NBFCs popular among people with urgent money requirements.
4. Competitive Interest Rates
Interest rates have become an important determinant of where to apply for a personal loan. Banks are usually very strict with their interest rates, but many NBFCs today offer comparable interest rates if not less than those of banks. For instance, Shriram Finance offers personal loans with interest rates typically starting from 12%* per annum.
5. Personalised Loan Products
The customised loan solutions an NBFC offers its borrowers make it unique and suitable compared to other lending institutions. Whether it is flexible loan tenures or repayment options customised to the customer, an NBFC personal loan online has a level of personalisation in the product that is difficult to find in traditional banking.
For instance, some NBFCs allow borrowers to choose flexible EMI options or loan tenures based on their repayment ability. This type of personalisation may ease the borrower's burden and improve their repayment process.
6. Wider Reach
In rural and semi-urban regions, people lack easy access to bank branches. That's where a personal loan from NBFCs comes to the rescue because these institutions extend their financial services to those regions. In the final quarter of 2023, NBFC lending in rural areas amounted to a total of ₹1,19,549 crore.
With a large network of agents and representatives, NBFCs reach areas where traditional banks may not operate by offering loans to individuals who otherwise would not have access to credit. Besides, NBFCs’ strong digital platforms allow individuals in remote areas to apply for loans and process their applications online, bringing financial inclusion to the forefront.
Conclusion
While conventional banks have long been the most preferred institutions for personal loans, NBFCs have many benefits that make them an even more desirable choice. Opting for a personal loan from NBFCs will be relatively easier if fast access to flexible, affordable financing is required.
