What are the benefits of taking a personal loan from a bank vs. an NBFC?

Posted on Tuesday, November 28th, 2023 | By IndusInd Bank

When it comes to securing a personal loan, the choice between a traditional bank and a Non-Banking Financial Company (NBFC) can be confusing. Both have their merits, but understanding the differences and benefits is crucial to making an informed decision.

In this blog, we will explore the distinct features that set a personal loan from a bank apart from one offered by an NBFC. Moreover, we will discuss the advantages of obtaining a personal loan from a bank and contrast them with those from an NBFC.

How is a personal loan from a bank and an NBFC different?

A personal loan from a bank or an NBFC provides financial assistance if you need funds to meet various kinds of expenses. However, several key distinctions set a personal loan from a bank apart from one secured via an NBFC.

1. Regulation and licensing

Banks are regulated by the Reserve Bank of India (RBI) and adhere to strict guidelines, ensuring financial stability and security. NBFCs are also regulated by the RBI, but they have more flexibility in their operations and require lower capital to be established.

2. Interest rates

Banks generally offer lower interest rates on a personal loan due to their stable funding sources. Whereas, NBFCs might have slightly higher interest rates to compensate for their increased risk appetite.

For instance, IndusInd Bank offers one of the lowest personal loan interest rates in the sector. The bank offers a 100% digital and paperless application process. This makes loan approvals lightning fast and you can acquire funds almost instantly.

3. Loan approval process

Not always, but banks usually have a rigorous approval process when loan amounts are high, including credit checks, income verification, and stringent documentation. NBFCs, on the other hand, often have a more relaxed approval process due to lower loan amounts, thus making them accessible to a wider range of borrowers.

4. Loan amount and tenure

Banks typically offer higher loan amounts and longer repayment tenures. Whereas, NBFCs may have lower loan amount limits and shorter tenures.

Both banks and NBFCs are viable sources for getting a personal loan. However, you must explore their offerings, benefits and flexibility to repay the amount. Knowing key aspects before applying for a personal loan can help you navigate any hassle at later stages.

Benefits of a personal loan from a bank

Banks are comprehensively regulated by the RBI and have a legacy of operation. They have built their reputation over decades and offer numerous financial services, such as bank accounts, loans and credit services, investments, and corporate banking services. Opting for a personal loan from a bank can offer you several notable benefits, such as:

• Lower interest rates: Banks generally provide a personal loan at affordable interest rates, resulting in lower overall borrowing costs.
  
  
• Flexible repayment options: Banks offer flexible repayment schedules, allowing you to choose a tenure that suits your financial situation.
  
  
• Higher loan amounts: Banks often provide higher loan amounts, making it easier to finance significant expenses like home renovations or weddings.
  
  
• Transparent terms: Banks are known for their transparency in loan terms and conditions, ensuring you fully understand the contract.
  
  
• Credit score improvement: Timely repayment of a bank loan can boost your credit score, enhancing your financial profile for future borrowing.

Benefits of a personal loan from an NBFC

NBFCs are a good alternative to banks for securing a personal loan. A personal loan from an NBFC comes with its unique advantages, like:

• Quick approval: NBFCs typically process loan applications faster, making them an excellent choice for urgent financial needs.
  
  
• Flexible eligibility: NBFCs may be more lenient in their eligibility criteria, catering to individuals with varied credit histories.
  
  
• Documentation: The documentation requirements for NBFCs are often simpler and more straightforward, reducing paperwork hassles.
  
  
• Tailored solutions: NBFCs often offer personalised loan products catering to specific niches, such as small business owners or self-employed individuals.
  
  
• Accessibility: NBFCs are more prevalent in smaller towns and rural areas, making them accessible to a broader segment of the population.

However, popular banks like IndusInd Bank have a wide network of branches, which operate in urban, rural and remote areas to provide their services to the extensive Indian demography. The bank offers extensive services and affordable interest rates, thus making it a popular choice for securing a personal loan.

Why should you opt for an IndusInd Bank Personal Loan?

IndusInd Bank stands out as a top choice for personal loans for several compelling reasons:

• Competitive interest rates: IndusInd Bank offers competitive interest rates starting from just 10.49% per annum, ensuring you get the best deal possible.
  
  
• Quick approval: The bank streamlines its loan approval process through a 100% digital channel for quicker turnaround, thus allowing you to meet your urgent financial needs.
  
  
• Flexible tenure: You can select a repayment tenure between 12 and 48 months that aligns with your financial capabilities, reducing the burden of monthly instalments.
  
  
• High loan amounts: IndusInd Bank provides substantial loan amounts ranging from ₹30,000 to ₹5 lakhs. You can obtain a loan instantly, enabling you to fulfil your diverse financial aspirations.
  
  
• 100% paperless documentation: The bank simplifies paperwork by removing physical documentation altogether. Now you can apply for an IndusInd Bank Personal Loan with just your PAN and Aadhaar details, making the loan application process hassle-free.
  
  
• Transparency and customer-centric approach: IndusInd Bank maintains transparent terms and conditions, ensuring you understand every aspect of your personal loan. The bank is also committed to delivering exceptional customer service, ensuring a seamless borrowing experience.

To make your financial planning easier, you may also use the integrated IndusInd Bank Personal Loan EMI Calculator and choose a loan plan according to your repayment capabilities. 

The bottom line

Choosing between a personal loan from a bank or an NBFC depends on your unique financial situation and preferences. Banks offer stability, lower interest rates and higher loan amounts, making them suitable for long-term financial goals. On the other hand, NBFCs provide quick approvals, flexible eligibility, and minimal documentation, catering to immediate needs.

IndusInd Bank shines as a reliable option for a personal loan, striking a balance between competitive interest rates, instant approvals, and customer-focused services. Your financial well-being is paramount, and with the reliability of IndusInd Bank, you can achieve your goals while managing your finances prudently. Apply for an IndusInd Bank Personal Loan now!

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.