The banks or the NBFC are the ones that provide loans to the borrowers. The banks are into multiple finance businesses, from lending loans to providing a d-mat account for securities trading, accepting fixed/recurring deposits, and providing credit cards to other financial services. At the same time, the NBFC focus solely on the disbursement of loans. NBFC’s are the non-banking financial services that are into the core business of providing loans. NBFC’s provide home loans, personal loans, business loans, gold loans. Etc. The NBFC is focused only on the limited financial services portfolio and thus is keen to provide loans to the borrowers. The sole business of providing loans is the only source of income to the NBFC. People usually tend to take loans from banks as people find it a more familiar and known source for availing loans. Taking loans from the bank is also not a bad idea. Banks also do provide loans at lower interest rates to the borrowers. The public sector banks provide lower interest rates, while some banks also provide loans at a lower interest rate to the borrowers. At the same time, the co-operative credit society tends to charge higher loans interest rates to the borrowers.
The NBFC may go a bit easy way in approving the loans of the borrowers. That means that the NBFC may approve the loans even in case of bit lower salary higher credits to the borrowers. Also, the NBFC may approve loans at even a low credit score to the borrower. The NBFC tends to provide better service to the borrowers as they are more in need of business. NBFC provides multiple payment options to the borrowers like an online payment system, auto-debit ECS[electronic clearance system], or the home pick-up drop of cheque service. Also, the borrower can himself go and pay the amount going to the nearest branch. Thus there are multiple options for the borrower to pay the installments. Also, the NBFC may take regular feedback from the customers regarding the service of their company. NBFC provides loans at sometimes moderate interest rates or even sometimes at higher interest rates to the borrower. Different types of NBFC have different service types of clients. There are NBFC who provide loans only against proper documentation and proper credit score only. And also, there are ones who provide unsecured loans to the borrowers.
NBFC VS Bank: Where to get the loans?
The NBFC is more recommended to the borrowers as these companies solely focus on the disbursement of loans. Also, the NBFC is keener to provide loans to the borrowers as they are solely dependent on the disbursement of the loan to the borrowers. NBFC provides better service to the borrowers than banks and is lenient in providing loans to the borrowers.
Benefits of NBFC:
- NBFC is liberal in providing loans to borrowers. Also, some NBFC provides unsecured loans with low CIBIL score and improper documentation.
- Also, NBFC may charge lower processing fees in case of negotiation and also loans at attractive interest rates.
- NBFC provides home service to the borrowers for the complete process of the formalities of the loans and posts availing loans provide home pick up service for the cheque collection for the payment of installments.
Drawbacks of NBFC:
- For the completion of disbursement targets, the NBFC is more likely to mislead the loan applicants though it does not fit into the company’s business policy.
- NBFC may sometimes charge higher interest rates to the borrowers, especially in the case of unsecured loans.
- Despite striving hard to provide the best service to clients, people find NBFC more unreliable and less trustworthy than the banks.
Benefits of availing loans from banks:
- Banks provide loans at lower interest rates than NBFC.
- Banks are found to be more trustworthy by the borrowers.
- Banks provide loans with minimum documentation in case of availing loans from the same bank where the borrower has a bank account, as the KYC process is already completed during the bank account opening.
Drawbacks of the banks for availing loans:
- Banks mostly do not provide home pick-up drop service for the collection of documents and cheques. The customer himself has to take out time to complete the loan formalities.
- The banks are very rigid in the case of providing loans to the borrowers. Banks provide proper CIBIL scores and also proper documentation, failing which the loans may get rejected.
Thus whether to take loans from the bank or an NBFC solely depends upon the borrower’s choice. However, NBFC is more recommended as they are keen to provide loans to the borrowers at competitive interest rates. However, if the borrower finds banks as more trustworthy, then, in that case, it is also better to opt for loans from the bank.