Difference Between Bank and NBFC Personal Loan

In today’s evolving world, Personal Loan has emerged as one of the most convenient ways to meet any type of financial needs. With a wide range of loan options available, people often find themselves torn between traditional banks and NBFCs. While both offer similar loan products, the eligibility criteria, interest rates and customer experience can vary significantly. In this blog, learn more about the differences between a bank and an NBFC and which one is suitable for you. Read on! 

What is an NBFC Personal Loan?

Non-banking financial company (NBFC) is a financial institution that provides services like loans and credit facilities. An NBFC Personal Loan is an unsecured loan which is offered by these institutions to you, if you’re salaried or self-employed. 

Advantages of Choosing an NBFC for Personal Loan

•    Digital Application Process: Most NBFCs have adopted end-to-end digital platforms that allow you to apply for a Personal Loan from the comfort of your home. From application to approval, the entire loan process can be completed with just a few taps.

•    Simple Eligibility Criteria: NBFCs are known for their borrower-friendly approach. They offer loans to a wide pool of applicants, even if you have a limited credit history. Just have a year of work experience with a monthly income of at least ₹30,000.
 
•    Minimal Documentation: Say goodbye to paperwork as NBFCs require just a few documents including KYC, address proof, income proof, bank statement and employment proof. NBFCs like Poonawalla Fincorp offers quick approval based on digital verification.

•    Flexible Repayment Tenure: Whether you’re looking for a short-term loan or a longer repayment window, NBFCs offer tenures up to 84 months. This flexibility ensures manageable EMIs that can fit well within your monthly budget.

What is a Bank Personal Loan?

Banks play a major role in how money moves around in the country. They are heavily regulated by the RBI and follow stringent guidelines to ensure financial stability and compliance. Banks usually cater to those applicants who have a stable income and maintain a good credit score.

Advantages of Choosing a Bank for Personal Loan

•    Financial Advice: Most banks have dedicated financial advisors who help you with the entire loan process. They analyse your financial scenario and suggest you with the right loan product and offer guidance on managing repayments effectively.

•    Trust and Creditability: Since banks are long-established and regulated by RBI, they offer a sense of security and reliability.
 
•    Suitable for Long-term Applicants: If you already have a long-term relationship with a bank like a salary account or any kind of deposits then you might be eligible for pre-approved offers with favorable terms.

Key Differences Between Bank and NBFC

Bank vs NBFC Personal Loan: Which One Should You Choose

The choice between a bank and an NBFC for a Personal Loan ultimately depends on your financial profile, urgency and comfort with the institution.

•    Choose an NBFC Personal Loan if: You need fast funds, prefer minimal documentation and want flexibility in your repayment tenure.
 
•    Choose a Bank Personal Loan if: You have a good credit history and can afford to wait a little long for disbursal. Additionally, if you value traditional customer services then the bank is an ideal choice. 

To Conclude

Both NBFCs and banks have their unique strengths when it comes to offering Personal Loan. While NBFCs lead in simple eligibility criteria, digital application process, minimal documentation and flexible repayment tenure, banks score high on financial advice, trust & credibility and are suitable for long-term applicants. The key is to evaluate your financial needs, eligibility and urgency before making a decision.

Frequently Asked Questions

How does an NBFC Personal Loan differ from a Bank Personal Loan?

NBFCs typically have simpler eligibility criteria, faster processing times, and more flexible repayment options compared to banks, which are more stringent and regulated.

What is the maximum repayment tenure offered by NBFCs for Personal Loans?

NBFCs like Poonawalla Fincorp offer repayment tenures up to 84 months (7 years).

What kind of documentation is required for an NBFC Personal Loan?

Required documents typically include KYC, address proof, income proof, bank statements, and employment proof.

Can I customize my Personal Loan with an NBFC?

Yes, NBFCs are known for offering loan products that can be customized according to your needs and financial profile.