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Why are NBFCs better option for personal loans than banks

Why NBFCs are a better option for instant loans as compared to banks?

Instant Personal loans are a great product that caters to the ever-increasing demand for liquidity and funds among individuals without foraying into the space of specialized loans such as auto or home loans, which come with specific guidelines on fund utilization. As the popularity of instant personal loans or quick loans continues to increase among individuals who are more aware of credit requirements and avenues for instant loans, NBFCs are playing a dominant role in this field. 

NBFCs are registered in accordance with the laws and regulations outlined in the Companies Act of 1956. Loans, stock and securities trading, and other services are permitted for NBFCs. They are not, however, allowed to accept demand deposits. NBFCs are not required to maintain the cash reserve ratio because they do not take demand deposits. 

While traditionally, commercial banks have had the lion’s share in the personal loan business, NBFCs are now emerging as strong contenders with their focused and customer-friendly approach.

Let us look at a few reasons why NBFCs are rising in popularity in the instant personal loan business.

1. Dynamic digital presence 

Commercial banks in the past have relied heavily on brick-and-mortar branches for operations. With the increase in digital penetration, online loan applications and end-to-end process flow are gaining momentum. NBFCs bank on digital mediums for granting personal loans online, which is cost-effective and convenient for millennials. A person can apply for a personal loan through the website or through the app-based platform. This dynamism brings lower costs for the NBFCs while creating a positive response in the minds of tech-savvy youth who look at digital process automation as an answer to their busy lifestyle. Instant personal loan apps also ease the entire process of applying for a personal loan and getting the funds credited to your account.

2. Less stringent eligibility criteria 

NBFCs are governed by fewer regulations and restrictions than those imposed on banks, as banks deal with other aspects of public money. As NBFCs focusing on instant personal loans have to deal with a limited regulatory framework, they can be flexible in their offerings and hence can sanction instant personal loans to individuals deemed ineligible for loans by banks. In many cases, persons with credit scores lower than the benchmark scores for banks can also apply for loans online and fulfill their credit needs. NBFCs are also able to provide higher loan amounts and best interest rates on loans and are able to provide a personalized offering for every individual.

3. Broader reach  

NBFCs banking on big data and process automation has a broader reach than bank lending. While most banks require a regular salary for granting loans, NBFCs are known to even finance persons without salary income based on their present and future cash flows. Easing eligibility criteria enables a broader section of the common public to avail of instant personal loans online who are traditionally underbanked within the commercial banks. With multiple online loan websites and personal loan apps coming up, anyone from a student to a retiree can get a loan online by selecting an option that suits his needs and criteria.

4. Affordable interest rates 

When comparing NBFCs to banks, one of the most visible differences is the personal loan interest rate. The interest rates offered by NBFCs are lower than those supplied by banks. Because NBFCs come with base rates that are governed by prime lending rates rather than repo rates. They can provide better rates to their loyal customers. Banks, however, are excluded because the RBI regulates their base rates.

5. Quick processing 

As opposed to commercial banks, which depend heavily on credit underwriters and other manual loan processing procedures, NBFCs are leaner in their approach. They are hence able to provide quick loans to customers. The entire process of applying for a loan from sanction to disbursement is now done online with minimal manual intervention. Data capturing and eligibility checks are done by bots, while documentation is done at a click by the customer. Instant personal loans seem to be the only option for someone who is in urgent need of funds at contingency hours when commercial banks may not be operational… Such flexibility and ease of availability of service make NBFCs a favorite alternative to traditional personal loan offerings by banks.

6. Convenience 

With the busy lifestyle of millennials, affording time and visiting a physical branch is cumbersome. Online personal loan apps provide the correct answer to this problem. An individual can apply for a personal loan at the convenience of his home and get the disbursement amount credited to his account without setting foot outside his home. Instant personal loan apps provide the end-to-end automation required for getting personal loans, with the option of customizing the offering. Eased regulations also help individuals with no prior credit history avail of instant loans with lucrative interest rates. As NBFCs provide better value for money in terms of customer experience, instant loans are gaining the upper hand as opposed to traditional lending. NBFCs offer a wide array of choices to individuals looking for a convenient, quick, and customer-friendly way to get the funds needed for their work. Coupled with these advantages, NBFCs offering instant loans are also customer-centric, with their customer care platform being quick and responsive to customer needs. This creates a sense of comfort in the minds of potential customers who are in need of funds for personal use.


In conclusion

NBFCs are a better loan option for most miscellaneous personal finance needs. However, selecting the right fintech solution is critical. It is really simple to obtain a personal loan from an NBFC. Because the country has so many respected non-banking financial organizations, picking the finest one by following the above suggestions makes choosing a lender much easier. Furthermore, when you apply for a personal loan from an NBFC rather than a bank, you can get a lower interest rate, faster approval, and more flexible terms and conditions. Consider factors other than interest rates and processing costs when evaluating non-banking institutions from which you borrow money. Before making a final decision, investigate your lender’s credibility and conduct a thorough review to avail a hassle-free personal loan service.

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