19 March, 2025 | 11:00 IST
Ever needed a loan but found the bank’s process too strict or slow? That is where Non-Banking Financial Companies (NBFCs) come in. They offer loans just like banks but operate under different rules. Regulated by the Reserve Bank of India (RBI) and registered under the Companies Act, 1956, NBFCs help people and businesses get the funds they need without the rigid requirements of traditional banks.
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An NBFC personal loan is a loan given by NBFCs that do not hold an RBI-issued banking licence. NBFCs have the legal right to approve loans and launch credit facilities for debtors. Some NBFCs also offer retirement planning assistance to people.
NBFC loans are a good option for people who may not qualify for bank loans due to lower credit scores or lack of extensive documentation.
NBFCs cater to different financial needs. Some specialise in vehicle and machinery loans (asset financing companies), while others focus on personal and business loans (loan companies). There are also infrastructure finance companies for big projects, microfinance institutions for small loans to low-income groups and housing finance companies that deal with home loans.
Moneycontrol has teamed up with eight lenders to offer fast, fully digital loans up to Rs 50 lakhs. The application process is easy to follow: enter your details, complete the KYC verification and choose an EMI plan. Interest rates can start as low as 10.5% percent per annum, depending on your employment status.
Unlike traditional banks, NBFCs often don’t have strict eligibility criteria for specific loans. Instead of focusing heavily on credit scores, they prioritise your income potential. This makes it easier for individuals with lower credit scores (around 600-650) to get loan approval.
In contrast, the eligibility criteria set by banks remain quite stringent. Unlike NBFCs, banks check for stable income and a strong credit history, which is supposed to be over 700.
If you are applying for a loan with an NBFC, there is no need to submit any documents if you are an existing or pre-approved customer. If you are a new customer, the documents are limited to just KYC, bank account statements and the latest salary slips.
When it comes to taking loans from banks, it is essential for both existing and new customers to submit lengthy paperwork. You also require additional documents for approving loans, like ID proof, salary slips, IT returns, bank statements and employment proofs.
One can get loans within a few minutes if they apply via NBFC. It is generally chosen if you need cash urgently. Pre-approved customers can get loans within a few minutes, and in some cases, unsecured loans are also approved within 5 minutes if applied from reputed NBFCs.
Banks have a lengthy and slow approval process, usually taking 2–7 days for detailed verification.
ALSO READ: How to get a quick personal loan: Your essential guide for instant loan approval
NBFCs offer lower amounts compared to banks but more flexibility in the loan structure. The tenure ranges from six months to five years. Even if you need a small amount for your personal needs, you can get it via NBFCs.
When it comes to banks, you need to apply for higher loan amounts, often up to Rs 50 lakhs and the tenure ranges from one to seven years depending on it.
NBFCs charge higher interest rates, usually between 10 percent and 30 percent per annum. The rate depends on your credit score, income and loan amount. Whereas banks generally offer lower interest rates, ranging from 8 percent to 18 percent per annum, depending on your credit profile. Interest rates are linked to the repo rate and other RBI policies.
Moneycontrol has partnered with seven lenders to provide you with quick, 100% digital loans up to Rs 50 lakhs. You can get the loan in three steps: enter your information, complete the KYC process, and set up an EMI term. Depending on your work status, interest rates can start as low as 10.5% per annum.
If you want lower interest rates and higher loan amounts, then banks are a better option. Banks typically offer competitive rates, especially for those with a strong credit score, ensuring a more secure lending environment.
NBFCs could be a better choice if you need fast approval, flexible eligibility criteria and easy documentation. NBFCs tend to offer quicker loan processing and are more lenient when it comes to credit score requirements, making them ideal for people with urgent cash needs or less-than-perfect credit.
ALSO READ: How to Compare Personal Loan Offers?
To conclude, NBFCs and banks both offer loans, but the right choice depends on your needs.
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