Which is better for Loan? Bank or Financial Company?

There was a time when a large amount of money was required to buy a house here, so the tax was available only from the bank. Getting a loan was not easy, the process was also complicated. But now it is not only easy to take loan from the bank but we also have other options. Many Non-Banking Financial Institutions (NBFCs) exist, which are offering loan service to more and more customers. That is, now apart from banks, you can also take loans from NBFCs. The question always comes in the mind that when there are two paths, which one to choose and why? In such a situation it is important to understand that both have their own advantages and disadvantages.



Difference in processes

NBFCs give loans even when the loan history (credit score) is poor as compared to banks. Also their loan approval process is easy and fast. On the other hand, to take a loan from the bank, many papers have to be completed and the lengthy process requires time. Even cases of non-fulfillment of the criteria for cancellation of loan applications by banks are easily accepted by NBFCs.


The time frame also different

Repayment of the loan taken from the bank Interest expenses can be saved by making the loan repayment time, but the NBFC loan can be repaid on time, not before that. Bank loans not only have low interest rates but are also beneficial due to the floating rate (based on repo rate changes by RBI from time to time). Whereas NBFCs continue with the fixed rate of interest for the whole time.


Guarantee difference

Most of the guarantees are not required in NBFC loans. When there is an urgent need for money, it is easy and profitable to take a loan from an NBFC regardless of the interest rate and cost. But if the civil (loan history) is good, the papers are complete and it is acceptable to wait for some time in the process, then the loan should be taken from the bank itself.


What is NBFC?

NBFCs i.e. non-bank financial companies are financial institutions governed by the Companies Act 1956 that provide various banking services but do not have a banking license. These institutions are generally not allowed to accept traditional demand deposits (such as money from the public in current or savings accounts). These companies deposit people's money only under a deposit scheme and then provide many types of loans. This limit keeps them out of the purview of traditional oversight from central and state financial regulators. Many financial institutions provide loans to buy these at shops of vehicles, TVs, mobiles etc.  

Applicants need a minimum CIBIL score of 750 to get approval. If the applicant has sufficient income and a strong career portfolio, he can apply even if he has a low credit score. Along with the credit score, the age should be between 23 to 55 years for NBFC loan.  

All NBFCs give loans to retailers, small scale phones, wholesalers, self-employed individuals, as well as many non-banking financial companies (NBFCs) in India provide personal loans to those who need to meet their personal expenses. Requires immediate cash.

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