Bank or NBFC: It is everyone’s dream to have a house of his own or a car of his own. Apart from this, sometimes big capital is needed for marriage or any other need. In such a situation, most people take loans for money. At present, many financial institutions are providing loans. This has made more options available to the people and it has become easier to get loans. However, sometimes the situation gets complicated due to the many options in the market. A problem that many people face is whether they should take a loan from a bank or from an NBFC (Non-Banking Financial Institutions). There are advantages and disadvantages of taking loans from banks and NBFCs. On the basis of some parameters, you should take your decision from where to take the loan.
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Select lenders on these parameters
- Rate of interest: On taking a loan from the bank, interest has to be paid at a floating rate which is linked to MCLR (Marginal Cost Based Lending Rate). This is determined by the central bank RBI through the repo rate fixed on the basis of macroeconomic factors. Its rate is usually lower than that of NBFCs. On the other hand, the interest rates of NBFCs are according to the RPLR (Retail Prime Lending Rate). Usually NBFCs have higher interest rates than banks but now they are also offering competitive rates to attract more and more customers.
- Credit Score: For people who have a high CIBIL score, their loan application is easily approved by the banks. It is very difficult for applicants who have low CIBIL scores to get their loan applications approved. On the other hand, NBFCs easily approve loan applications of those with high credit scores and also approve applications of those with low credit scores. However, those with low credit scores have to pay interest at a higher rate.
- Loan Approval Process: When you apply for a loan in banks, the process of getting it approved is very strict and many verifications are done in it. Sometimes the loan application gets canceled when certain criteria are not met. On the other hand, the loan approval process in NBFCs is easier and faster as compared to banks. Usually, those whom the bank refuses to give loans, they get loans from NBFCs.
- Overdraft: Some banks offer overdraft facility to their customers. In this, the loan can be repaid even before the due date. On the other hand NBFCs do not offer overdraft facility to their customers.
- Paperwork: When you take a loan from the bank, there is a lot of paperwork to be completed. Some people do not have enough time to complete such a long process. On the other hand, taking a loan from an NBFC requires less paperwork than a bank. Due to this the craze of NBFCs among the borrowers is high.
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