Personal loans are an instant solution for varied financial requirements whether such requirements are personal or business related. They are available without collaterals and also provide funds at the earliest. That is why personal loans are highly favoured by many of you when you are looking for a source of funds. When it comes to lenders offering personal loans, you would find both banks and Non-Banking Financial Companies (NBFCs) offering attractive personal loans. Which, among the two is better for a personal loan? Let’s examine –
Though banks also offer a range of personal loans, NBFCs fare better over banks because of the following reasons –
Why NBFCs are better?
- Quicker processing
Banks are governed by RBI rules and they have strict loan processing protocols. These protocols take time and the sanction of a personal loan might get delayed. On the contrary, NBFCs offer personal loans at more lenient terms. They have no strict processing rules and the loans are available relatively easily and quickly as compared to banks.
- Documentation
The documentation formalities for personal loans are also minimal for NBFCs compared to banks. NBFCs demand very little documents before the loan is issued and so if you are looking for a quick personal loan, NBFC should be a good choice.
- Loans with low credit score
One of the main advantages of availing a personal loan from a NBFC is that the loan is available even if you have a low credit score. While banks insist on a score of 650 or 700 and above, borrowers with scores below 650 can avail personal loans from NBFCs. So, NBFCs are a preferred source of personal loans for borrowers with lower credit scores.
- Gifts and privileges
NBFCs lure personal loan borrowers with gift vouchers and gift coupons which are applicable at partnered merchant outlets. So, loan borrowers get additional benefits when they avail personal loans from NBFCs.
Why banks are better?
- Interest rates
Though the interest rates on personal loans are very competitive between banks and NBFCs, banks have a slightly lower interest rate as compared to NBFCs. As such, for borrowers, banks are a better bet as personal loans from NBFCs prove to be costlier.
- Attractive discounts
Banks also offer discounts on their interest rates for women borrowers. There might also be additional discounts for existing bank customers. These discounts help in bringing down the interest rates further and make the loans more affordable.
Which one to pick?
If you are confused about which lender to pick, the answer actually depends on your suitability. If you have a low credit score or if you want funds at the earliest, NBFCs are a better pick as you can get a personal loan from NBFC even at low credit scores and the loan is also issued instantly. However, if you are looking for lower interest rates, banks are a better alternative. The interest rates are higher with NBFCs because NBFCs do not screen borrowers using stringent rules. Personal loans from NBFCs are offered at relaxed eligibility criteria and minimal documentation. As such, the interest rates are higher.
You should, therefore, compare the interest rates between banks and NBFCs and consider your personal loan eligibility qualifications before picking the right lender.
