When you need a loan, your first instinct is often to approach a bank. But banks are no longer the only players in the game. Non-Banking Financial Companies (NBFCs) have gained ground, offering fresh and sometimes more flexible alternatives.
Before you jump into the NBFC loan bandwagon, though, it’s important to ask: is borrowing from an NBFC truly a smart move, or does the convenience come with hidden downsides?
Let’s take a closer look at the advantages and potential risks of NBFC loans, so you can make an informed decision before borrowing.
What Is an NBFC?
NBFCs are financial institutions registered under the Companies Act, 1956, which provide financial services similar to banks — such as personal loans, business loans and vehicle financing — but do not hold a banking licence. While they are regulated by the Reserve Bank of India (RBI), NBFCs cannot accept demand deposits like savings accounts or issue cheques.
By adopting digital-first strategies and offering customer-friendly policies, many NBFCs have become go-to lenders for people with limited credit histories or urgent fund requirements.
Exploring NBFC Loan Apps And Options
Many NBFCs in India now offer personal loans through user-friendly mobile apps and websites, simplifying the borrowing experience. These platforms allow applicants to check their eligibility, upload documents and track their loan status with ease.
Some of the NBFCs that provide personal loans are:
- Tata Capital
- IIFL Finance
- Aditya Birla Capital
- Mahindra Finance
- HDB Financial Services
You can also explore personal loans of up to Rs 50 lakhs through the Moneycontrol app or website, where you can compare offerings from eight major lenders. The entire application process is digital, with some lenders approving and disbursing funds within minutes. With interest rates starting at 10.5% per annum, these loans provide the flexibility to cover various needs.
Advantages Of Taking A Loan From An NBFC
1) Easier Eligibility CriteriaOne of the most attractive features of an NBFC loan is the relatively relaxed NBFC loan eligibility norms. Compared to banks, NBFCs are often more flexible with documentation, credit score requirements and income thresholds. This makes them useful for first-time borrowers or those with slightly weak credit histories.
2) Quick Loan Disbursal
NBFCs usually operate online or through mobile apps, significantly reducing the time taken for processing. Many NBFC loan apps claim to approve and disburse loans within 24 to 48 hours, or even within minutes in some cases. This makes NBFCs ideal for emergencies and short-term financial needs.
3) Wider Loan Variety
NBFCs offer a wide range of loan products — from personal to home improvement and business loans. Many also have loan products to suit niche segments such as gig workers, MSMEs or rural borrowers who may not have access to formal credit.
4) Minimal Paperwork
Most NBFCs operate digitally, which means the entire loan application process — from eligibility check to disbursal — can be completed with minimal documentation and effort.
What About NBFC Loan Interest Rates?
One of the most important factors to consider before opting for an NBFC loan is the NBFC loan interest rate. While some NBFCs offer competitive rates that are on par with banks, others may charge higher interest due to the increased credit risk they take on.
Interest rates usually range from 10% to 45% per annum depending on the borrower's credit profile, income, loan amount and repayment history. If you're considering an NBFC loan, make sure to compare rates across multiple lenders before making a decision. Always read the fine print to check for hidden charges, processing fees, or prepayment penalties.
How Safe Are NBFC Loans?
Here are a few tips to ensure you're dealing with a trustworthy NBFC:
- Verify whether the NBFC is registered with the RBI (check the RBI’s official website).
- Read user reviews and testimonials for the NBFC or its loan app.
- Be cautious of extremely high-interest offers or aggressive loan recovery tactics.
- Avoid apps or companies that ask for upfront fees or unusual permissions on your mobile device.
Who Should Consider An NBFC Loan?
An NBFC loan can be a good option for:
- Salaried or self-employed people who do not meet bank loan eligibility criteria.
- Borrowers needing quick funds without extensive documentation.
- Those seeking short-term personal loans or business loans.
- People in tier 2 and 3 cities who may not have easy access to traditional banks.
The rise of NBFC loan apps has certainly made borrowing more accessible. But it’s important to note that digital convenience must not come at the cost of safety. Always ensure that the app is officially linked to a registered NBFC, and don’t download apps from unverified sources.
For those seeking a quick and convenient borrowing option, personal loans of up to Rs 50 lakhs are also available through the Moneycontrol app or website. The platform allows you to compare offerings from eight lenders and complete the entire application process online. With interest rates starting at 10.5% per annum, these loans provide accessible and flexible credit solutions tailored to your needs.
Overall, an NBFC loan can be a practical and convenient financial tool, particularly for borrowers who require quick funds or have limited access to banks. However, like any financial product, an NBFC loan demands careful evaluation. When used wisely, it can serve as a timely financial support system—but if mismanaged, it may lead to unmanageable debt.
Disclaimer
This piece/article was written by an external partner and does not reflect the work of Moneycontrol's editorial team. It may include references to products and services offered by Moneycontrol.Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
